Career Advancement for the Low Price of Your Soul
When I was a kid, I remember my little brother watching Disney films pretty much constantly from the ages of probably 1 to 6 or so. As a result, I have an embarrassingly encyclopedic memory of the plots and songs of the movies from that specific time window. Probably at the epicenter of this Disney knowledge for me was the film, “The Little Mermaid” and I can remember that crazed chef chasing Sebastian the crab around and still giggle to this day. But of all of the songs in that movie, there’s only one that makes me think of the corporate world. I’ll come back to that.
Claw Back, Disney Style
There are a few standard perks in corporate America (and, I’m sure the world, though I’m only familiar with hiring in the USA). Health insurance is pretty much table stakes for serious employment these days, and with a decent employer contribution to boot. Paid time off is certainly up there, along with holidays and general human decency, one would hope. There’s another tier that includes 401K contributions or some other retirement provision, perhaps a pension of some kind, things like life and disability insurance, and so on. And, then, you start getting into a land more exotic where employers offer weird, unexpected stuff like “take your dog to work day” or sabbaticals or something. One that usually shows up in this slightly more exotic realm is some concept of tuition reimbursement for employees that seek degrees or want to acquire skills through classes, certifications, etc.
This perk is a classic win-win situation. The company invests in the career development of an employee and, in exchange, reaps the benefit of the employee’s learning and added skills. The employee becomes more valuable to the organization by virtue of new knowledge and skills and, all other things being equal, will wind up earning more money over the course of a career. What could be better than this arrangement? Employees donate their spare time to improving themselves for their companies and companies donate money to the cause. Sounds like a pretty good exchange of consideration.
And the company, really, just wants to help. Advancing one’s skill set and education isn’t cheap, and there are so, so many poor unfortunates that just can’t afford it. You know what? I’ll let Ursula from the aforementioned Little Mermaid explain.
Poor unfortunate souls,
In pain, in need!
This one longing for more skills
That one wants a new degree
And do I help them?
Oh, but there is just one more little thing. Inconsequential, really. Almost not worth mentioning outside of the fine print. It’s just that, well, shucks, if you do that as an employee, we’ll just kinda sorta make you pay back every penny in the event that you leave at any point during the course of acquiring these skills or several years afterward. But, let’s not worry about that! What are the odds, anyway? We’re all friends here and on the same team!
Now it’s happened once or twice
Someone couldn’t pay the price
And I’m afraid I had to rake ’em ‘cross the coals
Yes I’ve had the odd complaint
But on the whole I’ve been a saint
To those poor unfortunate souls!
We’d never let the crippling financial pressure on you to finish your study and then stick around affect our relationship in any way! We’d never take you as an employee for granted, just because you have no realistic option other than to continue working in whatever conditions we subsequently subject you to. There’s no chance our relationship might change over the course of 5 years and somehow make you regret that signature! And, your automatic loyalty for years is the least you can do, considering what a huge, huge favor we’re doing you for really, truly, almost no benefit at all. This is practically charity!
You poor unfortunate soul
It’s sad but true
If you want to get ahead, my sweet
You’ve got the pay the toll
Take a gulp and take a breath
And go ahead and sign the scroll
Flotsam, Jetsam, now I’ve got her, boys
The boss is on a roll!!
This poor unfortunate soul!
So, anyway, hope that MBA is worthwhile. Because for the 3 years you spend getting it at night and a couple more after that, it’s not as though you have a choice about where to work unless, you know, you’ve got 10 grand in cash. What’s that? You don’t? Well, you didn’t want to go anywhere anyway, now did you? I’m sure you’re happy with your current pay and that freezing cold cubicle by the door, and, if you’re not, well, hey, you shouldn’t have gotten yourself into so much debt, now should have, sucker? Your own fault, really. Why did you ask for tuition assistance if you couldn’t afford tuition?
