Security Clearance Employment Agreements

I’m Sean Bigley, and I’m here with my co-host Lindy Kyzer of ClearanceJobs.com. We’re talking this segment about security clearance employment agreements. Lindy, I got to say, when you first broached this topic idea with me, I wasn’t entirely clear what you were getting at here. So, I guess, why don’t we start there?

Okay, way to throw me under the bus, Sean. This is a topic I think you’ve talked about a little bit with ClearanceJobs maybe to some extent or maybe not, or maybe it’s a figment of my imagination. But it’s a question that we’ve definitely gotten, and it’s about the topic around clearance sponsorships or upgrades or all of that, and folks wondering, “Hey, my company’s upgrading me for a security clearance. Can they require me to stay?” My understanding would be, unless it’s a part of your employment agreement, no, they wouldn’t.

I’m familiar with this from the standpoint of folks working in tech. We see that, where if your company gets a certain certification for you, for instance, they’ll make you sign something that says you have to stay for a certain number of months to repay the cost for them getting that certification.

I feel like I have never seen an agreement around security clearances, and I think it’s really a topic that I feel like you’ve addressed with us a little bit when it comes to the security clearance process. There’s some wonkiness around what is or isn’t applicable and how that would relate to employment law and how it would differ by states. But I definitely wanted to see if that was something that you had ever seen or come across, where a company did require a certain term of service with a clearance upgrade or anything specific to employment policies or laws in relation to the clearance process. Is there a reason a company or an employer wouldn’t want to have an agreement like that?

Yeah, so I guess there’s a couple different pieces to this. First of all, I have to give the big caveat that, as you referenced, employment law is something that varies quite a bit by state. So outside of the unique context of federal employees and to some limited extent, for example, as it pertains to polygraphs and things like that, federal contractors, generally speaking, state law is going to govern here when it comes to contractual agreements and things like that. So I can’t speak other than in generalities.

If you are somebody who’s listening to this and finds yourself in a situation, where you feel like, “Hey, my employer’s taking advantage of me,” or you’re on the flip side of this and you’re an employer and you’re looking at potentially drafting an employment contract, you definitely want to get legal counsel in your state who specializes in employment law matters.

Generally speaking, yes, this is something that I’ve seen. It’s somewhat rare, I think, because most employers acknowledge that at the end of the day, they’re not the one that’s footing the bill directly for the clearance, although certainly they have overhead and they have other reasons why they’re not going to be thrilled with an employee just jumping ship after they’ve invested the time and effort and resources to get this person cleared.

I think there’s two sides to this coin. There is the, is it legal and legit side to put something like this in an employment contract? Then there’s the, is it a good idea as an employee to burn the bridge and basically jump ship from an employer after they’ve invested time and effort getting you cleared just because a better paying opportunity or something has come along? I can certainly speak to the former. Lindy, I think you’re probably better situated to speak to the latter because you obviously see the employer side of this.

On the legalities piece of it, again, just generalities here, employment contracts have a lot of latitude in most states with what and can’t be included within the limits of the law, obviously. One of those outer limits is you can’t put something fraudulent in an employment contract. If the employer is saying, “We’ve spent money to get you this clearance, and we’re valuing it at X amount of dollars. If you leave our service prior to X date after you get the clearance, you owe us that amount of money back,” that’s probably not going to fly. Believe it or not, I’ve actually seen that on a couple of occasions over the years, where employers assign a specific dollar amount to the clearance and they say, “This is what you owe us.” I think that employers are going to have a hard time justifying that if it came down to it.

Now, there is such a thing as liquidated damages in the law. If an employer says, “Well, we can’t really assign a dollar value to the cost of what it is that we have to spend to keep you on overhead while you’re getting the clearance, so we’re going to roughly approximate it as X, and that’s what you owe us,” that might be a different story. Depending on the state, depending on the amount of liquidated damages, that may hold up in court.

There’s a lot of different factors to this, but, Lindy, why don’t you talk to the, is it a good idea aspect because I think that’s something that a lot of employees may overlook when they’re just looking at the bottom line.

As we talk about, it’s a matter of burning a bridge with an employer if you recently come into an upgrade. Now, I do think we are in a different situation now because it is such a candidate’s market. I tend to say to employers: This is where you really need to think, and if you are putting in a candidate for a clearance upgrade and it’s tied to their upward mobility within your company, you probably are going to be in a position where you should proactively pony up some additional cash to that employee in order to get them to stay.

