By Rob Gilmore
- More is negotiable than you realize.
People often think that the agreement or offer letter provided to you by the Company is set in stone. It usually isn’t. Companies these days expect negotiations and aren’t surprised by it. If you don’t ask, you don’t get.
- You may not know what is “market.”
You may only have a general idea of whether the terms offered to you are in line with your position, level of experience and market conditions. An employment lawyer who negotiates many such agreements may be in a better position to know what is reasonable under the circumstances and what is advisable.
- You level the playing field.
The Company has HR, in-house legal and possibly outside counsel involved in the terms of the Agreement. If you try to handle such an important transaction on your own, you may be doing yourself a disservice , and may leave money — and better terms — on the table.
- You gain respect.
The Company hired you to be a smart, competent professional. This is an important move in your career. Would the Company expect you to simply “sign on the dotted line” without negotiating key provisions? By raising issues in a business-like, reasonable manner, through a lawyer hired for this purpose, you show that you are exactly the person they want to employ.
- The lawyer can raise issues you aren’t comfortable raising directly.
You may feel that you would appear “greedy” if you directly ask your potential new boss for greater compensation, bonus, stock, etc. The lawyer can raise these issues in an attempt to get “market” compensation and terms.
- The best time to negotiate the terms of your exit is at the beginning of your employment relationship.
Nobody wants to think about leaving the Company when they are beginning a new job. But the reality is that most people don’t stay at their jobs for the rest of their careers. Whether it’s you who decides to leave down the road for whatever reason, or that the Company decides to terminate you or “go in a different direction,” you need to be prepared. You should try to obtain reasonable severance in the event of a “Without Cause” termination, and possibly include a “Good Reason” clause that allows you to resign and get severance under certain specified circumstances.
- If stock/equity is part of your deal, the devil is in the details.
You should address up front issues such as when the stock vests, what targets or “bogeys” need to be met for you to vest, and what happens to the stock if you leave. It is important to review the plan documents and award/grant agreements, so you know all the relevant terms and whether there is anything you can do about unfavorable provisions.
- Determine whether your compensation package (and any severance contemplated by the agreement) will trigger any unexpected tax liabilities.
If your compensation and/or severance will trigger either Section 409(A) (deferred compensation) or Section 280(G) (golden parachute), you could face steep tax payments or penalties. If so, you may want to include language that can protect you, or make sure that the Company agrees to foot the bill.
- If appropriate, include a “Change in Control” provision.
If you are concerned that the Company could be acquired, and that could negatively impact your opportunities at the Company, you may want to negotiate a “Change in Control” provision. These clauses provide that if there is a change in control, you either (i) can leave the Company with an enhanced severance within a certain period thereafter (a “single trigger”) or (ii) can leave the Company with enhanced severance if you are terminated (or other agreed upon negative actions are taken against you) within a certain specified period thereafter (a “double trigger”).
- Don’t get stuck with a non-compete/no-solicitation you can’t live with.
Your employment agreement (and other agreements such as stock awards) may contain a non-compete and/or no-solicitation of customers/clients and employees. These restrictive covenants may create issues down the road if you leave the Company. It is important to determine whether it makes sense to address these issues up front or leave these for a later day. The laws governing non-compete and no-solicitation clauses differ greatly among the states; what is enforceable in one state may not be enforceable in another. These clauses should be closely reviewed to determine the best strategy, and to decide if the non-compete is a “deal-breaker” for you.
KJK publications are intended for general information purposes only and should not be construed as legal advice on any specific facts or circumstances. All articles published by KJK state the personal views of the authors. This publication may not be quoted or referred without our prior written consent. To request reprint permission for any of our publications, please use the “Contact Us” form located on this website. The mailing of our publications is not intended to create, and receipt of them does not constitute, an attorney-client relationship. The views set forth therein are the personal views of the author and do not necessarily reflect those of KJK.