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Employment Contracts and Non-Competes

What Every Executive and Employee Should Know
By D Partner Studio |

Protecting your deferred compensation

Executives need to prepare for legal issues that routinely arise that impact their job mobility and the deferred compensation they work so hard to earn. Executives without a contract protecting their deferred and incentive compensation are vulnerable to losing same. Waiting until you have been fired to consider these issues is too late. You work hard and put the company first; don’t forget to protect yourself and your family.

Leadership changes, mergers, capital infusions, and activist shareholders can cause abrupt changes. When that happens, your past achievements often mean little to the acquiring entity or PE firm taking control. Indeed, it’s natural that investors want to import their own executive team and lay off existing employees as part of downsizing or “right sizing,” the politically correct euphemism for “in with the new and out with the old.”

Non-competes and non-solicits make it tough to find new job

Non-competes and non-solicit agreements are enforceable, so employees need to be wary. These covenants can prevent you from moving seamlessly into an opportunity with a different company. They hurt your “marketability.” Employers are reluctant to hire employees who are subject to non-competes, or they will offer less compensation because they fear if they hire them they will end up in an expensive legal battle.

Employment contracts should address your rights while employed and your rights and obligations upon departure–especially regarding non-competes and non-solicits. Best practices are to negotiate limitations and carve-outs to non-compete and non-solicit covenants on the front end, rather than enduring a lawsuit on the back end to challenge them. Automatic severance should be included, if you are not fired for cause. Execs also need change-in-control protection.

If you receive restricted stock or stock options…

Countless well-intentioned employees get busy doing their job and never get around to papering their deal. Then, when a capital infusion occurs, and they lack anti-dilution protection, or they experience a liquidity event with undocumented equity rights, they end up embroiled in bitter litigation. So, document, document, document your deal and any other agreements. Employees need a contract that automatically accelerates and vests stock options/equity awards, unless they are fired for cause.

Hiring a seasoned trial lawyer helps in negotiations

Paper pushers can take you only so far. Hiring an experienced trial lawyer who flourishes at trial increases your negotiation leverage (or settlement leverage if you’ve been laid off). If the other side knows your lawyer is bluffing, you will leave deal points or money on the table. If you are a defendant, you will pay less if the other side knows you have a trial lawyer. When the other side knows they are negotiating against a seasoned trial attorney who has won numerous multi-million-dollar lawsuits, for both plaintiffs and defendants, you maximize your negotiation positions.

The take away: A small amount of planning now protects your equity, gives you the flexibility to work elsewhere, and prevents expensive litigation.

Executives in need of employment contract and non-compete legal advice should seek the counsel of an experienced trial and employment lawyer. Rogge Dunn, at Rogge Dunn Group, PC represents executives, ex-pats, financial advisors, corporations, professional athletes, and sports figures in a variety of business and employment law matters including partnership disputes, non-competes, contract negotiations, change-in-control, and FINRA matters.

Executives Dunn represents include the current or former CEOs/presidents of American Airlines, Beck, Trammell Crow Holdings, Texas Capital Bancshares, Hagger Clothing, Halliburton Energy Services, Kinko’s, Tuesday Morning, Gold’s Gym, Whataburger, and Texas Tech University. He represents sports and entertainment clients such as Baltimore Orioles Manager Buck Showalter, “Big Al” Mack, co-host of the Kidd Kraddick Morning Show, Basketball Hall of Fame Coach Larry Brown, and the former Baylor University Title IX Coordinator.

Dunn’s corporate clients include respected companies and entities, including Adecco, Beal Bank, Benihana, Champion Home Builders, Cigna Healthcare, CVS, Perot Museum of Nature, and Science, and Outback Steakhouse.

Dunn has been twice recognized as one of the top 100 attorneys in Texas by Thomson Reuters service published in Texas Monthly. He has also been designated a Texas Super Lawyer every year that award has been made by Thomson Reuters.  Dunn has been repeatedly recognized by D Magazine as one of the Best Lawyers in Dallas.

Dunn is one of approximately 35 attorneys who is Board Certified in both Civil Trial Law and in Labor and Employment Law by the Texas Board of Legal Specialization. He litigates disputes across the U.S. and has tried cases to a jury verdict or arbitration award in seven states and eight Texas cities. Employees and companies who need the Power of a trial attorney hire Rogge Dunn.

Rogge Dunn, at Rogge Dunn Group, PC represents executives, ex-pats, financial advisors, corporations, professional athletes and sports figures in a variety of business and employment law matters including partnership disputes, non-competes, contract negotiations, change-in-control, and FINRA matters.

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