Executives, Officers, and Employees General Overview
Executives, officers and employees in all industries are in need, more than ever, for competent legal advice in connection with their employment. Whether you are offered a new position with a lengthy restrictive covenant agreement, your current employer is offering new benefits in exchange for future covenants on your behalf, or you are being terminated individually or as part of a larger reduction in force, you need your own, unbiased legal advice so that you make the best decision for you and your interests.
Counseling and Advice
Are you an expert at employment agreements, deferred compensation agreements, severance agreements, and restrictive covenants and non-compete agreements?
Before your employer provided you with any of the documents above, it likely had its own attorney draft or review the document. That attorney exists solely to protect the interests of the company – not your interests. As an executive, officer, or any other employee, you should not execute any documents in connection with your employment – or separation from employment – without having legal advice from your own attorney.
For executives, are you confident that your deferred compensation agreement complies with IRS Section 409A? Do you even understand if any of the myriad of forms of future compensation that you have been promised (i.e., stock options, RSU, ESOP, phantom stock plans, top hat plans, etc.) are subject to and comply with Section 409A? Many executives do not realize that the penalty for a deferred compensation agreement that does not comply falls squarely on the executive in the form of a 20% penalty on top of any ordinary income taxes owed on the deferred compensation. And more importantly, many highly compensated employees, although technically not “executives” under their company’s designation do not realize that part of their payment arrangements are deferred compensation agreements that must comply with Section 409A. With a 20% penalty in play, any employee with any form of compensation beyond their salary should obtain their own legal advice to ensure that 20% of their compensation does not end up in the pockets of the IRS.
Restrictive Covenants and Non-Compete Agreements
Many employees blindly sign a document titled “restrictive covenant” at the outset of their employment or even after having been employed for years. It usually is not until years later, when the employee seeks to leave her employer, when she realizes for the first time that the document she signed waived significant legal rights. These agreements usually have detrimental effects on the ability of professionals and sales representatives in several fields – medical, pharma, healthcare, real estate, construction, and technology to name a few – to move on to a better opportunity. Put simply, these types of agreements should not be executed without advice from your own personal attorney.
Layoffs and terminations – whether with or without cause – are something most employees have experienced. In many instances, the employer provides the employee with lengthy written severance agreement offering the employee only a few weeks pay as severance pay. But in exchange for that severance pay, the employee usually is required to release all claims that the employee may not know he even has against the company. In the shock and fear that comes along with any termination, many employees execute these lengthy legal documents not knowing and understanding their legal rights. Before an employee signs away their rights in exchange for minimal money, he should meet with his own attorney to ensure that he is acting in his own best interests.
Employee Benefits and Qualified Plans
Advise executives, officers and employees with respect to the negotiation and drafting of employment, bonus, severance and deferred compensation agreements, including analysis of the tax and Employee Retirement Income Security Act (ERISA) considerations applicable to these arrangements. Guidance is provided concerning the impact of Internal Revenue Code (Code) section 409A on the provision of nonqualified deferred compensation to executives, officers, employees and consultants. Compliance with Code section 409A is of utmost importance executives, officers, employees and consultants as the tax penalties for failing to comply can be significant, and the penalties fall principally on the executive, officer, employee or consultant covered by the noncompliant arrangement.
Wrongful Termination, Hostile Work Environment, Whistleblower, and Retaliation Claims
Many companies comply with the dozens of federal and state employment laws. Unfortunately, there are likely equally as many companies that do not comply with the law in dealing with employees. And as to these employers – the courts have seen cases involving discrimination and retaliation against the highest and lowest level of employees. In other words, whether you are an executive or an assembly line worker, you could find yourself the subject of unlawful actions by the company.
The federal and state laws in this area are intended to vigorously protect employees who make good faith complaints to employers about unlawful or discriminatory practices, and even those who have testified or provided information to a government agency in connection with a legal claim. More importantly, whether the employer intended to violate applicable laws or not, is irrelevant for most types of relief available to an employee.
If you believe you are being harassed at work, that your termination was unlawful, or that you have been retaliated against for complaining about unlawful activities, you should consult with an experienced employment attorney to protect your rights.
Wage, Overtime, Misclassification, Commission, and Bonus Claims
Payment of employees – even executives – is governed by a web or federal and state laws and regulations. And while there is some ability for employees and their employer to negotiate over the amount of pay and the frequency of pay, even those two basic issues are governed by a web of laws.
The federal and state wage and hour laws regulate and govern many issues, such as:
- Determining the employees “regular rate,” which is the rate that is used to determine the overtime premium pay (time and a half)
- Determining whether an employee can be paid a fixed salary for all hours worked or whether the employee must be paid an hourly rate and overtime premium pay
- Determining whether the employee has been misclassified as overtime exempt – meaning whether the employee should be earning overtime pay for all hours worked over forty hours per workweek
- Determining whether an employee’s on-call time is actually work time requiring the employer to pay the employee their regular rate of pay and any overtime premium pay
- Determining whether the company has misclassified an employee as an independent contractor, rather than an employee, thereby depriving the employee of significant benefits that should be paid by the employer such as qualified plan participation under ERISA, unemployment insurance, workers compensation insurance, and withholdings for temporary disability insurance
- Determining when an employee has earned a commission and therefore is entitled to be paid that commission
- Determining whether an alleged discretionary bonus has been earned by the employee thereby requiring the company to pay the employee the bonus
Deferred Compensation Basics: What You Need To Know To Avoid Substantial Penalties, February 17, 2016