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Tuesday, September 15, 2009

Relocation

My question is regarding a relocation pay-back clause. I accepted a postion with my company that involved moving from CA to TN in February of 2009. The company gave me a lump sum (after tax) of $10,000 to cover relocation and moving expenses. Since that time, I've decided that my long term goals don't align with my company's any longer. I'm looking to leave and actually have a new job opportunity on the table that I'm seriously considering.

My problem is that when I went back and looked at the contract that I signed for the new position, it clearly states that if I leave the company within 12 months of the hire date, I am liable to pay back all (or a part) of my relocation expenses to the company.

With this in mind, here are a few questions for you:

1) Is this for real? Would a company really demand that I pay the relocation back? If so, how much do you think I would owe them? Would it be pro-rated for the number of months I worked in the position?

2) Is this enforceable? How would HR go about collecting the amount that they deem I owe? What's stopping me from just telling them to "shove it"?

3) My company currently owes me some sales commissions that have not yet been paid to me. Should I suggest that these funds be applied to cover some or all of what the company deems to be my balance due?


Let me tell you a little story. Earlier this year my husband accepted a new job that required an international relocation. Part of his contract states that if he quits in less than two years he has to repay. Do you know how freaking expensive an international relocation is? Do you? It can easily run into 6 figures (in either Swiss Francs or dollars!). Before he signed on the dotted line, we had this discussion:

Him: We're in this for two years, no matter what.
Me: Even if your boss turns into a werewolf.
Him: Right. Because we're not repaying an international relocation.

You, apparently, didn't have this chat with yourself.

Now, the chances of you finding the job you really want and starting between now and February are pretty slim (unless you already have something lined up), so you are probably worrying for nothing.

But, yes, you have to repay it. Legally and morally. You signed the contract. You took the money. It's your obligation to repay. No whining on that. The pro-rating would depend on how it is written. My guess would be at 6 months you'd have to repay 50%.

Can they come after you? You betcha! Will they? Depends on the size of the company and how annoyed you've made them. Would I count on them just sighing and saying, "Oh well! Steve ran off without repaying!" Absolutely not. They can take you to court and since you are freaking out about repaying $10,000 my guess is they have more resources then you do. In all honesty, they probably won't take you to court, but they could and if they did they'd win.

If they still owe you money, certainly you can negotiate with them on how those funds would be applied. However, this is not a question best asked until you've already landed the next job.

This also means you will leave this company on bad terms. The company and you may have different long term goals, but you'll need the reference. Even if you were stellar employee, your boss is going to have a bad taste in his mouth about this.

Repeat after me: I will repay the money I owe. I am legally and morally obligated. I will repay the money I owe. I am legally and morally obligated.

Now, let's address another issue: This company doesn't align with your long term goals. Got it. You've only been there 7 months. If it's a goal issue, staying a few more months won't hurt. Leaving now will leave you a big black mark on your resume. You must be prepared to be asked, forevermore, "Why did you stay at Acme Corp only 7 months?" And, no you can't put: District Manager, Acme Corp 2009 on your resume. We see through that. We have special glasses that show us that years only means you didn't work very much of that year. (Exception, if you worked 1998-2009, I'll allow years only. But, I still don't like it.)

If this were a 3 year repayment clause I can see why you might want to leave sooner than that, but it's a 12 month one and it's more than half gone. Suck it up and stick it out, or pay up.

32 comments:

Allyson and Dave said...

I have to deal with this all the time. We do a lot of relocation packages...mostly when hiring nurses. We used to make them sign a 12 month contract and yes we collected the money if they left. We gave them the option of taking it out of their last check or a payment plan. We recently switched the plan and started paying half of the relocation up front and half at 12 months with no contract. So if they were not here at 12 months they never got the 2nd half. Can I tell you how many people took the first half and left a month later!!! People are greedy and sneaky!!!

Just Another HR Lady said...

