Negotiating Employment Agreements: Checklist Of 14 Key Issues

A clearly drafted Employment Agreement can set out the obligations and expectations of the company and the employee in a way to minimize future disputes. Contract negotiations can be difficult, and high level executives often use an experienced employment law attorney.

The following is a checklist of key issues to consider when negotiating an employment agreement.

1. Compensation

Compensation is the most obvious key issue, but there are multiple layers of negotiating points encompassed here, including:

2. Equity Grants

Equity grants are often an important part of the Employment Agreement, and key issues here include:

3. Scope of Employment

The scope of the employment and responsibilities raise a number of issues:

More AllBusiness:

4. Benefits

The various employee benefits available to an employee can raise a number of issues, including:

(a) Health and medical (including spouse and dependent coverage)

(e) Cafeteria Plan

(f) Life insurance

(g) Stock option/stock grant

(j) Executive financial counseling

5. Term and Termination

The circumstances when the employee’s employment can be terminated and the resulting consequences will raise the following issues:

(a) Conviction of a felony or any act involving moral turpitude;

(b) Commission of any act of theft, fraud, dishonest or falsification of an employment record;

(c) Breach of the employment agreement;

(d) Failure to perform reasonable assigned duties; and

(e) Improper disclosure of the company’s confidential information

6. Reimbursement of Expenses

7. Liability Protection for the Employee

(a) Indemnification protection for claims

(b) Automatic advancement of legal expenses

(c) Protection even if the employee is no longer employed by the company? (Note statutory limitations on indemnification.)

8. Confidentiality Restrictions

The employer will want confidentiality provisions in the Employment Agreement:

(a) Information that is or was publicly known, or which becomes publicly known through no fault of employee.

(b) Information that is or was obtained from a third party who had the right to disclose the information without restriction.

(c) Information independently derived by the employee without reference to the confidential information.

(d) Information that was already lawfully in employee’s possession or knowledge prior to the disclosure of the confidential information.

9. Invention Assignment Issues

Companies expect that any inventions or business ideas developed by the employee related to the company’s business during the employment period, will be owned by the company:

10. Disability and Death

Various issues arise on the death or disability of the employee:

11. Post-Employment Limitations

The Employment Agreement can address various limitations on the employee post-termination of employment:

(a) For what geographic regions?

(b) For what period?

(c) What is the scope of the covenant?

(d) Are the restrictions enforceable under applicable law? (Generally not permitted in California.)

12. Dispute Resolution

Most Employment Agreements have multiple provisions dealing with disputes between the company and the employee:

13. Golden Parachute

A “Golden Parachute” is a payment to or other benefit guaranteed to a company executive in the event the executive is fired as a result of a takeover of the company:

14. Miscellaneous Provisions

Good employment agreements have a series of “miscellaneous” clauses including those that address these issues:

Copyright Richard D. Harroch. All Rights Reserved.

Read all of Richard Harroch’s articles on AllBusiness.com.

Related Articles on AllBusiness:

For local business information on 15 million businesses, visit InBusiness.com.