I’m becoming a total proponent of the whole person concept, Sean, for basically all aspects of life because I think we can’t judge this universally. I don’t know of any precedent with employers setting up contractual obligations around a clearance, and I think that’s because it is often a very much a case-by-case basis.

So for the individual applicant or folks who are going in for an upgrade, thinking through what it means for their career in the short and the long term, if they jump ship now and if they’re going to burn a bridge with their current employer. But also then thinking through, hey, is their current employer potentially not giving them adequate compensation based on their career credentialing and considering how a security clearance is a career credential? We’re getting ready to launch our security clearance compensation report results, and we see the higher the level of your clearance, if you go from a DOD clearance to an IC clearance, your compensation does increase. That’s data that employers should be aware of and knowing that even if there’s not a contractual obligation on your side or on their side, there is a benefit to increasing compensation as clearance goes up because we just see overall across the population that is the case. Compensation does go up. It pays to get those higher level clearances. So for employers, they should just generally be aware of that.

Yeah, I think it’s always becomes tough because I see that come up all the time too, where we have candidates tell us all the time, “Hey, an employer told me that this security clearance was costing them X, Y, Z.” I don’t know if you mentioned that. I think that becomes a really tricky point for employers to say because we know the government is actually the one fronting the cost for the clearance investigation. Employers have those overhead costs, but obviously that can vary a lot by employer. But do you have examples maybe even that you’ve seen candidates who have come to you in some capacity in your practice who have said, “Hey, an employer is telling me they paid X, Y, Z for my clearance”? Has that ever come across?

Yeah, yeah. That’s what I was getting at earlier. I’ve seen this off the top of my head I think twice in my career. Again, not very common, but it does happen, usually with smaller contractors. I think what they are trying to get at here, and they’re un-artfully doing it, is they’re trying to get at a liquidated damages provision where they’re saying, “It’s tough for us to estimate what it costs us to have you on overhead while this six month or whatever process unfolds. So if you jump ship, we’re going to assign a value to it of whatever, and then that’s what you owe us.”

If they draft it the right way, in a lot of states, that is totally legit. If both parties are going into a contractual relationship with their eyes open and there’s no hiding the ball and the liquidated damages provision, if that’s what it is, is clear and there’s no ambiguities, that may hold up. But, again, it depends on the jurisdiction. It depends on whether there’s a reasonable relationship. It’s not a penalty. In contract law, occasionally you see situations where the liquidated damages clause is so high that it just starts to look like a penalty, and that’s not enforceable. There has to be some rational relationship between what it is that the employer’s claiming is the amount of money that they quote, unquote paid to get you this clearance and realistically what it actually costs them to keep you on overhead as the employee.

The times that I’ve seen it, I’m trying to think back in my memory because it’s been a number of years since I last saw it, but I believe the last one I saw, the employer was assigning a value of $10,000 to the clearance that they were getting for the candidate. Again, I think when that happens, you have to ask yourself, as the employer, how are we getting to this number? Is there any rational basis between this number and what it is that it’s actually costing us to keep this person on the books while things play out? That’s definitely a question you want to ask yourself as an employer if you’re thinking about doing this.

But also as an employee, you want to think about, okay, is there other work, for example, that the employer is having me do that’s of value to them while I am getting the clearance, while I’m waiting? So if you have a lower level clearance, for example, and you’re being put in for an upgrade, is there sufficient work that I can be doing as the employee while that upgrade is processing such that if it doesn’t go through or if I decide to jump ship after it goes through and the employer turns around and says, “You owe us money,” I can say, “No, I was providing a service of value for you and you were getting some benefit out of having me on overhead during that time.” Whereas flip side of that, if you’re sitting around twiddling your thumbs and the employer doesn’t have work for you, that may play into some aspect of a liquidated damages clause.

Bottom line, this is obviously a very, as you said earlier, wonky area of law. I think that for most federal contractors, this is not necessarily going to be a problem or something that they have to confront, with the exception of the part of this equation, is this a good idea? Because at the end of the day, obviously there’s the dollars and cents, but then you got to look at the longer term. If you have an employer who really feels like you burned them and they’re being interviewed by a background investigator, I think that’s something that people forget. There are questions that usually come up about, “Have you violated an agreement that you had with a prior employer?” If you have to answer that yes, that’s not a good look. If the employer is badmouthing you to background investigators saying, “This person cut and run. They cost me a bunch of money. They violated an agreement that we had,” also not a good look. You got to look at the big picture here, obviously.