Look at it this way, you and your employer signed a contract. The employer is legally required to provide all of the monetary and non-monetary compensation stated in the contract. You, also, are legally required to adhere to the terms of the contract for the clauses that apply to your obligation. What would happen if they didn't pay you? Would you assume they are required to pay? Would you do what it takes to make them pay their legal obligation? Of course.

They will dock your last pay for as much money as they can, and then take you to small claims court for the rest. (in Canada anyway)

My recommendation? Same as EHRL...stay until the required period is over.

Matt said...

As a part of HR in a large company, I have been "in the loop" on many such discussions. Most larger companies take these situations seriously, and work to reclaim as much as they can. You should count on them pursuing most, if not all, of the contracted value.

Anonymous said...

Also just FYI for the future. It's best to read and understand contracts before signing, not after.

class-factotum said...

You owe. Pay it. However, there is nothing wrong with telling New Employer that you want $X to cover the move package that you have a legal and moral obligation to repay.

In addition to what Anon said, also remember never to stop on the railroad tracks. Dad 101.

Ask a Manager said...

What is wrong with people?!

What do you the meaning of a contract is?

And why do you think they had you sign it? Because they were making an investment in you and were asking you to ensure they'd get some of the benefits from it.

Yes, you have to repay. Yes, many companies will come after you if you don't. Yes, you are a jerk to even be posing this question in the manner that you did.

Jeez.

Graham said...

In the HR department I work at we have a strict relocation agreement: Return one year of service or payback :(relocation cost / 12 months)* # of months remaining in year...seems pretty simple to me.

Chris M. said...

What Ask a Manager said.

And yes, ERHL, as always you are absolutely right (I'm not in HR but I have the same "chat" with myself any time I accept relocation money!), but you seemed to overlook some of the things the reader said:

1) "You must be prepared to be asked, forevermore, 'Why did you stay at Acme Corp only 7 months?' " - The person said she accepted a position with the same company she worked for, only moving from CA to TN, so I don't think this question would apply to her case?

2) "Now, the chances of you finding the job you really want and starting between now and February are pretty slim (unless you already have something lined up), so you are probably worrying for nothing." She did say in her letter
"I'm looking to leave and actually have a new job opportunity on the table that I'm seriously considering."

Still, what you said,
"Repeat after me: I will repay the money I owe. I am legally and morally obligated. I will repay the money I owe. I am legally and morally obligated." Is spot on!

Michelle said...

In 100% agreeement. I work in HR at a large company and we relocate people all the time. I personally have relocated 7 times in my career. That was 7 contracts I signed and 7 times I knew I was committing to stay with the company for 12 months or pay back the thousands of dollars the company was investing in me by relocating me.

You should talk to someone in HR to better understand the terms of the contract you signed. Honestly you should have done this prior to signing. But you didn't, so here you are. Ask about repayment, is it prorated for time served (my experience is that it probably is). Also, do they offer a payment plan or do the require full payment upon separation? You need to better understand what your obligation is so that you can make an informed decision.

Anonymous said...

Chris M and I read this the same way. I sounds to me like the employee took an internal transfer for a company that they already worked for, not a new position with a new employer. This doesn't excuse the early termination of a contract. However, the way this reads to me, it sounds like the employer could potentially pull the plug on that person's employment at any time. I didn't see anywhere in the e-mail that the employer was committed to the employee for a 12 month period.

Let me give you a different example where the shoe is on the other foot. A friend of mine was attending an executive MBA program at the request of her employer, with the funding for the MBA program provided for by her employer. Like most companies, the employer only re-imburses the student at the end of the semester after the grades have been issued and the performance in the class is in line with the standards for re-imbursement. Long story short, she got laid off due to a reduction-in-force brought on by the economic storm that we're currently in. Not only did she lose her job, but now she's out the money for the MBA program that she would not have even enrolled in, had her employer not requested her participation.

