Or maybe you're just winding up an agonizing period of unemployment you feared might never end. You're grasping a lifeline.
Either way, the question now is: What are you going to get?
The single most important...and the easiest...way to win a very good deal from a new employer is to make him or her fully aware of what a good deal you have where you are. Then the initial offer should be something you can graciously accept. Bargaining can be minimized or avoided altogether.
You're right, of course. Most companies don't want to hand you a document marked "Contract." Nevertheless, these days more and more corporations are putting more and more in writing.
And believe it or not, every time you start a new job, you can have an employment contract...even if you don't receive a paper with that title on it. You and I will make sure that your terms-of-employment are solidly nailed down...and as favorable as they can possibly be.
We'll also define the jargon you may be confronted with. And we'll review how you can pleasantly and reasonably speak up for what you want.
First let's look at the difference between employment negotiations and every other kind.
When you negotiate to buy a house, or a boat, or a car, the object itself stays the same in your eyes, while you haggle over price. Your liking and respect for the seller can drop to zero. But what you're trying to buy remains just as enticing as it was the first moment you saw it.
Unfortunately, when you negotiate for your own employment...and even if someone else "fronts" for you (which I don't recommend)... you're not just selling yourself. You're being yourself. You were a "class act" during your interviews. Don't figure it's now safe to turn into a ruthless...or a petty...sleaze, just because the employer has chosen you and begun discussing your terms of employment. As my Granny used to say:
"There's many a slip, twixt the cup and the lip."
If you demonstrate any undesirable characteristics at this point, the whole deal may be off. Anything that seems overreaching or underhanded will be held against you.
So stand by everything you promised, stated, or implied. If you described your current compensation as X, don't suddenly claim it's X plus 35%, just because four friends tell you that's what they're getting for almost exactly the same job you have. And if you initially implied that it would be easy for you to relocate, don't later raise all sorts of costly problems you want your potential employer to throw money at.
She just may decide that you've been less than forthright...or at the very minimum that you're a drag to deal with. And on either basis, you could still lose out to another candidate.
The trick in negotiations is to indicate what a good deal you have where you are.
In the end, you won't move unless you score a significant improvement.
And nobody's going to ask you to. At least not if they fully appreciate your current circumstances and compensation.
Responsibility, growth opportunity, and possibly a chance to build long-term net worth...not just a boost in current income...will be your main reasons for any move. But you do expect financial improvement, both immediate and long-term. And the only way your prospective employer can know the full extent of what you're getting now is if you tell him.
As an executive recruiter, I always make sure to find out every facet of current compensation, plus any expected changes within the next 12 months. And I communicate all of this information to my client in a detailed written summary before he meets the candidate. That way he realizes right from the start that Candidate X will have to get upwards of $190,000, whereas Candidate Y can probably be hired for $130,000 and possibly less.
Face it. Cost/value assessment works exactly the same in hiring executives as in buying merchandise. There will be no reluctance to pay what you obviously cost...a reasonable incentive over what you're making now...if you're evaluated and proven "the one we want" during realistic shopping for alternatives.
But if you allow yourself to be thought of as a $130,000 candidate, when it will really take more than $190,000 to move you, then don't be surprised to receive an "underwhelming" offer. And don't be surprised either, if subsequent disclosure and bargaining can never quite build the financial platform you should have stood on from day-one.
Prepare a written summary of current compensation. It's as helpful as your resume in orienting recruiters and employers.
Take a look at the sort of financial summary I prepare with respect to all the candidates I present. In the illustration on the next page, I've laid out the information as if you were preparing the chart for yourself.
Unfortunately, many recruiters don't bother to dig into current compensation. Moreover, you may be on your own, with no recruiter involved. So, unless you work up a financial review, chances are your proper figures won't be registered in the early stages when they'll do you the most good.
Indeed, you've probably got to do some figuring, just to find out for yourself where you stand. Nine out of ten executives I meet don't fully appreciate their current compensation until I prompt them to think about it in detail. In the end, of course, everyone always figures out to-the-penny what she's now making, in order to weigh the financial offer that accompanies an enticing opportunity. But by then it may be far too late to get the employer to think of you in the right price range
Keep your summary as simple and objective as possible. Only discuss cash. Don't bring up FICA, insurance, medical, and other ordinary employee benefits that are likely to be comparable, wherever you go. That makes you look petty. If you get $110,000 straight salary and nothing else, say so.
