Legal Question in Employment Law in Maryland
Compensation change resulting from company acquisition
- My company was acquired by a Fortune 500 firm
- Approximately 3 months after the acquisition, I was informed that 4% of my base salary would be converted to a bonus (variable compensation)
- During the first transition year, New Co would pay all of the 4% bonus in two equal disbursements
- There was an e-mail stating that if I left New Co before 12/31, I would have to pay back the entire 4% in full
- This salary change was communicated via e-mail, and I never signed an updated employment contract
- I resigned from New Co on 11/15
I have a friend in the same position who has argued that this violates contract law (no offer, acceptance, or consideration). New Co replied that they did not consider this a contract law issue, but a policy change and payment advance. It seems to me that if my employment contract was not changed, then this payback amount should be (at best) prorated & not paid back in full.
New Co has sent me two letters ; the next step is for them to refer me to a collection agency. I am also concerned about any impacts to my credit rating.
Do I really owe them money if I never signed an agreement? What should I do? Thank you in advance for your time.
1 Answer from Attorneys
Re: Compensation change resulting from company acquisition
There are two issues here. The legal and the practical.
On the legal side, this might be a contract because you remained at work. Often times, the courts will say that there is in fact offer and acceptance if the person stays at work after the policy change, thus signaling acceptance of it. The consideration is that the company agrees to pay you for your work and you agree to give them your work.
There are also quasi-contract issues that the company can raise, including unjust enrichment. That is, that by quitting, you enjoy the full bonus without earning the whole thing (staying until 12/31), so you were unjustly enriched and should pay back the bonus.
(On the other hand, you can also raise equitable issues, including that you earned at least some of the money - see below.)
These are not black and white issues. A court could also rule for you, given that you never actually agreed to the policy, etc. It might also be important if the change occurred long after some of the money was earned. It probably would not be allowed to apply retroactively.
But you don't want to have to spend money on going to court, so the practical issue is more important, here. That is, the company can damage your credit rating before you ever even get into court.
For that reason, I advise that you do everything you can to settle the matter. If all fails, you should consider paying it back (you can negotiate for a long payment schedule, without interest, just a few dollars per month), and then you could sue later if you really want to.
For now, I would offer the company to pay back a pro-rated portion of the bonus, just as you mentioned in your question. If you only had 45 days left, then argue that you earned 10 1/2 months of the bonus and would be happy to pay back 1 1/2 months, which is 8%. So, if the bonus was $1200, then $150 would be due.
If they are intransigent, then ask them if they would accept any other offer. If they simply will not agree to anything else, you can make the same offers to the collection agency if you want to let it get that far. (But again, your credit rating is important to protect.)
If there is a large amount of money at stake and you feel the need to hire an attorney, please call me for a free consultation to review the matter. If there are a lot of people in the same boat, perhaps we could negotiate a global agreement with the company since there is power in numbers.
Jeff Sheldon
Jeffrey L. Sheldon, Esquire
The Sheldon Law Firm
17804 St. Lucia Isle Drive
Tampa, FL 33647
813.986.7580
(f) 813.986.7489
(Admitted in Fl., MD, D.C., and Pa.)
http://www.SheldonLawFirm.com
Disclaimer: This posting does not and is not intended to constitute legal advice. It is not confidential, nor is it privileged, and it does not create an attorney-client relationship. Please consult with an attorney for advice specific to the facts of your case.
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