Employment Agreements

Executive employment agreements come in many different varieties, from short-form letter agreements, to multi-paged formal agreements. The attorneys of Lindabury’s Employment and Corporate groups work with businesses and executives alike to draft, negotiate and enforce employment agreements.

Executive employment agreements should clearly outline the term of the agreement. Will the agreement last for a fixed period of time or automatically renew absent written notice by one party, or will the agreement continue until either the employer or the executive takes affirmative action to terminate the employment relationship?

The employment agreement should describe the executive's position and employment duties along with whether the executive will be expected to serve on the employer's board of directors, any committees or provide services to any affiliates of the employer.

The terms of an executive employment agreement, including the types of compensation and benefits included in the agreement, can have significant tax and securities consequences for the employer. The types of compensation and benefits included in the employment agreement will depend on the negotiation process and circumstances such as the employer's business needs, industry, the executive's position and the employer's internal practices.

The compensation and benefits components that are frequently included in executive employment agreements are base salary, annual bonus provisions including discretionary and performance based bonuses, signing bonuses, stock options and perquisites, and participation in employee benefit plans.

Severance provisions of an executive employment agreement must be carefully drafted to avoid inadvertent tax penalties and other adverse consequences, including disputes regarding payment obligations. The agreement should outline the effects of termination by the employer without cause, termination by the executive for good reason, the executive's death and termination of the executive's employment due to disability. The employment agreement should also specify how the executive's eligibility for a bonus and participation in certain employee benefit plans is affected by any termination event as well as any post-termination restrictive covenants.