Windsor-Essex Employment Lawyers Advising on Executive Employment Agreements

Executive employment agreements can vary significantly from a standard non-executive contract. Executives are often granted additional benefits and financial incentives that are not available to non-executive employees. These agreements must be carefully negotiated and structured to form a reliable bedrock for the employment relationship.

Willis Business Law provides top-quality employment law services to employers in Windsor-Essex County. The firm’s experienced lawyers negotiate, review, and draft executive employment contracts that proactively secure the client’s rights and protect their interests if there is a breakdown in the employment relationship.

Short-Term Incentives & Bonuses

Executives possess greater bargaining power than regular employees, given their expertise and experience. As a result, executive employment agreements often include various financial incentives and benefits to supplement their base salary.

Many executive employment agreements include short-term financial incentives, often in the form of a bonus structure. Bonuses are usually based on an executive’s job performance as measured against a benchmark or corporate goal. Executive employment contracts may include a signing bonus, annual bonus, or one-time bonus for meeting a specific objective.          

Long-Term Incentives

While short-term incentives are based on job performance, long-term incentives reward an executive’s long-term commitment to the company’s success. Long-term incentives are intended to foster loyalty and increase the retention of highly-skilled, experienced executive employees.

Stock Options

Stock options are the most common form of long-term financial incentive offered to executive employees as they align the executive’s interests with those of the company’s shareholders. Executive employment agreements may include stocks as part of the compensation structure or allow the executive to purchase the company’s stocks at a certain price. The contract may also provide the option to invest in a stock option plan once the executive has achieved a specific performance goal or has worked for the company for a specified length of time.

“Golden Handcuffs”

“Golden handcuffs” refers to a substantial financial incentive – such as a large bonus, delayed stock options, a company car, or an enhanced retirement plan – that requires an executive to stay with the company for a particular time. Golden handcuffs discourage an executive from leaving the company early as they will lose the opportunity to receive the incentive. If the golden handcuffs were provided to the executive before the set period (as in the case of a signing bonus), they would be required to repay some or all of it to the employer if the executive were to end their employment before the set period.

Executive employment agreements incorporating some form of golden handcuffs may also include restrictions on the executive’s ability to compete with the company after leaving their employment.

Benefits & Perks

Although many employees receive health or life insurance benefits through their employer, executive employment agreements often include higher-tier benefits and enhanced coverage. Executives may also expect more vacation days and paid time off than regular employees.

In addition to health-related benefits and financial incentives, executive employment contracts commonly include other various perks and privileges. Some examples may include paid training or tuition, club or gym memberships, vacation packages, and company car use.

Severance Packages & Change in Ownership

A substantial difference between non-executive and executive employment agreements is the amount of severance pay the employee is entitled to if they are terminated without cause. Canadian case law demonstrates that executives may receive far more severance than most employees are owed under the Employment Standards Act.

Severance clauses should be carefully drafted to clearly define what constitutes “just cause” for terminating the executive’s employment. A well-crafted severance clause helps set expectations for the parties and mitigate the risk of future wrongful dismissal claims.

Enhanced Severance Packages (“Golden Parachute” Clauses)

Some executive employment agreements will include an enhanced severance package, often called a “golden parachute”. Under a golden parachute, executives are entitled to a sizeable payout that may consist of a set amount of pay in lieu of notice, pension funds, stock options, or benefits.

Enhanced severance packages offer financial security to an executive if their employment is terminated without cause. However, these packages are advantageous when the company undergoes new ownership, as the cost of executive golden parachutes can deter hostile takeovers. They can also help facilitate a smooth transition for all stakeholders during a merger and acquisition process.

Restrictive Covenants

While executives enjoy many perks not afforded to regular employees, they are also more likely to be considered fiduciary employees. As a fiduciary, an executive can place the employer’s business at significant risk if they do not act in the company’s best interests. Restrictive covenants enforce an executive’s fiduciary obligations after the employment relationship ends.

The most common restrictive covenants are:

  1. Non-Competition: Non-competition clauses (or non-compete agreements) are agreements that prohibit the executive from engaging in any work that is in competition with the employer’s business once their employment ends.
  • Non-Solicitation: Non-solicitation clauses (or non-solicit agreements) prevent executives from pursuing the company’s clients, customers, employees, or vendors after the executive’s employment ends.
  • Non-Disclosure: Non-disclosure clauses or agreements prevent an employee from sharing the company’s confidential information, which may include their processes, procedures, and proprietary documentation.

Canadian courts are wary to enforce unreasonable or overreaching restrictive covenants that would unfairly jeopardize the executive’s ability to use their expertise and experience to make a living. To reduce the risk of having a restrictive covenant overturned, they should be carefully drafted to ensure they do not exceed what is reasonably required to protect the employer’s business and proprietary interests.

Contact Willis Business Law for First-Rate Advice on Executive Employment Agreements

The skilled employment law group at Willis Business Law helps employers negotiate and draft comprehensive, tailored executive employment agreements. The firm’s dynamic employment lawyers develop contracts that support clients’ financial interests, career goals, and business growth. By anticipating potential issues before they arise, Willis Business Law provides proactive legal solutions that form a robust foundation for a lasting employment relationship.

Willis Business Law is located overlooking the beautiful riverbank of the Detroit River. The firm provides innovative business law services to clients throughout Windsor-Essex and the surrounding communities, including Amherstburg, Essex, Kingsville, Lakeshore, LaSalle, Leamington, Pelee Island, Tecumseh, Chatham-Kent, and Sarnia. To schedule a confidential consultation, please contact the firm online or call 519-945-5470.

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