TRACEY’S PRACTICAL EMPLOYMENT TIP
OF THE MONTH*

MARCH 2009: ANOTHER TIP ON EXECUTIVE CONTRACTS *

My February 2009 Monthly Tip advised executives who are offered a contract for a term to negotiate for the receipt of severance upon expiration of the contract term. This month’s tip addresses what to do in the event the company is resistant to adding such a provision.

If the company is reluctant to grant you severance upon the expiration of the contract term, the fall back position is to eliminate the term completely and become an at-will employee. It may seem counterintuitive, but most contracts for a term provide the company with the ability to exit the agreement at any time prior to expiration without “cause” so long as they pay a penalty otherwise known as severance. In other words, even if you have a contract for a term the ability of the company to end the relationship early really renders the relationship “at will.”

However, as long as you have a severance provision in the contract then the “at will” arrangement will (a) eliminate an inexpensive exit strategy for the company as the company can just let the contract expire, and (b) always provide you with severance no matter how long you remain employed.

Next Month’s Tip: A RECENT CHANGE IN THE LAW REGARDING AUTOMATIC RENEWAL

Monthly Tip Archive

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* Disclaimer: The contents of this page are for informational purposes only and nothing herein is intended to constitute legal advice nor should anything contained herein be taken or relied on as such. Each individual executive and employee has a unique set of facts and circumstances that the general discussion set forth above may be wholly inapplicable to. Only through consultation with a lawyer from our firm in which all of the facts and circumstances of an individual’s unique situation are explored and considered can a true legal assessment of your rights and remedies be ascertained. Any use of this information is taken solely at your own risk.