WWW.LAWYER-MONTHLY.COM 33 employer’s counsel and negotiate the terms of the severance directly, or we coach our clients in the background, and they carry on the negotiations themselves. In the latter scenario, we most often review the final severance agreement and provide suggestions for modification before the parties sign. An agreement must provide for severance: so many months of salary and benefits, paid out in a lump sum or by salary continuation. Releases, of course. In California, this should include mutual waivers of Section 1542 of the Civil Code. Commitments to honor the employer’s trade secrets, proprietary and confidential information, and any legitimate restrictive covenants should be expected. Cooperation in litigation: this commitment to help the former employer will be for what period of time? Will there be reimbursement for hours spent in cooperation and expenses incurred? Mutual commitments of non-disparagement are essential. How will inquiries from prospective employers be handled? Equity issues may need to be addressed, including the disposition of stock and options. Property to be transferred to the departing executive (such as laptop, cell phone, and cell number) should be identified, and a mutual commitment between the executive and employer to return property is necessary. Language addressing issues associated with IRC Section 409A may be required. It is important to reach an agreement on the text of any press release and on any internal announcement of the executive’s departure. An attorneys’ fees provision, by which the employer reimburses some or all of the fees incurred by the executive in the representation, should be included. When a senior executive is transitioning out of a role, what are the typical benefits (such as health insurance and retirement plans) that can be retained or negotiated as part of the severance process? ELG attorneys take the approach that everything is subject to negotiation, with the objective of obtaining a fair severance package that will bridge the executive into new employment or retirement. Exit benefits in an existing employment agreement provide the floor from which negotiations begin: so many months of severance, paid out as salary continuation or in a lump sum; typically, the same number of months of continuing health Obtaining, understanding, and augmenting a severance package is the greatest challenge. Success hinges on the executive’s leverage. The documentation of the separation must comport with all federal and California restrictions.
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