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Shardul Amarchand amends 3-month salary clawback to apply only to fraction of pay (if not leaving for in-house or ill-health)

After amendment hand-cuffs half open (or still half closed)?
After amendment hand-cuffs half open (or still half closed)?

Shardul Amarchand Mangaldas has relaxed its earlier controversial policy under which it could claw back up to three months’ remuneration from fee-earners, clarifying that only the difference between standard remuneration and “enhanced” remuneration over three months would be “returnable” (and only if lawyers join a rival law firm).

In the words of an email sent by the firm to lawyers today, “the claw back only applies to the special fee enhancement and not the total annual fee”.

Or, in case that’s not clear, in yet other words: lawyers would just be liable to repay an amount equivalent to three months’ of the base pay hike itself.

This would significantly reduce the amount theoretically re-payable by leaving lawyers to very little, as the amended policy would likely also exclude the potentially much larger variable or bonus payment and would only consist of the difference between the standard monthly base pay and the so-called one-time “special fee enhancement” to base pay.

It is understood that for the period from 1 September 2018 to 1 April 2019, monthly base retainer pay was “enhanced” by amounts from around 10% upwards, while the variable annual bonus amounts were “enhanced” to a much greater extent in most cases.

The original policy was first reported by us on Wednesday.

It had been controversial for - on a standard interpretation - requiring lawyers (including non-equity partners) to repay a full three months of hiked remunerations to the firm, if they resigned the firm anytime before 1 April 2018 (see clause below).

However, earlier today, co-managing partners Akshay Chudasama and Pallavi Shroff have sent the following email to the firm:

We are writing to address certain misunderstandings which have been brought to our attention:

1. Two staged increments - In addition to the annual fee enhancement that we pay out, we have rolled out a one-time special fee enhancement to reward all our teams, recognising their commitment, dedication and high service standards.

2. Claw back — the claw back only applies to the special fee enhancement and not the total annual fee. It is the pro-rata additional amount (i.e. the difference between the annual fee enhancement and the special fee enhancement from 1 September 2018 (on a pro rata basis)) that may be returnable. Exceptions to this shall be considered at the management’s discretion e.g. for reasons of ill-health or going in-house. The fee revision letter may be treated as clarified to this extent.

It is clear that with the special fee enhancement and the variable pay policy of our Firm, this is a significant increase in fee for all. We hope this resolves any misconceptions you may have and we look forward to seeing you work with renewed enthusiasm and vigour.

The original clause incorporated into retainer amendment letters to lawyers on 5 September had read that the:

enhancement in retainership fees is conditional upon completion of a minimum of 7 months as a retainer with the Firm from September 1, 2018, failing which, three months retainer fee will be payable to the Firm within 30 days of resignation or on the agreed last working date

We have reached out to the firm for further comment.

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