- The Termination Scenarios. Defining the circumstances under which the employment relationship can be terminated is essential. Considerable attention should be paid to the definitions of “cause” and “good reason.” Not focusing on the details of the definitions can have costly ramifications. Employers seek a broad definition of “cause” to afford greater latitude in terminating an executive and avoiding an obligation to pay severance. In response, the executive strives for a narrow definition of “cause” that avoids discretionary and qualitative terms. On the other hand, the executive should strive for inclusion of provisions that enable him/her to trigger a termination for breach by the employer and still receive maximum contract benefits and payouts. This is typically referred to as a “good reason” termination. It is also helpful to consider how the executive will be treated in the event a change in control of the employer occurs. And all termination must be viewed against the backdrop of IRS Code Section 409A, creating a labyrinth of possible tax liabilities.
For steps 1 through 4, please see posts:
Part I: Negotiating the Employment Package That Is Best for You – The Fine Print Matters
Part II: Negotiating the Employment Package That Is Best for You – The Fine Print Matters
Part III: Negotiating the Employment Package That Is Best for You – The Fine Print Matters