NEW YORK (Bloomberg) — American International Group Inc. employees unwinding the insurer's derivatives may leave in March if they don't get their promised retention bonuses, said a lawyer representing some of the workers.

Staff in the Financial Products unit may depart if the company, under pressure from regulators, doesn't pay the $198 million it previously committed, Andrew Goodstadt, a partner at Thompson Wigdor & Gilly LLP, said yesterday in an interview. There will also be instant litigation against New York-based AIG if the awards aren't sent, he said.

"Some or all of my group would be willing to go, these are very smart, talented people who've made a lot of money for the company," Goodstadt said. "If they don't get their payments, under Connecticut law that's a constructive discharge," he said, using a term for a situation in which an employer makes conditions intolerable. He said he represents about 20 workers at Wilton, Connecticut-based Financial Products.

AIG enraged lawmakers this year after handing out $165 million in retention awards to staff at Financial Products, the unit blamed for pushing the company to the brink of collapse with bets on subprime home loans. Remaining employees are now working to reduce the number of derivative trades as AIG sells assets to repay loans included in its $182.3 billion bailout.

Kenneth Feinberg, the Obama administration's special master on executive pay, has told AIG to reduce the $198 million in March 2010 retention bonuses, according to an October report from Neil Barofsky, the special inspector charged with policing the Troubled Asset Relief Programme. Feinberg didn't specify how much the payments should be cut, according to the report.

Financial Products workers are frustrated with the dearth of information about the retention pay and their 2010 salary, Goodstadt said. Feinberg rejected AIGs proposal to give the workers raises and said they will get only their base salaries this year, according to an October letter. He is in ongoing discussions with AIG regarding these workers, according to the document.

"If there is an unrealistically low cap on compensation, certainly they'd have motivation to leave," Goodstadt said. "If theyre getting paid less than what the market would bear in a free economy, why work for that company?"

Feinberg wanted to cut the March 2010 payments to less than $100 million, according to New York Magazine, which reported the workers' threat to leave in an article in the issue dated November 30. Gerry Pasciucco, the former Morgan Stanley executive appointed to wind down the AIG unit, offered to trim the payments to about $115 million, the magazine reported. Mark Herr, an AIG spokesman, declined to comment.

AIG has lost more than 50 managers to competitors since its September 2008 bailout. Chief executive officer Robert Benmosche sought to reassure workers last month by saying that the vast majority of them will be unaffected by Feinberg's rulings.

In March, former CEO Ed Liddy had to defend the bonuses before Congress and said that some AIG employees received death threats. Protesters visited the Connecticut homes of two Financial Products executives. The negative publicity hurt sales of life insurance and retirement products around the world, AIG said in regulatory filings.

The insurer's bailout includes a $60 billion Federal Reserve credit line, a Treasury investment of as much as $69.8 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the company.