My point is that the employer's lack of committment to the employee probably leaves a little wiggle room for the employee to negotiate in this case. It seems rather strange to me that the employer would pursue the employee monetarily in this situation, especially for a lump sum amount like $10,000. I would think a pro-rated amount based on the day the contract was signed would be the course of action. If this was an international relocation with big bucks involved, that would be a different story. In this case, I would tell the employee to lock down the new job, negotiate some sort of signing bonus, and use it to pay off the pro-rated sum due at the employer in question. If they ask you for the full amount, I would suggest you refuse and tell them you're only willing to pay a pro-rated amount (based on the number of months you stayed) or they can take you to court. They'll settle with you, trust me, $10,000 is not enough to go to court over. I would also suggest that if the amount of commissions owed is legitimate and you can prove it, you should bring it up before the commissions are paid out. The reason for this is because if you wait to get paid, all the taxes will come out of the amount owed and will require you to pay more out-of-pocket costs to terminate the contract.

If you really want the job take it, but be prepared to pay at least $5000.00

Anonymous said...

morally she has to pay it back?? Do companies have morals when they lay you off?

Ask a Manager said...

Anonymous, yes, morally.

When you sign a contract, you are agreeing to do something. That's what a contract is. If a company signs a contract agreeing to do something, they are held to it too.

You're trying to compare breaking your word to ... not breaking your word. It doesn't work.

Anonymous said...

I am in full agreement with the posting above. A contract is a contract. The employee signed it, and it is her legal (and moral) obligation to repay it. Getting laid off is outside of a contract.

Back to the original posting, I'm frankly surprised that this question is even being asked. I don't know who offered this employee a different job, but if they knew you were wanting to renig on a contract and tell your current employer to "shove it," they would likely think twice about the type of employee they were hiring. I wouldn't hire you.

Anonymous said...

Wow! This is a hot issue on the discussion board! My initial response is that I'd have to see the "contract". Are we merely talking about an offer letter with language in it governing the pay-back of relocation expenses or are we talking about an actual legally drawn up contractual agreement?

Is the "contract" countersigned by someone in the HR department with the appropriate authority level? Did the employee ever receive a copy of the countersigned "contract" from the HR department after this new position within the company was accepted?

There is more that a little gray area here (in my opinion), especially with the employer having not paid out commissions owed to the employee. It seems to me like the employee could potentially have a legitimate claim against the employer for not paying commissions owed. This one could get ugly...I would not accept the new position with the new company unless I had all of this ironed out first. The trick of it is, most folks (including myself) would we very wary (and rightly so) about contacting their HR department and asking the question without having the other job "locked down" (as the other Anon author put it above).

A Catch-22 situation to be sure. I strongly suggest you get legal advice before making any decisions...a $500 legal consult would be money well spent. Better yet would be to think through your list of friends/contacts and see if you know anyone who practices labor-related law and let them read the "contract" to determine its validity.

I would also disregard the comments above in the posting related to the "reference" from your former employer. This is really not much of a deterrent if the company she works for is a publicly traded company. Almost any large publicly traded company will only verify employment now-a-days. I would be shocked if the employer gave the employee a bad reference because of libel/slander implications. That could cost them a whole helluva lot more than 10,000 bucks.

Anonymous said...

Hmmm...compelling thoughts on both sides of this argument. Sounds to me like this one is headed for a split decision. Employer eats $5000 for employee's time served, employee pays $5000 for breach of contract.

The other Anon posting from yesterday with the example of the employee who got screwed on tuition re-imbursement is an excellent example of how an employee is morally obligated to pay (tuition in that case), but the employer is morally reprehensible for laying the employee off with no notice and not re-imbursing the tuition expense...especially when they pushed the employee into the program. I'll bet there are more than a few stories like that circulating in today's world given the downsizing and RIF's going on in the marketplace in 2008/2009.

Interesting points on both sides...a spirited debate.

CommunismisBest said...

Why should you comply with rules when your employer on Wall St doesn't it?

Charles said...

"What's stopping me from just telling them to "shove it"?

Such a lack of a moral compasss - Someone made a mistake when they hired this OP in the first place.

Perhaps, his/her boss will wake up, tell him/her to "shove it", and then hire people like me who have a sense of right and wrong.

