Connecticut Executive Employment Lawyers
The executive employment lawyers at the Garrison Law Firm are well versed in all aspects of entering into and exiting executive employment agreements. Our lawyers identify when it serves our executive client to be guided “behind the scenes” in their own negotiation and when it is better for us to “surface” to the employer’s counsel. We also negotiate and, when necessary, litigate breach of contract claims.
A significant part of our practice involves coaching executives through all aspects of their careers, from onboarding to separation and every significant event in between. We regularly guide executives on how to manage challenging bosses, coworkers, subordinates, and workplaces.
If you have an issue related to your employment as an executive, contact an experienced Connecticut executive employment lawyer to understand your options. Nothing can replace the bespoke guidance we can provide in one-on-one sessions. Still, here are the answers to four of the most common questions we receive from our executive clients:
1. What Information Should My Executive Employment Contract Contain?
As with most advice about employment law, there is no one-size-fits-all answer. An employment contract can include whatever terms the employer and executive want and agree upon. In general, though, executive employment agreements should and often do include some variation of the following:
- Compensation and benefits: An executive employment contract should state how much the executive will be paid, on what terms (e.g., fixed salary, salary plus variable compensation), and how frequently (e.g., weekly, monthly). It should also state what benefits are included. Executives should not start working for a company until they have a definite, written agreement on how much they will be paid and when that pay will start.
- Signing bonus / relocation assistance: As with compensation, the contract should state (if applicable) whether the executive will receive a signing bonus (also called a sign-on bonus) or relocation assistance. The employer may want to include the terms under which either payment must be repaid to the company. For example, many contracts require the executive to repay the hiring incentives if the executive’s tenure does not exceed a predetermined period (e.g., six months). These terms may be subject to negotiation so that, at the least, if the employer terminates the executive without cause, the repayment obligation is waived.
- Bonus potential / equity potential: An executive employment contract should state whether the executive will be paid a bonus (also called incentive compensation), including equity, and on what basis. Some contracts state that bonus potential is “up to” a certain amount. Others provide a target bonus (generally as a percentage of salary). The contract should state how the bonus will be determined (e.g., based solely on the employee’s individual performance or based on company metrics as a whole). And it should state who will determine the bonus. Many contracts reserve the bonus determination to the “total and absolute discretion” of the employer. In such cases, executives should understand that there is no guarantee that they will receive any bonus at all. With respect to equity, the contract should state what type of equity could be paid (e.g., stock options, stock grants, restricted stock units (RSUs), phantom stock).
- Job title / description/ duties / reporting structure: The contract should state what the executive will be doing and for whom. Not only does this ensure that the executive knows what is expected; it also ensures that they are performing the job to which they agreed. And the job description can become especially important in the event of a “good reason” resignation (as discussed below).
- Termination: This is the topic no one wants to discuss, but every employment relationship comes to an end eventually (whether by termination, voluntary separation, or retirement), and it is prudent to discuss how that will work at the outset. In fact, it’s so important that it deserves its own question.
2. When Can My New Employer Terminate Me, and What Happens Then?
Prudent executives will consider termination at the outset of each employment relationship, especially if they are leaving an existing job or sacrificing another job opportunity to accept the offer.
In general, termination clauses in executive employment contracts fall into a few categories:
- At-will: Many employment contracts state expressly that the employment relationship is “at-will.” “At-will” employment means that either the employee or the employer can end the employment relationship at any time, without notice, and for any reason or no reason at all, so long as the reason is not an unlawful one (such as discrimination or retaliation). Many at-will contracts are open-ended, meaning the employment relationship continues into the future until one of the parties decides to end it.
- Term contract: Some contracts state that they last only for a certain amount of time (e.g., one year, three years, until the completion of a certain project). These fixed-duration contracts also tend to state whether the contract automatically renews unless otherwise terminated by either party. Under Connecticut law, unless the contract says otherwise, a contract for a fixed term can be terminated only for “good cause” or “just cause.”
- Notice: Many term contracts provide for termination prior to the end of the contract under certain circumstances. The contract might say, for example, that the employer can terminate “without cause” – that is, even if the executive has done nothing wrong – by providing a certain amount of notice (e.g., 30 days, 90 days). If that is the case – and this is critical – then the contract is actually a term contract for the notice period only. After all, if you have a five-year contract that can be terminated with 30-days’ notice, then in reality you only have a 30-day contract. Do not be fooled.
- Silence: Some contracts don’t say anything about who can terminate the contract or on what grounds. The default in Connecticut — as in 48 other states — is that the employment relationship is at-will, so silence tends to mean that. However, the default can be overcome by the statements, conduct, or intent of the parties. For example, if your employer made you a promise (even if it is not in writing), you may have the basis for a breach of contract claim, and that could be a good reason to speak with an experienced executive employment lawyer.
3. What Are the Most Important Termination Clauses to Negotiate Into Executive Employment Agreements?
- Good cause / just cause: Some executive contracts state that the employment relationship can be terminated only for “good cause” or “just cause.” Some common examples of “good cause” include willful misconduct, violation of company policy, or a criminal conviction. If the contract provides for termination only “for cause,” and the employer terminates “without cause,” then the executive usually is entitled to be paid a predetermined severance package (as described in the agreement) and/or could have a claim for breach of contract.
- Executives who receive proposed employment contracts are wise to scrutinize the contractual definition of “cause,” because not all “cause” clauses are created equal. The clauses that are the most protective of the executive narrowly define the circumstances under which the employer may terminate without any further obligation. For example, instead of a mere “violation of company policy,” a better clause would require “a material violation of a uniformly enforced company policy.”
- Notice and an Opportunity to Cure: Contracts most favorable to executives not only define “cause” narrowly, but also include a “notice and opportunity to cure” provision. These provisions constrain the employer to put the executive on written notice of conduct that may implicate the “cause” provision and provide the executive with a set period of time to address (or “cure”) the conduct if possible.
- Good reason: “Good reason” clauses allow the executive to resign while still obtaining the predetermined severance package. “Good reason” might include a material change in duties, reduction in compensation, or a requirement to move to a new work location. In contrast to the “cause” clause, it is to the executive’s advantage for the “good reason” clause to be drafted as broadly as possible. The broader the definition, the greater the likelihood that the executive will be able to take advantage of it and receive a severance payment upon resignation. If the executive’s proposed contract does not include a “good reason” clause, the executive should consider advocating for its inclusion and carefully negotiating its wording.
4. The Contract Includes a Non-compete Provision. Should I Be Worried?
Perhaps. Covenants not to compete – or simply non-competes – are complicated and controversial, as they restrict the executive’s opportunity to earn a living. Some states – most notably California – prohibit them altogether. There are a multitude of factors for the executive to consider in deciding whether to accept a non-compete or attempt to negotiate its elimination or restriction. These include the geographical, temporal, and subject-matter scopes, as well as the severance package the executive will receive when employment ends.
Note, as well, that an executive employment contract may ask the executive to represent that they do not have any existing non-competes and/or that there is no legal reason why they cannot accept this position. The executive’s prospective employer may also ask for a copy of any non-compete or other restrictive covenant by which the executive remains bound.
One last warning: A non-compete may reside in a stock agreement, benefit plan, or other document besides the individually-negotiated executive employment contract. The executive would be well served to read every document they sign carefully, even if the employer represents that the agreement is all “standard.”