The Ethics of Claw Backs
This nasty little bit of bait and switch is a pair of golden handcuffs that goes by the general name of “tuition claw back arrangement” or something relatively similar. It sounds innocuous and even reasonable at first blush. Sticking around is the least you can do for a company that’s paying for you to get a degree, isn’t it? It was nice of them to offer it in the first place and it’s not like you had to take advantage — you went in eyes wide open. So isn’t this villainous portrayal of companies completely unfair?
Well, no. I don’t think so at all. Before I explain it in simple terms, let’s consider a parallel scenario that I might cook up as a founder — one that would make you take in breath with a hiss in response to my utter evil. Let’s say that I had a department full of devs, and I equipped them with creaky, six year old computers to get their work done. That is unless, of course, they wanted me to buy them a nice, new, state of the art laptop with a docking station, an SSD, insane amounts of RAM and all sorts of other productivity-boosting horsepower that incurred a price tag of 10K.
Would I do this for them? Yes indeed! I’d want them to be productive and to have the best. The only caveat would be that if they were to leave the company within the next three years, they’d have to pay back the price of the new machine. It’s only fair because once I’ve bought it for them, it’s not like I can just turn around and sell it for 10K. And, they knew what they were getting into with their extravagant tastes and their wanting to keep up with their more productive coworkers at merit increase time. It’s hardly my fault if they feel pressure to keep up with the Jonses due to their own inability to make due with what they have.
Now, granted, you’ll be able to find differences between tuition claw back and my hypothetical one, but the principle is relatively similar. Employers dangle a means for (expensive) advancement in front of ambitious employees and then hold it over their heads like the Sword of Damocles after they accept. And, what’s more, there’s a completely rational, if Machiavellian, incentive for a manager to take for granted an employee that can’t leave the company without incurring a crippling financial penalty. Pfft. Why worry about morale or retention? It’s not like Jones is going anywhere; if he doesn’t like getting passed over for a promotion he can, well, haha, he can do absolutely nothing is what he can do.
Another ethical point worth contemplating in this arrangement is whether the student has any reciprocal leverage in the event the employer gets cold feet. That is, if your company lays you off while you’re working toward your degree, do they keep paying for it until you finish? Or, now that you probably can’t finish, do they reimburse you at your hourly rate for all of the hours you put into a degree for them that they stopped you from finishing? I’ve seen some pretty interesting claw back language in my time, but let me tell you, it’s never, ever gone both ways.
Tuition clawbacks are indeed nasty bits of trickery. They smash together two issues that should be separate for the sake of convenience: retention and employee perks. Tuition reimbursement is all about self-improvement and is a benefit. Claw backs are all about retention and are a deal with the devil. I mean, think about it. Do you honestly think that your employer, BigCo Inc, is making its budget and saying, “well, Alice wants to earn a Master’s Degree, and ponying up 10K for it could conceivably bankrupt us if she takes another job, so let’s do it anyway but let’s make sure that we don’t go out of business if she leaves. We’ll just pin the fate of the company on hiring a lawyer to chase her down and extract our pound of flesh.”
It’s completely absurd, and it’s absurd because investing in people as a benefit is a sunk cost to the company. It’s like buying new hires laptops and taking them to lunch or like giving them “mental health” days or buying them Pluralsight subscriptions. It’s an investment in relationship, morale, and mutual respect, and a company that treats it otherwise by weaponizing it is being jealous and petty. If you took a leadership course last year and they paid for it out of the 2014 budget, what exactly is the loss incurred by them when you depart this year? And, perhaps more interestingly, why does this loss magically evaporate in a year or two when the clawback agreement runs out? I would think that it would get more and more devastating each year since, ostensibly, the claw back agreement is to prevent them from losing out on a more knowledgeable, more productive you, and your knowledge and productivity are only going to grow.
So, as you read the rest of the post, don’t shed any tears for the poor, damaged companies that disguise Faustian bargains as career development and lazy retention measures as employee benefits. If they want to keep you, let them do it by persuasion rather than blackmail.