Even better, I hope that this person's new boss reads this and knows what troubles lie ahead if they hire him/her.

Charles said...

P.S. I am more disturbed by this person than the actions of the pharmacist.

Anonymous said...

From a large company that does relocate folks and has them sign a contract. I'm amused that the person accepted the relocation and now has an "offer on the table." I wonder where this new offer is located? All said and done - the offer and relocation was done in good faith (on the employer end) - not so sure on the employee end. As far as paid education ... is the person really complaining that the organization was paying her MBA - now she may have to pay it herself?

Maybe we need to go back to the days when folks paid for their own education and relocation - then no gripes. I think this falls into the "let no good deed go unpunished"

HR Godess said...

I wonder how the original poster would feel or act if the company had told them to "shove it" when he incurred the cost of moving from CA to TN and had asked for the relocation reimbursement.

Never a dull moment in HR, that's for sure. It's interesting that company's are to be held to such high standards but when the shoe is on the other foot, it's a different story.

The same contract that was signed would be upheld in court if the company didn't pay so it will also be upheld in court if the employee backs out. And most companies I have worked for go after the whole amount, not just a portion or a pro-rated amount. In hiring a new person, they may have to pay that amount again to get someone on board. They shouldn't pro rate it. It's all or nothing.

Kelly said...

Anonymous, I was with you up until As far as paid education ... is the person really complaining that the organization was paying her MBA - now she may have to pay it herself?

Maybe we need to go back to the days when folks paid for their own education and relocation - then no gripes. I think this falls into the "let no good deed go unpunished"


Her company encouraged her to get a degree that she otherwise wouldn't have pursued, for *their* benefit. Yes, it benefits her, but it was a qualification they wanted her to go for. If not for the tuition reimbursement, she probably wouldn't have.

And she didn't quit, she was laid off, which means that it was also *their* choice not to get further benefit out of her education.

This isn't "let no good deed go unpunished." The employer wasn't originally paying for her education out of the goodness of their hearts--it was to their benefit. And they should've had the decency not to make her pay it back when they let her go.

Anonymous said...

Hyatt Hotels Corp. laid off the entire housekeeping staffs at the Hyatt Regency Boston, Hyatt Regency Cambridge, and Hyatt Harborside Hotel after the morning shift had ended on Aug. 31 because their housekeeping staff was paid on average $15/hour with health benefits. They've outsourced to company that pays around $8 with no benefits....this is why you should have no loyalty to your company.

Anonymous said...

Because some companies are heartless, treat all companies as if they are heartless. Is that the plan?

That's the kind of thinking that makes this society a pretty crappy place to live in. You shouldn't base your own morals on how other people treat you. You shouldn't be acting in such a way that you feel you have to justify your actions.

It's the Golden Rule, does nobody learn that anymore?

And aside from all that, regardless of the company's ultimate intentions, the bottom line is that the contract was signed. If you're going to go along with an attitude of "screw everyone, look out for #1," then you'd better at least respect a contract, which is the only thing that keeps a society full of selfish assholes from falling apart.

Union_Boss said...

If you want to be respected in the workplace...join a union. Evilhrlady has said on many occasions that she doesn't work for the employee she works for the company...do you think that implies your best interest is at heart?

Matt said...

And a union does?

Joining a union doesn't create respect in the workplace. It's the complete antithesis to a good employer/employee relationship. It ensures a combative and adversarial relationship with management at all times.

If this is what you want, then by all means go for it. But don't mislead yourself into thinking this creates respect.

Anonymous said...

Kelly - you're right - I must have been in an interesting mood when I posted. My experience is that a Master's program (while encouraged by the organization) is reimbursed on a semester basis. I was under the impression that we were talking about one course and not the entire MBA program. And while our organization hopes that the education would be beneficial ... we do not pursue folks that leave (or are let go) to reimburse us. These are difficult times (on both sides - the employer and employee) I would have hoped the organization that let her go - would have seen the bigger picture and not require her to pay back for education it encouraged her to get.

