Negotiating Employment Agreements

By

Neil Klingshirn

Employment Agreements

Compensation and benefits. Duration. Duties. Arbitration. Non-compete and NDA. Severance.

Non-competition Agreements

Non-competition. Non-solicitation. Non-interference. Geographic scope. Duration Enforcement

Severance Agreements

Severance amount. Unemployment compensation. Release of Rights Tax treatment of the severance payment. Lump sum vs. salary continuation. Benefits continuation, especially health

insurance;

Severance Agreements (cont.)

401K Rollover. Outplacement services. Retraining opportunities. Eligibility for rehire.

Severance agreements (cont.)

Use of office and support staff. References and non-disparagement. Confidentiality. Enforcement.

Negotiating Favorable Terms

Know the law. Create leverage. Identify goals.

Employment Law Overview

Contracts Statutes Common law

Contracts

Wages for work. Employment at-will, unless otherwise agreed. Other mutually acceptable terms. Remedies for breach.

Statutory Rights

Discrimination. Retaliation. Trade Secrets. Wages and Hours. Benefits and Leaves. Safety and workers’ compensation. Civil service.

Common Law Employment Rights

Implied contracts. Public policy protections. Minority shareholder/employees. Duty of Loyalty. Privacy.

Employment & Non-compete Leverage

Your value. Competition for your services. Competition for your job.

Employment & Non-compete Goals

Maximize:– Compensation and benefits.– Duration. – Severance.

Minimize:– Restrictions.

Avoid:– Arbitration. – Non-competes and NDAs

Employment Agreement Negotiation

Obtain and evaluate the offer. Craft a counter.

– Be realistic.– Leave room to move.

Justify your position.– Take the employer’s perspective.– Back it up with objective data.– Blame it on a higher power (e.g., the spouse).

Compensation, Duration & Severance

Compensation is market driven, but:– Define bonus, commission terms;– Vacation, sick time is negotiable;– Consider stock options; – Avoid equity as compensation.

Duration is usually at-will, but try:– One year, with automatic renewal (evergreen);– Notice for terminations without cause;

Severance is ticklish, but try:– Uncertainty of the position;– Trading off for duration, non-competition;

Non-competition

Just Say No. Limit restrictions to:

– Your own customers;– One year or less;– Those imposed by Trade Secrets laws.

Trade for: – severance, – compensation.

Arbitration

Just Say No. Limit to violations of the Agreement

– Carve out statutory rights;

Reject limitations on rights and remedies; Shift costs to the employer.

Severance

Severance plans. Know your rights.

– Violations = claims.

Know the value of your claims.

Severance (cont.)

Obtain and evaluate an offer. Craft a counter.

– Be realistic.– Leave room to move.

Justify your position.– Take the employer’s perspective.– Back it up with evidence.

Be patient.

Special Severance Issues

Unemployment compensation.– Agreement not to contest.– Pay severance as lump sum.

Health insurance– COBRA.– Stimulus subsidy.

Eligibility for Re-hire.

Carve Outs from the Release

EEOC’s right to investigate; Right to apply for unemployment; Wage and Hour claims; Pension, 401(k); Claims arising after the agreement.

Get it in Writing

Review with an attorney. Waiting periods. Beware of the boilerplate.

The End

“The Best Time to Understand an Agreement is Before you Sign it.”