employment separation agreements (60 minutes)compensation. he advises employers about the corporate,...

EMPLOYMENT SEPARATION AGREEMENTS First Run Broadcast: December 11, 2014 1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes) Releasing a key employee is as risky a decision for an employer as hiring someone. Whether the employee is leaving voluntarily or involuntarily, there can be substantial questions about compensation (including sales commissions) and benefits, protection of vital employer information (customer lists, pricing information, trade secrets) to which the departing employee had access, and competition from the departing employee. There is also the risk that, even if the departure is initially amicable, litigation will arise as the ex-employee grows disgruntled. The employer might also have lingering liability for acts of the employee, including EEO liability. All these substantial risks highlight the necessity of effective separation agreements when a key employee departs. This program will provide you with a practical guide to negotiating and drafting the major provisions of employee separation agreements.

• Negotiating and drafting employee separation agreements • Identifying the risks of litigation and financial liability • Drafting enforceable waivers of liability • Salary and benefit issues, severance payments, and payments tied to future performance • Commission issues for sales employees • Non-competition and non-solicitation provisions – protecting confidential information • Arbitration and other dispute resolution provisions

Speakers: J. Mark Poerio is a partner in the Washington, D.C. office of Paul Hastings, LLP, where his practice focuses exclusively on employment agreements, employee benefits and executive compensation. He advises employers about the corporate, tax, financial accounting, securities, labor, and litigation issues surrounding employment agreements. Mr. Poerio has served as an Adjunct Professor of Law at Georgetown University where he currently teaches a course on the business aspects of executive compensation. He has also written an lectured extensively on executive compensation topics. Mr. Poerio received his B.A. from the University of Virginia and his J.D. from Cornell University Law School. Marc E. Bernstein is a partner in the New York office of Paul Hastings, LLP, where he has an extensive employment law practice, including complex wage and hour class cases, discrimination lawsuits, corporate raiding/unfair competition cases and SOX whistleblower actions. Earlier in his career, he was associate general counsel of the American International Group, where he headed the company’s worldwide employment law group and was the senior employment lawyer advising management regarding employment issues. Mr. Bernstein received his B.A., summa cum laude, from the State University of New York at Buffalo and his J.D., cum laude, from Harvard Law School.

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Employment Separation Agreements

Teleseminar December 11, 2014

1:00PM – 2:00PM 1.0 MCLE GENERAL CREDITS

PAYMENT METHOD:

Check enclosed (made payable to Vermont Bar Association) Amount: _________ Credit Card (American Express, Discover, Visa or Mastercard) Credit Card # _______________________________________ Exp. Date _______________ Cardholder: __________________________________________________________________

VBA Members $75

Non-VBA Members $115

NO REFUNDS AFTER December 4, 2014

Vermont Bar Association

CERTIFICATE OF ATTENDANCE

Please note: This form is for your records in the event you are audited

Sponsor: Vermont Bar Association

Date:

Seminar Title:

Location:

December 11, 2014

Employment Separation Agreements

Teleseminar -LIVE

Credits: 1.0 MCLE General Credit (Program totals 60 minutes)

Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.

www.paulhastings.com ©2011 Paul Hastings LLP Confidential – not for redistribution

Separation and Release Agreements:Material Drafting Points and Risks


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Speakers

Marc Bernstein, Paul Hastings Partner (NYC)

– Employment law and litigation

– [email protected]

– (o) (212) 318-6907

Mark Poerio, Paul Hastings ERISA Partner (WDC)

– Executive compensation and employment issues (design)

– [email protected]

– (o) (202) 551-1780

– Related blog: www.executiveloyalty.org


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Overview

1: Identifying the risk of litigation and financial liability

2: Drafting enforceable waivers of liability

3: Salary and benefit issues, severance payments, andpayments tied to future performance

4: Commission issues for sales employees

5. Non-competition and non-solicitation provisions -protecting confidential information

6. Arbitration and other dispute resolution provisions


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1: Identifying the risk of litigation

Litigation risks –

A. from term of employment

B. from ERISA and severance expectations

See “Smart Goodbyes” article (attached)

C. from circumstances of termination

Aside: change in control… see appendix re 280G

D. from post-termination events

E. from future class actions


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1: Identifying the risk of financialliability (continued)

Financial Liability –

A. Managing the employer’s expense

Cash payments

Stock awards

B. Possible protections for the employee

Rabbi trust – funded or springing

Secular trust


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2: Drafting enforceable waivers

Primary Risks of Invalidation –

Inadequate consideration

Ambiguous waivers

ADEA

Covenants not to sue

Class actions


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3: Salary and benefit issues

Salary issues

Bonus entitlements

COBRA issues

Pension Accruals

401(k) deferrals from severance


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3: Severance payments, and futureperformance (cont)

Structural choices for severance

•Flexibility when no prior agreements

• lump sum payment

• installments

• Constraints from existing agreements – 409A next

•Earn-outs vs. Clawbacks

• Ambiguous provisions as to bonuses/retirement

•Mercury Morris case


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Code Section 409A – Quick Reference

What is 409A?

– Applies to non-qualified deferred compensation plans,employment agreements, stock plans, etc.

– Potential reporting and disclosure violations of employer

– Correction procedures are available in certain situations(IRS Notices, 2008-113, 2010-6, 2010-80)

Who pays what?

– Violation results in 20% tax/penalty interest to employee

– Employer usually pays if mistake

– Graphic Packaging case


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Common 409A problems

Timing Payment to Execution of the Release

Vague Reimbursement Rules

6-month delay rule

Omitting separate payment rule

Non-exempt stock awards

Amendments that trigger violations

Post-employment consulting


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4: Commission issues re sales

Employee Protection Laws to Consider

Special Severance Benefit Issues

Documentation Tips


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5. Non-competition and non-solicitation provisions

A. Case law Trends Generally

– DE: Delaware Elevator

– NY: IBM vs. Visentin

– Virginia: Home Paramount

B. Shoring-up in Release Agreement

C. Garden Leave?

D. Drafting particulars to note re non-solicits


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5. Protecting confidential information

Nature of precautions

– How precise?

– Risks from being too general?

– Too specific?


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6. Dispute resolution provisions

A. Arbitration – no right answer

B. Forum selection

C.Choice of law provision

D.Mandatory mediation or consultation

E. Fee shifting provision


QUESTIONS

Break for Q&A

Blog and topical updates available at …

www.executiveloyalty.org

More info on following slides re goldenparachutes

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Golden Parachutes

Background

Preliminary Example:

– Base amount = $200k

– 3x base amount = $600k

– Parachute payments = $700?

Result:

– Lost corp. deduction: $____???

– Excise tax on Executive: $____???

Code Section 280G


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Golden Parachutes – Quick Reference

Basics: see Treas. Reg. 1.280G

– Who? Disqualified Individuals.

– When? CIC

– What? A parachute payment is any payment made inconnection with the change in control transaction,including:

• Severance payments

• Employer payment of insurance coverage

• Value of accelerated vesting

– Beware: performance-based vesting

• Early payment under bonus or deferred comp plans\

• Extraordinary awards within one year of CIC


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