Olivia said...

I'd be curious to know how many of the Anonymous types who railed at Hyatt or others for laying off or getting cheaper employees have avoided staying at the Hyatt because it was too expensive. Same for all of those who condemn Wal-Mart (a.k.a. The Evil Empire) for their employment practices, but still shop there, "because they have the best prices".
The fact of it is that both employer and employee (or Consumer and Provider) play flip sides of the same coin. If employees show no loyalty, it's unlikely that the company will, and vice versa.
Back to the original point: You signed a contract. You are obligated to live up to it, whether you want to or not. Read before you sign things. Moreover, understand the implications of what you're signing.

Anonymous said...

Wow, the comments got way sidetracked.

I normally avoid blaming the victim but since the OP isn't even a victim in this case I have no qualms about saying this: Why didn't they read the contract BEFORE they signed it?

It wasn't a surprise that they were being reimbursed for moving so why wouldn't they read the terms for that reimbursement? Am I the only one that doesn't expect people to give me money with no strings attached?

I've always been an 'at will' employee so maybe someone else can tell whether an employment contract has tiny type. Was the part about moving expenses hidden? Are these things as hard to read as the worst banking disclosures? Somehow I doubt it.

Also, why shouldn't the company expect that money back? Why does the OP expect that some company should pay them to move without expecting something else in return? It doesn't make any sense. It is not unfair or unreasonable for a company to want to avoid the situation described in the very first comment: paying a lot of money for someone to move only for that employee to leave soon after.

Anonymous said...

Hi I was given this offer letter a few months ago. The contract I signed is exactly the same except for the "looking forward to seeing you" part and mentions no stipulation for employment longevity for the relocation expense..

Thanks for coming in and meeting with us. I am pleased to offer you the position of Software Engineer IV at XXXXXX, Inc. reporting to XXX XXX, Application Engineer Manager. Attached please find the Job Description for this position. This is a full-time position beginning July 27, 2009 at a yearly salary of $95,040.00. Your bi-monthly pay is $3960.00 before taxes and insurance. You are also entitled to a moving allowance from your current residence to XXXX, MS. XXXX will pay actual expenses up to $5,000.00 based on your expense reports submitted with original receipts. I have also attached several documents (Non-compete, Intellectual Work product, and Confidentiality Agreement) that you will be expected to sign prior to work actually starting.

I look forward to hearing from you and having you join the company.

Recently I was let go because they said the were downsizing and that I was not a good fit. (Different software skills?)

Ok, I am not upset at being let go because from my point of view, they were not a good fit either. Not even upset that I was literally given NO warning either and the day they said I was let go was the day they wanted me to leave. However, I did pay 2,600 bucks of my own money in which the contract and offer letter both states that I'm entitled to "reimbursement" up to 5k. I have sent them my expense invoice & report (once while I was working) and twice now since I am unemployed and they simply refuse to communicate with me. It's been 45 days thus far. Is this a legal binding "enforceable" agreement/contract (ST: Mississippi) or should I just write this up as a loss?

Thanks for you help.

Anonymous said...

Can you please comment on obligation to pay back relocation bonus if there was no contract signed? I was transfered within company (I asked for it), and I was offered a relocation bonus (I hadn't asked for it) instead of adjustment/increase in my salary.
I was never given a contract to sign. It was simply a proposal that I received in person. There is no obligation to repay or any time obligation for the bonus. They have mentioned in the letter that my pay will be adjusted in one year from the start date. Now I have to leave for personal reasons (family medical) and the company has verbally mentioned they want the relocation bonus back. Do I have to pay it back?
I like to keep my good terms but don't want to/can't afford to pay it back 6 months into the job. Please help!

Anonymous said...

Here's another small twist. My employer had me sign a relocation contract but never signed on the line designated for their signature. Seeing as both parties did not sign the contract, is it enforceable?

Anonymous said...

Here's another small twist. My employer had me sign a relocation contract but never signed on the line designated for their signature. Seeing as both parties did not sign the contract, is it enforceable?