Considerations for senior employees

Are you a director or a senior executive? If so, the settlement agreement you enter into might need to include additional considerations that will need to be negotiated and agreed between you and your employer.

Restrictive covenants - As a senior employee, you will have had access to much more confidential information compared to your more junior colleagues. Your former employer will be alert to the risk that you could utilise this information to compete directly with them. A risk may also be present if you are influential and could poach or solicit former colleagues, clients or contacts. Your contract of employment may have contained covenants to protect your employer against the above risks. However, if the contract has been breached then these covenants will not be enforceable. The settlement agreement therefore provides the opportunity for the employer to re-impose or amend the covenants. It also gives you the opportunity to negotiate their terms so that they are not overly restrictive.

Any re-imposition or amendment of restrictive covenants should be met with additional compensation from your former employer. Our specialists will advise you on the reasonableness of the restrictive covenants and the adequacy of the compensation offered.

Share options - You may well have share options that you have yet to exercise. These will need to be dealt with in the agreement together with the tax considerations. For shares options that have been exercised, the employer may require you to transfer these stocks upon termination. A fair price will therefore need to be negotiated and agreed.

Retirement as director/loss of office - Any directorship/office you hold will not cease at the same time as your employment. The settlement agreement will therefore address this and it is common for directors to agree to resign on termination. Any compensation for loss of office should be negotiated between you and your former employer.

Company property - As part of your role, you may have the benefit of a company car, mobile phone, laptop/tablet. These are usually returned to your employer by a certain date however, it may be possible to negotiate the transfer of this property to you.

Announcements - The settlement agreement should address the issue of an announcement, be that to your former colleagues and to the market. This could be especially relevant in terms of your reputation and that of your former employer.

References - A reference is perhaps one of the most important considerations to you. You will want to ensure that you have the best possible reference, especially when there may be factors which could potentially affect your employability if disclosed to a prospective employer.

The agreed reference is therefore an area for negotiation which does not involve financial considerations. Caution should however be exercised if you are working within the financial services industry and are regulated – your employer is under various duties to disclose all relevant information regarding you and to do otherwise, would be an offence.

Garden leave - Due to your influence within the organisation and your access to confidential information your employer may decide to place you on garden leave for all or part of your notice period. During this time all benefits under your contract continue but you will not be required to work and may be prohibited from entering your employers premises and speaking to former colleagues.

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