But if you've got money coming at you from several directions, point out and add up everything. If you expect a raise or a promotion within the next several months, be sure the recruiter and the employer know what's coming. Your incentive to move must be figured on top of what you'll soon get where you are...not just on top of what you have this very minute.
Even if you're unemployed, you want your prospective employer to realize what you're accustomed to getting. If she's sensitive and smart, she won't want you to feel that your duress has been taken advantage of. And, since you'll be nervous about asking more than she offers, you'll want to make doubly sure that her initial offer is as high as possible.
If so, you're prepared to handle compensation in the strongest, yet least disruptive, possible way:
"Well, I did a little figuring before I came over here. I didn't want to waste your time, if what I already have is close to what you'll be offering. When you have a few minutes, you can look this over and see if it's something you can see fit to improve upon."
(Hand over your paper.)
"By the way, are you having any problem with the new import quotas?"
See what your paper does? It lets you register...without being at all boastful, obnoxious, or tedious...all facets of the good deal you already have. And you do so without skipping a beat in the central conversation that is convincing your host that you're the person who best understands his business and can do the most to build it...the person he needs, regardless of cost.
Today executive compensation packages are hardly ever simple and straightforward. They have to be studied to be understood. How anyone will fare in years one, two, three, and beyond in leaving X Company to join Y Corp., which has different programs, requires careful analysis.
Chances are, the person you hand your "summary" to, won't even attempt to evaluate it himself. He'll have it looked at by his compensation expert, who can authoritatively analyze what you have, compared to various proposals he might make.
The result will be an offer your prospective employer is comfortably sure will be attractive to you. Moreover, it will probably be accompanied by a visual aid that clearly showed him...and now proves to you... what the advantages of his offer are.
The best way to negotiate is to avoid having to do much negotiating at all. Do your homework right away. And let your would-be employer know as quickly and clearly as possible what you're already getting. He's a lot more likely to make you an offer you can't refuse if he's thoroughly aware of what you can refuse.
Now let's discuss contracts. Can you get one?
Yes!
Play your cards right and you can almost certainly put your new employer under a written obligation. And if you're smart, you'll surely try to do so.
As you may recall from your Business Law course in college, a verbal contract is just as enforceable as a written one. But only if, by its terms, it's to be performed within one year. This, of course, becomes important if you are looking for a firm agreement of employment to last more than a year.
Indeed, if you only have an oral agreement, it had better not promise anything that can't be performed in a year. Otherwise, the whole agreement can't be enforced...even the parts that can be performed within a year.
And of course "time protection" for more than a year is usually the main thing an employee tries to negotiate. When she tells her would-be employer, "I want a contract," she's saying:
"I want to be sure, before I give up the secure job I have, that you can't casually dump me on the street in no time at all, and for no good reason."
And in her traditional reluctance to provide a written "contract," the employer is saying:
"That's exactly what I want to be sure I can do. I can't manage my business unless I'm completely free to pick and change my team at any time and for any reason."
How do these seemingly irreconcilable views get resolved?
By compromise. The executive asks for a four or five-year "contract," and the employer comes up with two-years, or less. Seldom will a company commit itself for five years to an executive who isn't already on its payroll.
Consider the "termination agreement." It's better than an X-year "contract"...and easier to get.
The employee wants firing to be permissible only for criminal acts...and maybe also insanity, wanton negligence, or gross incompetence. The employer, on the other hand, wants just about any reason to suffice, as long as time parameters are respected. In the end, the employer will usually get plenty of leeway as to cause for firing. The employee will hold out for...and achieve...time protection, which is basically all he ever hoped for anyway.
Which brings us to the advantages of a "termination agreement" over a straight X-year "contract." Employers who are unwilling to grant two-and three-year contracts will usually be more amenable to an 18-month...or if you can't do better a 12-month...termination agreement which says, in effect:
"You can fire me at any time for any reason. But you must give me 18-months' notice, or at least keep me on the payroll for 18 months afterward."
This arrangement doesn't tie the employer's hands, and it doesn't box him in for an exceedingly long time. So he's more willing to go along with it.
