lacba what every lawyer should about drafting and negotiating executive employment agreements

What is an example of an executive employment agreement?

For example, many executive employment agreements provide for bonuses to be paid, either at the discretion of the company based on subjective performance or upon the employee meeting objective performance targets, such as revenue or net income goals.

How can I maximize the value of executive employment agreements?

Competent counsel experienced in employment and compensation law can help to maximize the value of executive employment agreements for all concerned. Andrew P. Sherrod is a partner and co-chair of the Employment Law Practice Group at Hirschler Fleischer (Richmond, Va.).

How effective are employment agreements?

Effective employment agreements strike the appropriate balance between protecting the company from employee misconduct and providing reasonable job security for the executive. As a parallel to “for cause” termination on the part of the company, some employment agreements provide the executive with the ability to terminate early “for good reason.”

Do I need an employment lawyer to sign a contract?

Before signing a contract, high-level executives often use an experienced employment lawyer to identify areas that can be negotiated in your favour, potentially problematic clauses to be aware of going forward, and whether more punitive portions of the contract are enforceable.

What are the disadvantages of hiring a lawyer to draft a contract?

On the other hand, some drawbacks of hiring a contract review attorney may include:Spending unnecessary funds on hiring an attorney to review a simple and straightforward agreement;Having to wait for an attorney to review a contract, which in turn, will delay signing it and moving forward with a business deal;More items...•

What are the advantages of hiring a lawyer to draft a contract?

Contract lawyers by your side can provide these seven compelling advantages:Help you better understand the contract. ... Identify potential liability isses and resolve them. ... Ensure the contract is valid and legally enforceable. ... Ensure new regulations and applicable state laws are considered.More items...

What role does an attorney play in helping businesses negotiate and form contracts?

A lawyer for contracts will help you ensure that any contracts you enter into are executed properly so your interests are protected and the purpose of the contract is achieved. A contract lawyer is generally a professional who specializes in this type of work.

What do you think is the most important reason to hire a lawyer when facing litigation?

Their job is to advocate your best interest and to make the best case possible for you. More importantly, your lawyer knows how to file court documents, recognize unfair treatment or bias from a judge.

What are the important points that should be taken into consideration while drafting contracts?

While making a draft one must consider various issues including the subject of the contract, goods to be manufactured, amount of consideration, indemnity, dispute resolution, et cetera. Once a draft is complete, it must be reviewed.

Is a draft agreement legally binding?

It's easily done: following months of negotiations, a draft contract is ready for signature but other things take priority, work begins and the contract never gets signed. Six months later, a dispute arises – but, as the draft hasn't been signed, it isn't binding.

How do lawyers negotiate contracts?

A lawyer usually recommends that contracting parties talk to each other directly before getting him or her involved in the negotiations. The communication can occur over the phone or via email, and it should involve discussion of the main points and getting an agreement on the proposed changes.

How do you negotiate an employment contract?

While you can adjust the minutiae of your contract negotiation strategy for each potential employer, there are 10 elements to build your expectations around.Have your end goal in mind. ... Be realistic. ... Realize that everything is negotiable. ... Think beyond your salary. ... Be prepared to walk away. ... Know how to present yourself.More items...

How do you negotiate a contract agreement?

10 Tips for Successful Contract NegotiationStart with a draft. ... Break it down into smaller pieces. ... Keep your initial terms simple. ... Know your “why.” ... Prioritize your key objectives. ... Ask questions and understand your counterparty's motives. ... Come prepared with research.More items...

What's the difference between attorney and lawyer?

Attorney vs Lawyer: Comparing Definitions Lawyers are people who have gone to law school and often may have taken and passed the bar exam. Attorney has French origins, and stems from a word meaning to act on the behalf of others. The term attorney is an abbreviated form of the formal title 'attorney at law'.

How important is a good lawyer?

An attorney will guide you through the entire legal maze and provide you ample protection. Adopting a child , starting a new business or filing a divorce involves legal processes which you might not be versed with. Hiring an attorney will help you go through these steps well armed with the right legal knowledge.

How much does it cost to hire a lawyer?

You can pay anywhere from $50 to thousands per hour. Smaller towns and cities generally cost less while heavily populated, urban areas are most expensive. The more complicated the case and the more experienced the attorney, the more you'll pay. Lawyer fees can range from $255 to $520 per hour.

What are the advantages and disadvantages of a lawyer?

Top 10 Being a Lawyer Pros & Cons – Summary ListBeing a Lawyer ProsBeing a Lawyer ConsLawyers can earn really good moneyLawyers often work long hoursBeing a lawyer implies excellent career optionsStress can be enormousLawyers can work in many different jobsBeing a lawyer may affect your family life7 more rows

How do you draft a legal agreement?

Information required before drafting an agreementWhat does the drafter hope to achieve?Who are the parties to the agreement?What is the subject matter and nature of the agreement?From when will the agreement take effect?What does the other party reasonably hope to have included in the agreement?More items...•

Why is it important to have an executive employment agreement?

To maintain the proper balance between the interests of the company and the executive , drafting effective employment agreements for key personnel is essential. While not an exhaustive list, below are five important aspects of executive employment agreements that will nearly always warrant consideration during the negotiation process.

When an employment agreement is structured so that it can be terminated early by the company without cause or by the executive for?

