Clawbacks of Bonuses and Commissions: Wage and Hour Considerations

Summary

This practice note addresses the wage and hour implications of clawback and forfeiture provisions and provides drafting considerations for incentive compensation agreements. Clawback provisions require employees to pay back money to employers that they already received whereas forfeiture provisions provide that employees forfeit the right to receive money when specified conditions occur. The practice note covers the types of compensation often subject to clawback and forfeiture provisions and addresses the circumstances where payments may or may not be forfeited or clawed back. The note also discusses whether compensation subject to a clawback/forfeiture provision constitutes "wages" under state law.