Law Offices of Louis Spitters
408-780-1920

More employment contracts include clawback clauses

Earning a college degree and completing the necessary training is all part of landing that dream job. For many new hires, whether fresh out of college or veterans in their field, the hiring process can be a whirlwind of interviews, assessments and paperwork. Among the documents to review and sign is the contract, and more employment contracts are now including provisions that penalize employees for poor performance or misconduct.

In the past five years, use of the clawback provision has skyrocketed from less than 3 percent to over 80 percent. California employees who receive bonuses or other types of incentives may have such a clause in their contracts. The clawback allows the business to take back any incentives paid to an employee if the company is involved in a scandal or the employee is accused of misconduct. Additionally, if the employee is responsible for improving profits for the business and the profits fail to meet expectations, the company can rescind or revoke any bonus or incentive.

The point of the clawback is for the company to reclaim money the business may have lost through the employee's misconduct or ineffectiveness. Even if the employee is not directly responsible for the malfeasance, invoking the clawback option may be a way to regain the trust of the public as well as recovering profits. A company may also exercise the right to clawback an incentive if an employee breaches a non-compete clause after termination.

While the use of such clauses in employment contracts seems airtight, there is always the potential for disputes. Whether a California employee feels the exercise of the clawback option is discriminatory or the employer is struggling to recover funds from an employee, it is beneficial to seek legal assistance. A skilled attorney with experience in contract disputes can help in guiding the matter to a more positive resolution.

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