clawback

A clawback is the recovery of previously authorized funds.

A clawback provision is a contractual clause that permits an employer to recover previously paid compensation from an employee under certain conditions, such as misconduct, violation of company policy, breach of fiduciary duty, or financial restatement. These provisions became more widespread following the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, both of which emphasized corporate accountability and executive compensation reform.

In 2022, the U.S. Securities and Exchange Commission adopted Rule 10D-1, which requires national securities exchanges to establish listing standards mandating that listed companies adopt and comply with written clawback policies. The rule went into effect in 2023, and by 2024, listed companies were required to have compliant policies in place. Rule 10D-1 applies to incentive-based compensation awarded on or after October 2, 2023, that is received during the three years preceding a required financial restatement.

Clawback provisions have also been litigated in various state courts. For example, in Resurgence Asset Management, LLC v. Gidumal (2019), the court addressed an employee’s alleged breach of a contractual clawback clause.

In July of 2025, the House of Representatives narrowly passed an amended rescissions package including approximately $9 billion in clawbacks from previously approved federal funding for foreign aid, global health and development, and public broadcasting, among other appropriations.

[Last reviewed in July of 2025 by the Wex Definitions Team]

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