Employment law
i Employment contracts and severance benefits
As noted above, most of the terms and conditions of an executive's employment are established by contract between the employer and the employee, and not by statute.
Executives typically enter into contractual agreements with their employers, which provide that, if an executive's employment is involuntarily terminated, he or she will be entitled to a severance benefit that is usually a multiple of compensation – for example, one to two times the executive's average total compensation for the previous three years. Often, other ancillary benefits are also provided, such as vesting of equity-based compensation awards or continued provision of medical benefits. An employer's obligation to pay severance is almost always conditioned on an executive agreeing to release the company from any legal claims that the executive may have against the company. The severance benefit can be paid either in instalments over time or as a lump sum. It is uncommon for cash severance benefits to be reduced in the event that the executive obtains new employment following his or her dismissal.
ii Agreements not to compete or solicit
Many US companies require their executives to agree, as part of their employment terms, that after their employment ends they will not disclose confidential information about the company to other persons, disparage the company, solicit the company's employees or customers or, sometimes, compete with the...
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