THE QUESTION
I was offered a bonus based on my good performance in the previous quarter, but the bonus comes with an obligation to remain with my employer for six months. Otherwise, I would have to forfeit/repay 100 per cent of the bonus amount. I tried to negotiate it down to staying for just three months but they said no. This seems unfair to me if the bonus is rewarding my good performance in the past. What are my options if I don’t want to stay at this company for six months?
THE FIRST ANSWER
Katie Ahn, associate lawyer, Carbert Waite LLP, Calgary
A bonus is meant to reward past performance, but when it comes with a mandatory work commitment, it starts to look less like recognition and more like a retention tool – or even a penalty.
Legally, employers can attach conditions to bonuses, such as requiring repayment if you leave before a certain period. This is often used as a retention mechanism and the enforceability of any clawback terms depends on your employment contract and bonus agreements. If the provision is poorly drafted or overly restrictive – unduly limiting your ability to leave the company – you may have grounds to challenge it. However, if the clawback terms explicitly tie payment to continued service and you agreed to those terms, your employer may have the right to demand repayment if you leave early.
What are your options if you don’t want to stay for the required period? Start with reviewing the repayment clause – some contracts may allow for prorated repayment instead of a full clawback, offering more flexibility. You could also try negotiating a reduced repayment in exchange for the employer’s promise not to pursue legal action. If the employer demands full repayment, you may have grounds to challenge the enforceability of the clawback. Courts often scrutinize harsh restrictions on job mobility, so if the terms are too burdensome, you may have grounds to challenge the repayment demand. If you do decide to leave, do not spend the bonus money, as the employer may demand full repayment. Before acting, we recommend consulting legal counsel to assess the enforceability of the clause.
THE SECOND ANSWER
Chris Randall, employment lawyer, Toronto
The answer depends on whether this bonus will be paid pursuant to an existing bonus arrangement. If you have no pre-existing bonus entitlement, the company can impose any terms and conditions it likes on the award. If this is the case, take the bonus and keep the money in your bank account for six months in case the company seeks repayment. Also, make sure you review any terms and conditions to confirm whether the company will seek repayment if your employment is terminated.
If you were entitled to this bonus anyway, and this is a new term, before you plan your exit, check your employment agreement and bonus plan. Some companies include a clawback clause, allowing them to reclaim all or a portion of your bonus if you resign before a specified period.
If your bonus is discretionary – even if based on past strong past performance – they may still attempt to recover it if you leave based on this new term. However, if you’ve met all criteria and there’s no clawback clause, you’re likely entitled to keep it, even if you resign or are terminated before the six-month mark.
Practical advice? Do not resign until the bonus is in your bank account. The last thing you want to do is walk away before the funds have cleared, only to find out repayment is not required. If you’re looking for a new role, consider negotiating a buyout of your bonus repayment obligation with your future employer in case your company takes a firm stance on repayment.
It’s also worth asking: Why does your employer require you to remain for six months? Is it a busy season where they need your expertise or are they struggling with turnover and trying to retain talent? If turnover is high, it may be a red flag about the company’s stability.
Whatever the case, review your employment agreement and bonus plan, and be strategic. Secure the bonus, ensure your transition is seamless and, most importantly, don’t resign until you have a new role lined up. A well-planned exit is always better than a hasty one.
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