What Does “Clawback” Mean in a Contract?
A provision requiring return of money or benefits already received, typically triggered by certain events like early departure or misconduct.
Detailed Explanation
Clawback provisions allow companies to recover compensation already paid. Common triggers include leaving before a specified period, misconduct, or financial restatements that reveal bonuses were based on incorrect data.
Clawbacks are increasingly common for signing bonuses, relocation expenses, and executive compensation. They create ongoing financial risk even after you've been paid.
Example in a Contract
“If Employee voluntarily terminates employment within 24 months of the Start Date, Employee shall repay the signing bonus on a prorated basis: 100% if within 12 months, 50% if within 12-24 months.”
Why It Matters
Clawbacks create contingent liabilities. A signing bonus isn't truly yours until the clawback period passes. Before accepting such compensation, understand the triggers and your realistic ability to stay the required time.
Related Terms
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