And for all practical purposes, you receive even better protection than under a two or three-year "contract." Security under those deals soon elapses to zero. But with an 18-month termination agreement, there's always a year-and-a-half of future paychecks. Even if you become CEO at $800,000 per year, you can still whip out the termination agreement you got when you joined the company as a division manager at $80,000 ten years earlier. You'll collect $1,200,000 during the next 18 months...thanks very much!
There are contracts... and there are CONTRACTS!
On the one hand, there are handshake agreements, written into an "offer letter."
And then there are "employment contracts," hammered out by opposing lawyers.
If you can get ideal protection from something simple and friendly, don't hold out for "big deal" paperwork.
I've known lots of prominent and highly paid New York lawyers... business-controlling partners in the famous law firms, and General Counsels of America's largest corporations.
Standing head-and-shoulders above them all is the smartest human I've ever met...about 5'2" and hardly 100 lbs. (mostly brain)...who attended law school over 50 years ago and since then has been doing post-graduate work in common sense. He's always practiced independently of the huge law firms. Many corporations use them for routine matters...but bring him in on very important and difficult issues. Moreover, the CEOs of those corporations insist on getting his slant on their personal legal matters.
Interestingly, this legal ninja has a devastating secret weapon that many of the other "super-lawyers" seem almost unaware of:
Simplicity!
Phil (not his real name...but close) would much rather have an agreement embodied in a plainly-worded letter or an exchange of letters than in a 27-page document full of convoluted clauses.
It's not at all unusual to go to Phil asking that a contract be drawn up to formalize an agreement along the lines of a simple letter or an exchange of letters you show him, only to be told:
"No way! You've got'em flat-footed on the basis of this letter. If they don't perform, we can sue them and get everything you're looking for, plus punitive damages as well. But if we go in and try to negotiate a formal contract with their legal department involved, there's no way in the world we can get language like this.
"Just write them a friendly reply, saying you're pleased to go ahead as they've suggested, except for that one little change in the schedule that you've both agreed to.
"And for heaven's sake, don't misplace the letters. They prove what your agreement is, and you could be mighty thankful to have them later on."
You get the idea.
It may be comforting to have a long and explicit document spelling out every conceivable facet and contingency of your arrangement with your employer. But it's not necessary. She and her company are just as bound by what she writes in her offer letter...assuming you accept her offer and go to work relying on it...as if there's a fancy paper marked "contract," which you both sign. And she's equally bound whether she asks you to countersign her "offer letter" or not.
Today almost every company provides offer letters.
So don't quit your job until you have something in writing.
You have clout.
You may not have enough leverage to get all the money or all the protection you want. But whatever you do get, you certainly have the power to get into writing.
"My base salary will be $150,000, and I'll participate in the officer-level short- and long-term management incentive programs...and receive options...as you outlined them to me. I'll also get that $75,000 upfront to make up for not coming under your bonus plan this year, and to help with any moving expenses not covered by your most comprehensive moving package, as described in this booklet. And I'll receive a $1,000 monthly car allowance.
"In terms of job security, I'll be getting 18 months' termination protection. You can discharge me at any time for any reason. But unless I've done something criminal against the company, you must either give me 18 months' notice, or pay me for 18 months after you let me go. And if you give me some notice but less than 18 months, you'll continue to pay me up to a total of 18 months from the time you give me notice.
That's the way.
Just assume Herb will be putting what you and he have agreed on into an offer letter. When he does, you'll resign. And, of course, not before.
How can he refuse? He'd have to say:
No, he can't say that. And when you have your "offer letter," you have your "contract." The essence of your agreement with him is in writing.
About the only resistance he could put up would have to go something like this:
"We do things here on a handshake. There's mutual trust. It's almost like a family. You have my word. That ought to be good enough. And if it isn't, then maybe you and I don't have the right relationship to go ahead on anyway."
Your obvious rejoinder would be:
"Herb, there's no question that you and I have exactly the right relationship. I know you'd never break your word to me. But, God forbid, something might happen to you...or me...on the way home tonight, or next month, or a year from now. I know of an instance where that's exactly what did happen. So before I resign, I'd really appreciate a note from you."
If Herb refuses, no matter what reason he gives, you're better off not going to work for him.
Virtually no employer will refuse you an "offer letter."
But many will deny you a "contract."