When an employment agreement is structured so that it can be terminated early by the company without cause or by the executive for good reason, a severance payment is typically involved. Awarding severance in such situations is a normal cost of recruiting top talent who have other options and want financial security in the event that their new role does not play out as envisioned through no fault of their own.

What is the purpose of an employment agreement?

Effective employment agreements strike the appropriate balance between protecting the company from employee misconduct and providing reasonable job security for the executive.

What are the grounds for termination of executive employment?

In such cases, the company should, at a minimum, include a provision allowing for the agreement to be terminated early “for cause.” Typical grounds for termination “for cause” include certain criminal convictions, dishonesty and uncured performance issues — to name a few.

How long does an executive have to give notice of termination?

It is also common for executive employment agreements to contain terms allowing for early termination upon a specified amount of notice (30 days, 90 days , etc.). The notice periods provided for in the agreement are subject to negotiation and typically depend upon the bargaining power of the respective parties. In most cases, for a termination-upon-notice provision to be acceptable to an executive with sufficient negotiating leverage, a meaningful severance payment by the company will be required.

Why is confidentiality important in an employment agreement?

Including confidentiality obligations in the employment agreement, along with enforcement mechanisms in case of a breach, is often a more efficient and effective means of protecting the company’s secrets than relying upon the employee’s common law or statutory duties. 2.

Why are non-compete clauses important?

In most states, courts will uphold non-compete clauses in employment agreements, provided the restrictions are reasonable, as viewed from the perspective of the employer’s legitimate business interests, the employee’s need to earn a living and public policy concerns. The reasonableness of the provision’s functional and geographic scope, as well as its duration, are key considerations.

Why do you need an employment lawyer before signing a contract?

Before signing a contract, high-level executives often use an experienced employment lawyer to identify areas that can be negotiated in your favour, potentially problematic clauses to be aware of going forward, and whether more punitive portions of the contract are enforceable.

What are the categories of executive compensation?

These categories are: Base Salary. Short-Term Incentives.

Why are long term incentives important?

Similar to short-term incentives, long-term incentives are often incorporated into executives’ compensation plans to ensure that executives are productive and effective in their jobs. Long-term incentives are often offered to high-ranking executives whose work directly impacts the well-being and success of the company.

Can an executive receive stock options?

Depending on the stock option plan, the executive may receive stocks of the company as part of their compensation. These stocks can only be accessed after certain conditions, which are pre-determined per their contract, have been met.

Is an employment contract for an executive more challenging?

Employment contracts for executives are more challenging. It seems that the more senior a position, the more complex a compensation plan is.

Why do courts try to avoid harsh results?

Courts will try to avoid harsh results, when possible. Underpinning the result in this case is a sense that the courts were seeking to avoid a potentially unfair and harsh result for Balles, who had provided years of valuable service to Babcock. Employers considering terminating an employee for cause should not only adopt a reasoned interpretation of the contract but also consider what process is contractually due to the executive before proceeding.

What did Balles sue Babcock for?

Balles then sued Babcock, seeking to recover severance pay, invalidate Babcock's share repurchase and recoup the dividend payments. Babcock countersued Balles, alleging that he breached his fiduciary duties to the company, among other claims.

Did Balles meet with the board of directors?

During the investigation, Balles was not allowed to meet with the company's board of directors or submit information to the board. Babcock also did not provide Balles with an opportunity to cure (i.e., remedy) his conduct. The board voted to fire Balles for cause, resulting in the forfeiture of his severance and the repurchase of all of Balles' shares in the company for a nominal amount, which meant Balles missed out on dividends worth over $1 million.

Did Balles get reimbursed for Babcock's affair?

Balles had also criticized Babcock and his superiors in text messages to the woman and falsified a travel reimbursement request to conceal the affair (although the trial judge found that this did not result in Balles receiving any undue reimbursement).

Who is Eric Balles?

Eric Balles was an executive and shareholder of Babcock Power Inc.

Does SHRM offer legal advice?

SHRM provides content as a service to its readers and members. It does not offer legal advice, and cannot guarantee the accuracy or suitability of its content for a particular purpose. Disclaimer

Did Balles violate the common law?

The court also held that there was no error in the trial judge's determination that Balles' conduct did not rise to the level of "fraud" under the common law definition, which requires both fraudulent intent and harm and which were found to be lacking here. The SJC also agreed that Balles did not engage in "gross insubordination" because he did not disregard a direct order, rejecting Babcock's argument that Balles met that standard by violating company policies.

Protect The Company’S Confidential Information and Property

Restrictive Covenants Are Important, But Should Not Overreach

Set Clear Grounds and Procedures For Termination of The Agreement

• Many executive employment agreements are for a set term, often with a mechanism for renewal. In such cases, the company should, at a minimum, include a provision allowing for the agreement to be terminated early “for cause.” Typical grounds for termination “for cause” include certain criminal convictions, dishonesty and uncured performance issues —...

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Consider An Appropriate Severance Payment Upon Early Termination

Create Compensation Structures That Reward Strong Performance and Loyalty

Base Salary

Short-Term Incentives

Long-Term Incentives

Benefits

Perquisites

Severance and Change-in-Control Agreements

• Executive compensation plans may also include provisions regarding what the executive is entitled to should her employment be terminated or should the company undergo a change in ownership or control. Severance Agreements Under the Ontario Employment Standards Act, all employees are entitled to severance pay upon termination without cause. However,...

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