Before signing, know the details of an Executive Employment Agreement

On Behalf of | Oct 20, 2021 | Employment Law

When companies in Boston and other US cities hire you as a new executive or senior level director, it is standard practice to be presented with an executive employment agreement to sign before you start. The agreement describes the terms of your employment and compensation and almost always includes restrictions about what you will be allowed to do (or what you must refrain from doing) when you leave.

Obviously, this is an important contract. You need to know exactly what is in the executive employment agreement before you sign it. Don’t assume that the restrictions are not enforceable.  Failure to talk to a lawyer before you sign could mean you may be stuck with obligations that could require some detours in your career path you may not have anticipated.

What you can expect to find in an executive employment agreement

While every employer has its own policies regarding these executive agreements, common terms include:

  • A list of “causes” for termination if the employer wants to fire you “for cause” and avoid severance obligations
  • For performance problems, a “notice and cure” provision that requires the employer to explain its dissatisfaction in writing and gives you a certain amount of time to try to cure the problem
  • A clause allowing either party to terminate, with notice, “without cause”
  • Severance in the event you are terminated without cause
  • A “good reason” severance clause  — meaning that you may collect severance if your responsibilities are diminished or salary reduced and you resign.
  • A non-compete clause. In Massachusetts, this must be supported by financial consideration for the period you are required to refrain from competing.
  • Other post-termination restrictions such as non-solicitation of employees or customers.

As you can see, the agreement will establish the employer’s right to terminate the executive and may limit the executive’s right continue a career within the industry for a period of time. These terms may be negotiable to some extent, and it is worth thinking about the consequences of signing ahead of time.

With so much at stake, you cannot just sign the agreement, close your eyes and hope for the best. It is important that you retain an employment law attorney to review its terms and explain them to you in detail. Knowing the consequences of what you are signing (or requesting a change first) gives you the best possible control and protection over your career.