The Reality of Claw Backs
If you’re contemplating taking advantage of this career development opportunity and you are presented with a claw back clause, I would consider, up front, whether you are willing to incur that cost should you leave the company. And I’d take into account the lack of trust implied when evaluating whether you think the relationship will remain good in 1, 3, or 5 years. If this is a retention strategy the company employes… it probably won’t. So the good, early, and most ethical advice I can offer is to try to avoid the clause altogether. Tell them, frankly, that you want to take advantage of the reimbursement, but you don’t like the claw back provision and see what they say. You can always explain that it’s hard to trust them when they don’t trust you. Doesn’t hurt to ask.
But, in all honesty, if you really want the training, you might just go for it and hope for the best. It could be that you remain a happy employee in perpetuity and that it never comes up. God Bless. But even if you get unhappy and leave, the odds of them successfully clawing back the tuition from you are incredibly long. I’ve left more than one situation where I was ostensibly under the long tail of an expensive clawback and never heard a peep about it (in one case, the company hit hard times and was cutting pay and benefits, making my employment untenable for me, financially, and, in the other, I was prepared to repay if necessary). I’ve seen other people do the same in various situations. What I’ve never once seen or heard about in my career is a company successfully clawing back money from someone.
This makes sense when you think about it. The clawback provision costs the company nothing to put into the agreement, and it seems reasonable, appealing vaguely to a sense of fairness if you don’t actually think too hard about the slippery slope toward quasi-indentured servitude. It’s a lot of sound and fury that’s really just there to make you hesitant to leave. It’s not there to prevent you from leaving, and it’s certainly not there because it’s financially important to the company. If you blow them off and ignore a threatening letter or two, they’ll have to send a lawyer, and they’re going to have to spend more in legal fees to go after you than you probably owe them. And think of how ugly that might get from a PR perspective — BigCo Inc, sticking it to the little guy for chump change because evil. Would you want to go work at a company with a reputation for taking former employees to court over tuition for a Microsoft Certification course?
The claw back agreements are the corporate equivalent of having a motion-activated recording of a barking dog. They are there, quite simply, to discourage you from leaving. They aren’t there as a financial strategy for the company. (I’m not guaranteeing you that a company won’t pursue it — I’m just talking general strategy in the most common case).
I’m Getting Out — How Should I Handle It?
Okay, so you’ve weighed your options and decided that you just can’t take it at BigCo anymore? Everything seemed great when you signed Ursula’s contract, but in the years since, the company has moved to a building an hour away, instituted a ludicrous dress policy and brought in Michael Scott to manage you? How do you get out with your wallet intact?
The first thing that I’d do is pore over the agreement to see if there’s any loophole in it. Maybe there’s something about the wording that could be interpreted to mean that it doesn’t apply to you (I’ve seen these things worded downright stupidly before, such as accidental phrasing that it only applies if you finish a degree, but not if you just take coursework). If not, or if you can’t find it, have a lawyer look it over, preferably as a favor and with a promise that you’ll retain them if it comes to it. An employment lawyer can also educate you about the enforceability of claw back policies in your state as well. I am not a lawyer (IANAL), but I do know that these types of punitive measures against working stiffs tend not to do well in court (claw backs, non-competes, etc). Judges, for whatever reason, don’t seem to like it when companies use their legal teams to bury middle class employees in overreaching, terrifying legalese. Go figure.
All of that is to prepare you for someone bringing the claw back up after you’ve given your notice. Keep in mind, it’s unlikely that anyone is going to bring it up, but it’s good to know the lay of the land if they do. Why do I say that no one will bring it up? Well, who would? The signed claw back is probably sitting in a dusty HR drawer somewhere. Your manager may not remember and may not care. No one with a budget has a sticky note taped to their monitor that says, “remember if Bob quits to claw back tuition or we won’t make our Q4 numbers!!” Honestly, the most likely situation is that you are the only one who remembers or cares. What if they do? I’ll come back to that shortly.
