Terms that tend to decide disputes
The definition of cause matters because it often determines whether severance is paid. Many agreements also give the executive the right to resign for good reason, such as a material reduction in duties or pay, and the notice and cure steps for that right are easy to miss. Severance terms often require signing a release, and the timing of that release interacts with federal tax rules for deferred compensation. Equity awards are usually governed by separate plan documents, so the agreement should be read together with them, especially provisions on vesting and acceleration after a change in control. Restrictive covenants, such as noncompetition, nonsolicitation, and confidentiality, deserve close reading of their scope.
Restrictive covenants and the current landscape
New York courts generally enforce noncompetition clauses only to the extent they are reasonable and protect a legitimate interest, and proposals to restrict them further have come before the state legislature repeatedly, so the current status should be checked at the time of signing. A federal rule that would have banned most noncompetes did not take effect. Agreements governed by another state's law, or with a forum outside New York, can change the analysis. Executives moving from a competitor should review the obligations they still owe to the prior employer before accepting, because a new employer may ask about them.
Reviewing an offer or a separation
If you are negotiating a new role, bring the offer, the draft agreement, the equity plan and award documents, and any term sheet. We go through what happens in each way the job could end and identify the terms that are commonly negotiated. If you are leaving, we review the agreement and the separation proposal to see what is owed, what the release covers, and what restrictions continue. Tax advice on deferred compensation and equity should be coordinated with your accountant or tax adviser.