Yet the two papers amount to the same thing! Ironic...but true. Ask for an "offer letter" and you'll almost never be refused. But ask for a "contract," and you'll be refused more than half the time:
"No way, Edith. We just don't have written contracts here. Why, I don't have one myself. I can't...and I won't...do for you what nobody's ever done for me. We're not one of those shifty outfits where that sort of thing is necessary. I trust my boss completely to do what he promises me. And he's never let me down. If you can't think of me the same way, then maybe I'm not right for you...or maybe our company isn't right for you."
Now you've confronted yourself with a tough argument to overcome. You've asked for a "contract." You haven't merely assumed you'll get an "offer letter"...something virtually every company gives, and something your prospective boss did get when she came aboard.
Lots of luck!
Why should your would-be boss try to achieve for you, an unproven newcomer, something she's never received during nine years of loyal service and outstanding performance?
Seen through her eyes, you’re asking for a "contract" seems presumptuous, if not downright unreasonable. Fortunately, there are several rejoinders you can make, and I'll lay them out for you.
But don't blunder into arguing for a "contract," when an "offer letter" will work equally well, and be vastly easier to get. The trick is to find out in one of your earliest discussions...long before you begin "negotiations"... whether the company uses "employment contracts," and whether they're willing to give you one. If not, don't even bring up the subject later on. Just assume your way into an "offer letter" that covers the same ground.
But suppose...for whatever reason...you want to get a mutually-signed document labeled "Employment Contract" out of a company that traditionally refuses to give them. Here are the arguments you can use:
- "It's a logical, businesslike approach to a business matter. People die and move on, and memories fade. A written agreement is the obvious safeguard."
- "More and more companies are writing 'employment contracts' for senior managers these days." Some estimates and surveys suggest that over 50% of America's largest corporations now enter into formal written agreements with a substantial number of their executives.
- "I have an 'employment contract' at my current company, and I appreciate the security it provides. It's just one of many advantages, and I don't feel like moving to another company and getting less on any score than I've got now."
- "With today's business uncertainties, all executives are more reluctant to move than ever before. I believe that it's important for your company to rethink its policy against giving contracts. Not only do I want one. But I'll also be trying to recruit other outstanding and well-situated executives to work for me here. Being able to give them the reassurance of a contract will be very helpful."
- "Moreover the company can extract some important concessions from the executives it has under contract. We can put reasonable restrictions on their ability to walk out and leave us in the lurch...to join our direct competitors...to reveal our trade secrets...to be paid for work other than ours in their spare time...and so forth. Besides helping us get people, our contracts can help us get what we want out of them."
If you do wind up negotiating a formal employment contract, lawyers will be involved on both sides.
Don't underestimate their prodigious ability to destroy a good deal for you.
I've seen it over and over. An executive gets a once-in-a-lifetime opportunity. In a love-feast of seeing eye-to-eye on absolutely everything, the prospective employer and employee "let the lawyers take over from here." Far from merely "getting things down on paper" or "tying up loose ends," as the happily-mated principals expect, the result is total destruction of the deal.
Here are a couple of examples. Names, of course, are changed to protect the foolish.
Len was President of a $175 million group of companies owned by a $9 billion conglomerate. I recruited him to join a far more prestigious $4 billion corporation as President of its $565 million group of similar companies. He wasn't and never would be a corporate officer of the $9 billion company, because his businesses were insignificant to its volume. At the $4 billion company, on the other hand, he'd head one of just four "Groups," and he'd be a corporate officer and a Director.
Len and the CEO readily agreed on everything...salary, duties, directorship, generous participation in incentive programs, and a fist-full of stock options. So the CEO supplied a contract, which Len had a week to check out with his lawyer.
On the second-last day, Len phoned me. He was at the office of a prominent attorney used by his sister, a world-famous entertainer. "I don't know what to do, John. I'm getting way more than at X corporation, but this guy points out that it's quite a bit less than the other three Group Officers make. He wants me to ask for more."
I told Len it was too late. The CEO would tear up the contract, if Len went back on his word. And besides, Len was becoming one of five top officers and a board member. Any inequity would be corrected as Len proved himself through performance, and increased the relative size of his group through internal growth and acquisitions. "Attack any other wording of the contract on advice of counsel, but don't let him make you look sleazy and indecisive," I told Len.
