Employment Agreements and Contracts
Often, a new executive opportunity is exciting but also can be challenging to determine all of the potential legal issues that may arise, including those related to executive remuneration and conditions under which termination may occur. Each situation has its own unique circumstances. Sometimes an executive has protected characteristics that deserve consideration. It is important for an executive to retain an experienced New York City employment lawyer to evaluate these issues and negotiate for the best possible terms during the drafting of employment agreements and contracts.Components of Employment Agreements and Contracts
Negotiating the terms and conditions of employment is an important and sometimes delicate task. Employment agreements with New York employers are usually enforced under New York law. Employers must comply with New York employment laws, including the New York State Human Rights Law. If your employer is based in New York City, it will also need to comply with the New York City Human Rights Law. The state and local laws are favorable to employees with certain protected characteristics. In some cases, an employer will try to select a different state law that bears some connection to the employment relationship. Certain employers also require mandatory arbitration of employment disputes or non-competition agreements that extend beyond the agreed upon term of employment.
Often, executive employment agreements are for a specific and limited term. For example, the executive employment agreement may be for three years with an automatic renewal. Most executives would prefer to have a longer guaranteed term of employment and guaranteed salary. In some cases, it is possible to negotiate that termination before the end of the specific term be only for just cause or upon another event occurring. The agreement may include express financial consequences for termination and a provision about how to resolve any disputes that arise. When these types of clauses have been negotiated, it is possible to bring a wrongful termination lawsuit down the road if the employer fails to live up to its end of the bargain.
The employment agreement typically describes job duties. Sometimes the duties are implied by the executive's title. Often, the employer will ask for an agreement to avoid conflicts of interest. Usually, a non-compete clause is negotiated. Non-compete clauses are generally disfavored by New York courts, but when determining whether to enforce a non-compete agreement, courts will look at whether the agreement is necessary to protect valid business interests like trade secrets or special skills obtained while you were an executive, whether the geographic and temporal scope was reasonable, any harm to the public through the agreement, and whether the agreement is unduly burdensome. Sometimes a non-compete period may be attached to severance pay, such that either side can shorten the non-compete period by stopping or waiving severance payments.
Compensation needs to be carefully spelled out in an employment agreement. For many executives, there is a base salary, as well as bonuses, commissions, short or long-term incentive compensation, deferred compensation, and stock options. The employer needs to comply with section 409(a) of the Internal Revenue Code. For example, certain high-level executives cannot be paid severance benefits until at least six months after termination, but there are exceptions for profit sharing and qualified pension plans. Often, summary plan descriptions are part of an employment agreement, as are pension, stock option, and severance benefit plans. Often, executive contracts also include provisions related to vacation time, holidays, sick leave, health benefits, and any expense account reimbursement.
It can be important to look carefully at any disability provisions in an executive employment agreement. Employers with at least 15 employees are not permitted to discriminate against employees with disabilities under the Americans with Disabilities Act (ADA). There may be obligations that certain employers with at least 50 employees must meet in connection with disabled executives under the Family and Medical Leave Act. There are also stringent obligations toward disabled executives that must be met under the New York State Human Rights Law and the New York City Human Rights Law.
Usually, there is a dispute resolution provision. In most cases, it is not advisable to have a mandatory arbitration provision. However, it may be appropriate to include the requirements of a good-faith discussion and the use of a mediator or mediation provision. The language should also address the scope of the dispute resolution provision — whether it applies to all disputes or just some.Consult a New York City Attorney Regarding an Employment Contract
If you need assistance in protecting or asserting your rights under an employment agreement or contract, you should consult an experienced employment litigator. You can contact Phillips & Associates at (212) 248-7431 or through our online form to set up a free consultation. We handle employment litigation in the Bronx, Queens, Brooklyn, and Manhattan, as well as Nassau, Suffolk, and Westchester Counties and New Jersey.
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