Clawbacks
Curious if anyone has just not paid back a bonus subject to clawback after resigning / being fired. Do MMs sue? Any other longer term ramifications to think of?
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Based on the most helpful WSO content, here’s what you need to know:
Ignoring Clawback Requests: There are anecdotes of individuals who left their firms early and ignored calls or emails about paying back signing bonuses. In some cases, they reported no immediate repercussions, such as hits to their credit score or legal action. However, this approach is risky and not guaranteed to work.
Legal Ramifications: If a firm decides to pursue a civil suit, you are legally required to respond. Ignoring it could result in a default judgment in favor of the firm. This judgment could lead to wage garnishment, credit score impacts, or other collection actions.
Long-Term Consequences: Even if legal action isn’t taken immediately, unpaid debts could be sold to debt collectors, which can create ongoing financial and legal headaches. Additionally, burning bridges with a firm could harm your professional reputation and future career opportunities.
MM Firms and Clawbacks: While not all MM firms aggressively pursue clawbacks, some do. The likelihood of legal action may depend on the firm’s policies, the amount owed, and the circumstances of your departure.
If you’re considering not paying back a clawback, weigh the potential risks carefully, as the consequences could escalate over time.
Sources: Not Paying Back Signing Bonus, https://www.wallstreetoasis.com/forum/investment-banking/jefferies-are-these-rumors-true?customgpt=1, 2021 S&T Bonus
Bump
Yes, they will sue. They will also either notify your next employer about this, or your next employer will require that you disclose any existing lawsuits against you.
Their legal complaint will likely be public and findable on the internet including all the details, which is not good for your reputation.
Unless you seriously believe you're not legally subject to the clawback and are willing to engage an attorney to defend your case, you should pay them back.
"Don't pay them back and ignore their calls" will land you in a bad place.
100% - of course they will sue and make life hell for you (in court with time and expenses as well as the collateral impact on your career and reputation). It also makes you unhirable - why would i hire someone who bailed on his prior employer and tried to steal money he's not contractually owed?
What is the point?
Part of a guarantee is being mad whole on what you’re leaving behind in deferred at old shop + claw back at old shop + a lot more on top to incentivize you to leave in the first place
If I have $5m in deferred I’m not leaving my firm unless I have a lot more being guaranteed to me.
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