Executive Employment Contracts

Pennsylvania business executives should have employment contracts that outline the terms and conditions of their employment. Without a contract providing for a specific length of employment all Pennsylvania employees are deemed to be employed at will which means that an employee can be terminated at any time for any reason unless the termination violates a federal or state law.

Abramson Employment Law represents business executives in negotiation of employment contracts. Most high-ranking executives enter employment contracts for specified periods of time and are not employees at will. Employment contracts provide certain protection for executives and assist employers in finding and keeping highly qualified management which is necessary for a company’s success.

Designing appropriate language in employment agreements not only requires an understanding of the executive’s duties and responsibilities but knowledge of the legal ramifications of contract language. The amount of leverage that an executive has in negotiating an agreement is impacted by an executive’s experience, skills, the employer’s size and what other companies in the industry offer.

When negotiating Pennsylvania employment agreements, we advise our clients based upon their individual objectives and negotiate with employers to tailor each agreement to the client’s own situation. It is imperative that all parameters of the employment relationship be carefully assessed, including compensation, relocation assistance, restrictions arising from the client’s previous employment and a clear delineation of duties and reporting relationships. At the onset of executive business contract negotiations there are many considerations. Some are obvious, some require more analysis. Critical terms and conditions include:

1. Compensation: The amount of total compensation to be paid by to an executive. Compensation can take many forms and includes base salary, signing bonus, annual bonus, and guaranteed increases in compensation for future years.
2. Stock options: While the number of stock options granted is critical, they are many other considerations as well such as how options are granted, is there a vesting period and what happens if the company issues more stock in in the future (i.e. is there a dilution in the value of stock)
3. Job description and duties: There should be a clear delineation of the executive’s job title and duties and a description of any circumstances that could cause a modification of the job title or duties, and what happens if there is any change in the job title or duties.
4. Employment benefits: Most often the terms and conditions of an executive’s benefits will be determined by the employment benefit plans that an employer offers to other employees. An executive employed in Pennsylvania should have a clear understanding of all benefits programs in which the executive will be eligible to participate such as medical plans (including dependent participation), disability and life insurance, retirement plans, such as a 401k or a defined benefit pension plans, and the amount of paid vacation,
5. Expense Reimbursement. Both the amount of relocation expenses allowed and how such expenses are handled must be addressed. In addition, ongoing expense reimbursements should be clearly and may include a car allowance, cell phone allowance and a business meal and entertainment budget.
6. Liability Protection. An executive must be sure that an employer has the appropriate insurance protections and agreements in place so that an executive is not exposed to personal liability. Insurance considerations include Directors and Officers insurance coverage, and general liability insurance coverage. In addition, there should be a review of the employer’s by-laws to make sure that there is appropriate indemnification for all business activities in which the executive engages.
7. Restrictive Covenants. Many employment contracts place restrictions on what happens at the end of the employment relationship which may prohibit a business executive’s future employment opportunities. Restrictions include prohibiting an executive from working for a length of time in the same industry, geographic areas in which certain restrictions may apply and many other provisions which could limit future employment. It is critical that substantial thought be given to such restrictions before an executive employment contact is finalized.
8. Confidentiality Requirements: Most employment agreements require that an executive employee agree not to divulge confidential information acquired during employment. When there are confidentiality restrictions, it is critical to provide for certain limitations such as information that is publicly known or becomes publicly know and information that is already lawfully in an executive’s possession prior to disclosure of the confidential information.
9. Termination of the employment relationship: An executive employment contract should detail the circumstances by which employment may be terminated: For instance, under what conditions may an executive be terminated for “for cause.” While it may be obvious that if an executive is convicted of a crime or, commits fraud the executive could be terminated for cause. Many other situations fall into a grey area and need to be clearly defined.

At some point in time an executive’s employment will end. When an employment relationship ends or there are proposed changes and there are many considerations that may need to be addressed, including,

1. What happens if there is a material change in job duties or reporting relationship
2. What happens if there is a change in control of the company
3. Severance provisions
4. Stock option vesting
5. The forum to resolve for disputes – arbitration or litigation
6. Applicable state law
7. Incapacity considerations
8. Responsibilities to the company after employment is severed

Abramson Employment Law brings a unique perspective to Executive Employment Contracts based upon our experience in representing employees in disputes with their employers, in federal and states courts including the Eastern District of Pennsylvania and surrounding counties. Many times, executives are referred to our firm by attorneys who work at large law firms who have represented employers whom our clients have litigated against in the past. These attorneys often have conflicts of interest in representing executives and we feel a great sense of pride when one of our former litigation adversaries thinks enough of our firm to refer a client.

If you are a Pennsylvania business executive and need instance with an employment law matter, call us today at 267-470-4742 or contact us online to discuss your legal options.