The next thing to do is put the claw back on the table as a bargaining chip with your new company. If you’re going back and forth a bit on salary, tell them that you’ll go a few thousand lower on annual for a one-time signing consideration (bonus) that would cover the claw back. Lower annual for a lump sum isn’t a good deal for you, so make sure you’re not giving up as much annually as you’re asking for once. Alternatively, you could structure it so that new employer agrees to cover the claw back if and only if it happens — that’s a sweeter deal for them because they know as well as I do that it’s unlikely to occur, so don’t give up as much for that. Long and short of it is that you can have a lot of peace of mind about the claw back by getting your new company to help you out.
Now, back to BigCo and its pound of flesh. You’ve given your notice and you’re a little on edge over the last two weeks as you tread lightly and look to avoid The Conversation. But then it happens. Maybe your manager brings it up or maybe the HR guy mentions it in your exit interview. “Oh, looks here like you’re going to owe us some money for your tuition over the last year.” Whatever you do, do not argue! This is not a conversation you want to be memorable or in any way, period. Just say something vague like, “oh, really, I remember reading that over, and I could have sworn it wasn’t going to apply to me — guess I’ll have to go home and take another look.” At that point, there’s really not much more for them to say, and if they press it, just say the same sort of thing: “look, I really need to go back through my notes, so let’s touch base early next week sometime, and we’ll make sure everything gets squared away.” Be agreeable without agreeing. (The only exception is if they tell you that they’re going to withhold it from your last paycheck, in which case, you should tell him that you’ll be contacting an attorney, and then contact an attorney because there’s a pretty good chance that’s illegal).
After your last day, hopefully you never hear further about the claw back. Again, that’s the most likely scenario. But, if you do get a phone call, I’d be polite and vague and put them off. If it’s a voice mail, ignore it. A letter, ignore it. They’ll probably go away. This is a pain for them, and they’re dedicating people’s time to pursuing it, so remember, they’re likely to try to get the most bang for their buck without actually doing much. You might want to consult a lawyer on this stuff, but you probably don’t need one yet.
If they make enough noise that something bad seems imminent (a court summons, collections, etc), then it’s time to engage them. Get an attorney if you want or just talk to them. Tell them that you don’t have the kind of money that they’re looking for up front and that they’ll need to work out a payment plan over some number of months or years. Offer to pay them $100 per month or something. They’ll probably agree because to them, at this point, the most likely thing is that they’ll get nothing, so this is gravy. Pay it for a month or two, and then just stop. Wait for the late notices and ignore them, and, again, engage when it looks like they might do something. Repeat.
This last bit isn’t an exact science by any stretch, and a lawyer may happen along and say that I’m either too cavalier or taking the company too seriously, for all I know. Again, IANAL, and that’s just what I’d do in the situation. I don’t understand the law as much as I do the way businesses tend to operate and the amount of difficulty they have pursuing individuals for petty (to the company) amounts of money. I watched a company fail to re-collect an erroneous overpayment to an outgoing employee — literally, too much money deposited in his checking account by mistake. They hounded him with letters and sent him to collections or something, and never saw a penny. If they can’t collect on a clearly demonstrable, honest bookkeeping mistake, what are the odds they’ll succeed with an ethically murky scam like a claw back?
At the end of the day, it’s just not worth pursuing you for the company. The money is already spent, and going after you is a bad business decision. Drawing up nasty agreements, threatening you, sending letters, etc are all good business decisions (if generally bad faith actions) because they have little cost and relatively high potential upside. Actually going after you with time, lawyers, and other expensive investments? Not so much.
Spoiler alert: Ursula doesn’t win, in the end. Ariel makes the nasty deal with her, gets what she wants, and ultimately doesn’t have to pay Ursula’s terrible price. Your relationship with your employer certainly isn’t a fairy tale, and I can’t promise that you’ll marry a handsome prince as a crowd of friendly sea creatures looks on, but at least you’ll have a job you like more, and probably with all of your money intact to boot.