The terms of severance are always an important part of the employment relationship in Massachusetts. When the person was a company executive, though, the stakes are even higher. Mistakes made by either the executive or the company in the severance agreement of an executive contract can put the company at grave risk or can ruin the executive's professional future.
Issues to Cover in Executive Severance Agreements
Executive severance agreements are similar to those used for other workers, and have to cover many of the same types of issues:
- Severance pay
- A release of claim clause in which the outgoing executive agrees to not file a lawsuit against the company
- A non-disclosure agreement that forbids the executive from divulging sensitive company information and trade secrets
- A non-compete agreement that restricts where the executive can work next
- A non-solicitation agreement that forbids the executive from courting the company's current workers or clients
- A non-disparagement agreement that limits what the executive can say about the company
- How the company will act if it is contacted for a reference about the executive
How these issues are resolved by the agreement will often depend on whether the executive retired, quit, or was terminated with or without cause. Finding a good resolution requires a very delicate balance between the competing interests.
Loose Post-Termination Restrictions Can Hurt the Company
On the one hand, the company needs to protect itself from the departing executive. The last thing that the company needs is for their former executive to bring the company's client list and trade secrets to a competitor and for the company to have no legal recourse.
However, company stakeholders also need to be aware that how they treat this departing executive will be seen by their next executive. Needlessly restricting the outgoing executive can make his or her successor wonder if the company really has their best interests at heart or if they have to keep matters in their own hands – a conflict of loyalty that could hurt the company in the long run.
Executives Need to Protect Their Future
On the other hand, the departing executive will want to be able to move on to their next leadership role with as few strings attached as possible or, if they are retiring, with an ample severance package.
Or, more often, both.
Deciding which goal to focus on – a financial severance package or professional freedom – can help executives get what they really need. Additionally, executives need to determine which post-termination restrictions will really hinder their progress and which ones they can live with. Doing both can drastically increase the executive's ability to negotiate for a severance agreement that suits their needs.
The Employment Attorneys at the Katz Law Group Help Negotiate and Handle the Terms of Executive Severance in Massachusetts
The employment lawyers at the Katz Law Group has nearly four decades of experience in negotiating executive severance agreements as well as enforcing them for companies and challenging them on behalf of executives.
Call their central Massachusetts law office at (508) 480-8202 or contact them online.