"You're right, of course," said Len. "But would you mind coming over here and saying the same thing? This fellow is a close friend of our family. He's an expert, and he's charging me far less than he normally gets. So I don't want to just casually dump on the advice he's giving me."
Shocked...and concerned that the CEO and I had both made a mistake in selecting this otherwise brilliant and successful executive...I walked four blocks and took an elevator 38 stories to the intimidating opulence of the great lawyer's office. The guy was a sleaze! And he was encouraging Len to be one, too. Nevertheless, I spoke diplomatically.
Len did not return his contract as he should have the following day. Nor did he call. After the weekend and two days of the next week rolled by, the CEO and I agreed that I should call Len...hear a good excuse if he had one...and if not, tell him the deal was off. Len may have been advised to await a panicky call from us offering more money. That did not happen. And the deal was off.
Less than a year later, Len's conglomerate divested his unit to a company that didn't need his services. He's had other jobs in the several years since. But none as good as the one he was forced out of. And none even remotely as good as the chance-of-a-lifetime job on which he gave his hand-shake acceptance...and then asked his lawyer to check his contract.
Another example is equally pathetic.
I recruited an executive we'll call Bill, who had built the fastest-growing business in its field for Conglomerate X. The CEO of Conglomerate Y wanted him to take over an operation of equal size and much greater potential.
The attraction...besides an exciting challenge...was a contract, which gave Bill a percentage of increased-profit. Moreover, Bill couldn't be fired except "for cause." Salary was well above Bill's current base-plus-bonus, and the deal was designed to more-than-double his pay after a couple years of his dependably excellent management. Within five years Bill...who was enthusiastic about the opportunity-should have earned about $600,000 per year, three times his current compensation.
This time the employer's and the candidate's lawyers both helped queer the deal. The CEO of Conglomerate Y wanted Bill's contract signed within 72 hours, to provide extra news at a previously-scheduled Monday afternoon meeting of securities analysts. A contract was hastily prepared by company lawyers who, unfortunately, included a clause they use with executives who don't get Bill's deal.
The flawed document was zapped to Bill by facsimile late Friday afternoon. His lawyer pointed out the offending phrase as "bad faith" by the over-eager CEO, who could legitimately be accused of "applying time pressure" toward hasty acceptance. Bill had been invited to call the CEO at home over the weekend with any questions. He didn't. And meanwhile, Bill's current CEO called Bill and pressured him to stay.
Result: Instead of calling his new employer on Monday morning, as agreed, to confirm he'd signed the contract, Bill called to say he was backing out. Shocked, the CEO offered to let Bill's lawyer revise the wording as he saw fit. He also offered to forgo the announcement in favor of any more leisurely schedule Bill preferred. Too late. Bill had been wrongly convinced that his prospective employer was looking forward to breaking the contract.
Percent-of-profit deals with no cap and no time limit are exceedingly rare. Bill will almost certainly never be offered another one. Indeed, almost no executive ever gets such an opportunity.
But there's a bit more to this story. Although Bill was thrilled with the opportunity, he and his family disliked moving from the "Sun Belt" to the residential suburb of New York, where the business is located. So his lawyer's advice reinforced other qualms. Ironically, Bill's current company soon promoted him to their Manhattan headquarters. Now he lives in a town very near to where his once-in-a-lifetime opportunity is located. But instead of a five-minute drive to the office, he has an arduous daily train ride.
Meanwhile, a more junior executive has completed his first year in the job Bill could have had. Sales are up nearly 50% and profits are up about 70%. This young man receives only ordinary compensation. Bill, on the other hand, would be earning twice what he does with his current company, even after a big raise that accompanied his promotion and relocation.
In both incidents, lawyers served as "sounding boards" and "consigliore," when excellent executives were emotionally vulnerable. It's one thing to be coldly analytical and decisive when dealing with business problems...and quite another when weighing an irreversible change in your personal circumstances. Then you reach out for...and cling to...the advice of your lawyer. More than at any other time, you're likely to let someone else help you decide, rather than merely provide further input for your own objective decision.
Interestingly, the lawyers engaged by both executives were personal friends...supposedly eminent attorneys, and supposedly working for far less than their customary fees. How easy it is to give undue weight to the comments of a lawyer who's your friend, and confirms that friendship through a low fee.
