Spross & Associates, PLLC

Releases in Employment Separation Agreements

One of the things that people don’t think about when they are putting together or executing Employment Separation Agreements as part of their employment is whether or not anything should be excluded from the release.  Employment releases are very broad and cover EVERYTHING, but what if the employee was an officer?  Most Bylaws and other corporate governance documents have an indemnification obligation on the part of the company for actions by the officer/employee in their role as an employee.  Normally, an individual is not named in a lawsuit against a company; however, there are times when the individual does get named (shareholder suits for instance). 

 

If an employee is signing an Employment Separation Agreement, I would suggest that there should be a carve-out for “indemnification obligations that arise pursuant to the Bylaws [or any other agreement that gives the employee indemnification]”.  If this is not carved-out from the release, there is a very good argument that the employee has released any indemnification claim.

Does Your Company Make Everyone Sign a Proprietary Information Agreement?

Do you have a proprietary information agreement (“PIA”) that you require all of your employees to sign?  If not, you are making a mistake.  A PIA covers things such as confidentiality, nonsolicitation, noncompetition, at will employment (in applicable states) and dispute resolution.  These agreements are important for a variety of reasons.  First, it is a contractual protection of confidential information which is your company’s family jewels.  It also covers your ex-employees poaching from the company or competing.  Finally, it will have an arbitration provision so that if there is an employment dispute, you will end up in arbitration in front of usually an ex-judge instead of with a jury.

What is a Double Trigger for Vesting of Options?

If you are an employee or executive at a small company and you have received option grants, you may want to think about having a “Double Trigger” for accelerated vesting of your options on a change of control.  The reason it is called a “Double Trigger” is because there are two things that must occur before the accelerated vesting occurs.  First there must be a Change of Control.  Second, there must be something else that occurs to “Trigger” the acceleration.  A few things that could be are (i) termination without cause; (ii) reduction in responsibilities; (iii) reduction in title; or (iv) requiring a physical move of greater than 50 miles.

 

When the “Trigger” occurs, usually a portion of your remaining unvested options immediately vest.  Keep in mind that it would still be up to you to exercise the options or not.

What are the steps for performing a criminal background check for someone you plan on hiring?

1)  You must have written permission to perform the background check.

2)  You will need the birth date of the person as part of the process.

3)  You must make sure that you make a job offer BEFORE you receive a birth date, otherwise, there are potential age discrimination issues.

4)  The job offer should be contingent upon completion of the background check.  I like to use the following language:  “It is our pleasure to extend to you an offer to join __________________ as a __________________, subject to the successful completion of a criminal background check.”

General Overview

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