Executive Employment Agreements – Part 1

If you are a key executive employee, your employment contract sets forth the obligations and responsibilities between you and your employer. In other words, what each party agree to do (or not do) for each other. This contract also sets forth your executive compensation package, including benefits, equity and any severance payments. Other provisions commonly included in employment agreements are your position, conditions of employment, compensation, cause for termination, non-disclosure/non-compete provisions, and dispute resolution methods.

Importance of Employment Contract to Executives

Don’t make the mistake of thinking an employment contract is primarily boilerplate language that cannot be negotiated. It is important to not only review the provisions of the agreement, but to also have an experienced attorney review it. You will be bound by this contract for a very long time, so it is imperative that you are protected to the greatest extent possible.

Most executive employment contracts are “at will,” which means your employer can terminate your employment with or without cause, so you will want to make sure the contract provides you with protections if this clause is used. For instance, if you are terminated, do you get to keep your signing bonus? Are you entitled to receive severance pay? These types of questions need to be addressed in your employment contract.

Importance of Employment Contract to the Company

Having an employment agreement with key employees is important to the company because it provides stability. It helps prevent misunderstandings and disputes. However, it also allows the company to maintain flexibility in case changes are needed at a later time. For example, the “at will” clause permits the company to terminate executives at any time.

The company can also set limits on what an executive is entitled to receive in terms of salary, benefits, severance and other compensation terms. The company can protect itself from prior discussions or understandings by excluding them and limiting the entire agreement to the terms of the written contract. Finally, providing employees with a clear, written employment agreement encourages confidence and top-quality performance from key employees.

If you need the advice and guidance of an experienced business attorney, contact our office today to schedule an appointment with one of our knowledgeable attorneys. We can help answer questions regarding employee retention or any other business issue you are facing.