I bring all of this to your attention for a reason. If and when you negotiate an employment contract, chances are you'll turn to a personal friend who's a lawyer for advice. From experience I know that's what almost every executive does.
Please be careful.
You've experienced the universal tendency of lawyers to screw up every kind of deal. Know right here and now that they...your friends included...will have just as much tendency to screw up your breakthrough employment opportunity.
So much for general advice on negotiating your employment contract.
Now let's quickly look at the topics to cover, and how to handle them.
Reread this section for ideas, whenever you're hammering out a formal contract.
Despite its seeming complexity and its importance to you, your "Employment Contract" will cover only a relatively few matters:
- Duration of the Contract
- Your Duties
- Getting Rid of You
- Tying You Down
- Your Compensation, Including Salary, Bonus, Various Stock Options and Grants, Golden Handcuffs, and Golden Parachute.
As you negotiate a formal employment contract, bear this happy thought in mind: Virtually all experts agree that such contracts benefit employees more than employers. You gain more in job security, compensation, and bargaining clout if and when the relationship goes sour, than the employer does in terms of actually preventing you from leaving at an inopportune time and taking your competitively-significant skills elsewhere.
Duration of the Contract
When a new employee is brought in under contract, the agreement is likely to run only two or three years. Key employees already on payroll...and sought-after superstars from outside...are usually tied down for three to five years. The more sure the employer is that he wants you, the longer the commitment he proposes.
Automatic renewal can extend the contract indefinitely:
"This contract shall be extended for additional three-year periods, unless either party notifies the other in writing prior to one year from the end of any such three-year renewal."
Very nice protection if you can get it. A more common provision would be an automatic one-year renewal. Consider, however, how favorably an 18-month termination provision may compare with whatever automatic renewal you're offered.
Your Duties
The statement of duties is extremely important, because it opens the door to the two main ways employers try to get out of their commitment. They either:
- force you to leave by changing your duties, or
- fire you, claiming you haven't performed them.
Nail down specifics. Title? Location? Reporting to whom? With what operations reporting to you? Are you a member of the Management Committee? The Board of Directors? Try to get a statement that you can't be given a lesser title, lower-level reporting relationship, less responsibility, or relocation away from corporate headquarters.
Watch out for these phrases: "such duties as may be assigned" and "full time and best efforts." If you agree to perform whatever duties you're assigned, stand by for some pretty demeaning ones when your boss wants to get rid of you. Try for a modifying phrase such as "of comparable or higher responsibility and status." And if you pledge your "full time and best efforts," look for an attempt to break your contract if you try to do any outside consulting, writing, or speaking in the evening or on weekends. A better promise would be not to do any consulting or other work for any competitor of your employer during non-business hours while on the employer's payroll.
Getting Rid of You
You'd like to tie up your employer so he can only fire you "for cause" as the lawyers say. And very good cause, such as committing a felony against him. Otherwise, you'd like to force him to employ you to the end of your contract, or at least pay whatever severance is specified.
He, on the other hand, would rather employ you "at will" so he can dispense with you at any time, without a reason, and with no financial consequences, just as he could if there were no contract (although these days age-discrimination legislation and sympathetic courts may provide some protection, even without a written contract).
In the end, you'll get a provision that says you can only be fired "for cause." But you'll have a tough time getting the statement of what constitutes adequate "cause" worded narrowly enough to give you any real protection. You'll want a lawyer to ponder the exact language. But here are a couple particularly troublesome "cause" statements that you should beware of:
"Violations of law and company policy." Will traffic violations suffice? Taking home pencils and pads to do office work at night and on weekends? Failure to get your expense report in on time? Failing to prevent your teenage son from taking the company car for a spin? Failing to obey any order of a superior officer, no matter how frivolous or demeaning?
"Failure to perform duties as assigned from time to time by the employer." Which duties? Newly-assigned, frivolous and demeaning? Requiring relocation to the island of Elba? Failure to meet unrealistic goals, budgets, and forecasts?
Obviously you should try to get permissible firing "for cause" as clearly worded and as limited in scope as possible. "Illegality" might be tagged "except for misdemeanors not directed toward the employer." And, if possible, try to require "prior written warning" before you can be fired for "violation of company policy" or "poor performance." Might as well get a shot at correcting your deficiency.
