Does a physician assistant have to pay back their bonus if they terminate their employment agreement early? The answer to this is it’s likely. Now, again, every employment agreement is different but from our experience and most employment agreements that we have reviewed over the years, normally when there’s some type of bonus. And when I mean bonus, I’m talking about a sign-on bonus, commencement bonus, any type where you get a bonus upon signing or upon starting your employment, there’s normally some type of payback provision or payback language or forgiveness of the amount language in your employment agreement. So, you always want to make sure you read it carefully.
When you’re offered these big sums of money upfront, it’s very attractive, but you want to make sure that you read the whole employment agreement because there is normally some type of language in there which requires you to pay back either the full amount or prorated amount. Let’s talk about that. Normally, there are two ways that this is structured. The first way is, if you terminate your agreement within a specific period, it’s normally anywhere between one to three years, and it will say in your employment agreement if you terminate your employment before then for any reason, you’ll have to pay back the full amount. Now, what’s dangerous about this and what you should look out for is when they say the full amount, when you receive that bonus, it’s considered income and therefore taxes are taken off the top. Let’s just say the bonus is 10,000, you’re not going to receive the full 10,000.
You’ll receive the amount of money minus any taxes. And when you have the language in your employment agreement that says if you terminate it before this specific period, you have to pay back the full amount, they mean the full amount. So, you want to be careful there. Now, it’s always best if it’s prorated, which means for every month, it’s normally a month. We’ll just say that for every month that you’re employed, a fraction of that amount is forgiven. So, if you’re there for, let’s just say the forgiveness period is one year and you’re there for six months, well, therefore, you’d only have to pay back half of that bonus. That’s a little bit more reasonable and fairer. I would always try to either have it prorated or have that restricted period go down to one year. I’ve rarely seen an employer go down lower than one year. And the reason why this is is to keep you. It’s like a retention incentive.
The other thing you want to keep in mind is relocation expenses or a relocation allowance if it’s structured like a bonus, typically there always is some type of payback language in there or a period until it’s forgiven. So, you want to double-check that as well. So, relocation allowance, relocation bonuses, commencement bonuses, signing bonuses, and sign-on bonuses, look for that language. If you’re getting one of those, I’m almost positive that there’s somewhere in there that says that you must pay it back if you terminate your employment early. And then lastly, probably a little bit rarer is if you get any type of bonus for student loan forgiveness, I have seen that they may give you a lump sum upfront to pay back your student loans. And if you leave within a period, you must pay that back.
Basically, anytime your employer wants to hand you a big sum of money, there’s normally going to be some type of requirement. And it’s normally that you stay employed with them for a certain period. Otherwise, you’ll have to pay that back or a portion of that. These things can get a little stressful, so it’s always good to advise an attorney.
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