Prudent executives should utilize the services of an employment lawyer when they are initially hired and offered an executive compensation agreement, but they seldom do. Making sure an executive compensation agreement is properly drafted in favor of the executive employee, from the get-go, is of paramount importance. Otherwise, the executive risks not being properly paid, being fired without notice, having an illusory employment contract, or ending up in litigation. Lesson: Executives should hire their own employment lawyer to protect their rights during the drafting process of their executive compensation agreements. Us lawyers often appear on the scene once the executive is being terminated, has been fired, the executive realizes they will never be properly paid under their executive compensation agreement, money is due under the agreement, or there is clearly the need to sue the employer. Sometimes they are asked to assist in severance negotiations when a high level employee is being fired. As an executive employment agreement lawyer, they represent executives in negotiating executive contract terms, including compensation, relocation, tax gross-ups, restricted stock and options. The best time to negotiate an employment contract is before an offer is made or accepted. However, there may be times when you need to re-negotiate your employment agreement such as when there is a change in executive leadership or reporting relationships. An employment contract attorney can help set up a well-planned executive employment agreement that will pave the way for a successful executive/company relationship. However, compatibility with company and fit of skills and personality, as well your own intelligence information on the company’s current business status and potential, are key to the success of the partnership. The company’s conduct during the negotiations can offer you valuable insight into the company’s decision-making process, motivations and flexibility, as well as your potential fit. Below are ten critical areas that executives and companies should both consider negotiable to assure that both are treated fairly. Executives should utilize the services of an employment lawyer when they are initially hired and offered an executive compensation agreement. Making sure an executive compensation agreement is properly drafted in favor of the executive employee, from the get-go, is of paramount importance. However, executives rarely hire their own employment lawyer to protect their rights during the drafting process of their executive compensation agreements. Severance AgreementA severance agreement is an agreement between an employer and an employee which specifies the terms of the employee’s separation from the employer. A severance agreement is typically a legally binding document, but it can often contain tricky and confusing language. A severance agreement will contain a number of provisions that can affect your legal rights. There are a number of common important sections in a severance agreement, including provisions regarding: Can I Negotiate the Terms of a Severance Package?Often, companies will have employment policies that state the way that severance packages are determined. These policies will generally include provisions like when you are entitled to severance pay; how it is calculated; and what the package will include. This could also be addressed in an employment contract between the employer and employee. If this is the case, the employer would be legally entitled to offer you severance pay according to the contract terms. However, you may sometimes have an opportunity to negotiate your severance package. If that is allowed, the following factors will probably be brought up during negotiations with your employer: Some Common Severance Package DisputesAs with any type of employment agreement, severance packages can sometimes form the basis of legal disputes or conflicts. These can range from minor disputes to company-wide violations that affect many employees. The drafting and negotiation of executive-level employment agreements, and in particular severance packages, require a careful eye toward compliance with principles of contract and relevant employment laws. Severance agreements entered into must offer some compensation or benefit beyond that to which the employee was already entitled (i.e., final pay) in exchange for any agreements not to sue or a relinquishment of rights. Additionally, the agreement must be made available for the employee to consider for a certain period of time before she or he is forced to sign, whether the agreement is a result of termination, layoff, staff reduction, or changing ownership. Additional rules apply for workers over 40 years old; we can help make sure your severance and release agreements comply with the Older Workers Benefit Protection Act and other applicable laws. If you are an executive in the process of exiting a company, you will want experienced counsel to examine the severance package offered to determine if it adequately compensates you for any rights you have relinquished, and to negotiate a more favorable agreement on your behalf if the offered agreement is unfair. A very good attorney will also help to ensure that you have a sufficient right to work within your industry so your acquired skills can be utilized to their fullest. Unless you have a contract of employment with a specific term of employment, employers typically do not have an obligation to provide a Separation Agreement or severance pay. Generally, however, an executive employee holding a high or mid-level management position will be asked by many employers to sign a Separation Agreement, which usually includes a general release of the employee’s claims against the employer as well as additional provisions, including confidentiality and protection of the employer’s proprietary information. Particularly with the termination of executives and managers, it is important to understand the types of rights you are being asked to release as well as the extent of the confidentiality and other obligations. Additionally, employers sometimes seek to add a non-competition or non-solicitation provision, also called restrictive covenants, to Separation Agreements. At a time when companies are reducing their workforces, individual employees often do not receive adequate severance compensation. Many individuals simply assume they have no leverage or basis for demanding more from their employer at the time they are presented with a severance package and release. However, often these employees, either individually or as a group, will have valid legal claims that will enable them to negotiate a more appropriate severance package as they move forward in their careers. In addition, in a down economy, many employers are attempting to cut corners and not provide their employees with compensation and benefits they are entitled such as continuing medical insurance coverage and unemployment compensation. Once an employee asks for a better package or different terms for a Separation Agreement, the employee may have technically rejected the employer’s offer. Therefore, an employee runs the risk of losing the guaranteed offer by making a counteroffer. However, in practice most employers will typically not rescind their offer if an employee makes a counteroffer, although that is a possibility. Consequently, it is imperative that you seek legal counsel who is knowledgeable in such matters. Severance & Change-in-Control AgreementsSeverance agreements provide for payments to executives in the case of voluntary or involuntary termination and can play a constructive role in the recruitment and retention of key employees. Severance agreements are a way of mitigating the risk an incoming executive takes by leaving other employment opportunities and thus are often included in agreements for executives hired from outside the company to encourage him or her to leave a prior employer in case the new arrangement sours. Severance for longer-serving executives can be oriented in a way as to protect the executive’s income, thereby maximizing retention, while offering the company protection through the use of non-compete agreements and “Good Reason” provisions which ensure a severance agreement does not become an incentive to leave. Change-in-Control agreements sometimes referred to as “golden parachutes,” compensate executives for loss of job due to mergers or sale. Executives are fiduciaries, charged with taking action in the best interest of the company and the shareholders. However, CEOs face inherent difficulties when it comes to a merger or a sale of the business, the end result of which will result in the executive losing their position. Change-in-Control agreements are structured to encourage executives to seek out and enter into sale or merger opportunities when it is in the best interest of the shareholders without having reservations about losing their own positions. Free Initial Consultation with LawyerIt’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
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