And try to insist that your firing "for cause" be done in writing, and accompanied by a "written statement of the reasons" for firing. If the reasons are flimsy, the company may hate to put them in writing, and may either be less quick to fire, or more willing to pay reasonable severance.
Also insist on an "arbitration clause" providing that conflicts under the contract shall be settled by binding arbitration. Court calendars are backlogged for years and trials are prohibitively expensive...at least from your point of view. Quicker, cheaper justice helps you a lot more than it helps your employer.
And finally, try to get a clause continuing your company-provided medical and life insurance until you're employed full-time by your next employer. If you fail, federal law [COBRA] may give you the right to continue your medical insurance for 18 months, but you will pay 102% of your former employer's cost.
Tying You Down
Obviously one of the main advantages the employer receives is your agreement to work for her during the contractual time period. Since she has you signed up for X years, you'll presumably turn a deaf ear to executive recruiters. And certainly none of the time she's paying you for will go into looking for a better job.
Right up front the contract will say that "the Company employs" and that "the Employee agrees to be employed" from X until Y.
Does that mean you can't possibly leave?
No. As court decisions on these matters often point out, "slavery" ended generations ago. No matter what the paper says, you can't be chained to your desk. The contract gives you various compensation guarantees and some measure of security. But it can't force you to work for the employer.
About the best the contract can do for the employer is to try to discourage you from working for any of her competitors. However, that can hurt you. After all, they're more likely than anyone else to want you, and to pay big money to get you. If you're performing brilliantly for your employer, you're able to do the same thing just as well for them.
Two clauses..."non-compete" and "confidentiality"...will try to keep you away from your most likely alternative employers. Fortunately, both clauses are hard to enforce by suing you for breach of contract, because the employer must prove damages in order to get money from you. And most of the time that's not easy. If you leave and take major customers or clients with you, she probably can prove she's lost profits. But if you merely withdraw your management brilliance and the operation doesn't fall apart the minute you walk out, she's got a very weak case.
The "non-compete" clause pledging you not to join a competitor during the term of the contract...and possibly for several years afterward...is particularly interesting because there's a logical "Catch 22," which you can use in bargaining with your employer. If you're so valuable that he has to isolate you from all his competitors, then he should be paying you plenty for your work...and for your vow of competitive celibacy. Conversely, if your agreement to stay away from your likeliest future employers isn't costing your employer very much, then it shouldn't be very stringent.
Hard as it may be for your employer to recover damages if you join a competitor when prohibited by your contract, the non-compete clause still has some nasty implications. The employer can sue you. And legal costs and time-consuming aggravation will cause you real pain. To your corporate employer they're not burdensome. Moreover, your appeal to other employers may fade if they know you're being sued by your former employer. Indeed, they may even be sued...rightly or wrongly doesn't matter...for "inducing" you to breach your contract.
Even though your employer may not be able to win a cent of damages from you in the long run, he can certainly give you trouble when you try to walk out. And in the end he may make you buy your freedom. He may offer to give up his "rights" under the contract if, in return, you give up some of your deferred compensation, a retirement benefit, or your latest earned-but-not-yet-paid bonus.
On the other hand, if you're a really hot property, you may be able to get protection from the company that's trying to hire you. They may be willing to provide the legal defense necessitated by breaking your contract, and to pay any judgment (unlikely) that's entered against you. Now your former employer has to pick on someone his own size. Chances are, he'll drop his sure-to-fail law suit.
So the bottom line is that you can walk out. But you may not be whistling.
In writing the non-compete clause, the employer will try to make the prohibition as broad and long-term as possible...perhaps shielding you from "any company or organization having any activities or interests competitive to the Employer, during this contract, and for X years afterward." You, of course, will want to minimize the prohibition. Try to:
- Eliminate the clause. Say you aren't being paid enough to curtail your most likely employment opportunities.
- Void the clause if you're fired, or if your contract isn't renewed. Why should your employer be able to tell you what to do after she stops paying you? Moreover, if discarding you is correct and fair, you'll handicap her competitor. She should cheer you on!
- Limit the clause to full-time work for a competitor. Try to preserve your chance to do consulting in your industry after retirement or firing.
