Top 10 “TakeAways” June 15 – Employment Contracts & Separation Agreements

Presenters – Ellis Carter of Carter Law Group, P.C. & Deanna Rader of Rader Mayrose LLP

1. All employment relationships are contractual in nature, but unless a written agreement is signed, the relationship can be terminated by either party at will.
2. A written contract should be seriously considered for non-profit executives. The contract can be flexible in the terms, including if it is able to be terminated at will or only for cause.
3. The contract is not enforceable unless signed by both parties (the executive and board president). The contract should be approved at the Board level and recorded in the minutes.
4. It is worth having an employment attorney create the contract. Contracts found online may not have the correct legal terms for your state or situation. Employment attorneys can create a contract quickly and inexpensively.
5. Compensation included in a contract should be Fair Market Value unless there is a very specific cause for excess benefit.
6. It is better to not make one lump sum for a retirement package, but rather smaller deposits to a retirement account. A large lump sum will be taxed at a higher rate.
7. Contracts are beneficial to both the employee and the organization! It is better to be prepared with a contract rather than handling a crises when you are in it.
8. Do not pay a severance package without getting a severance agreement! The agreement can include a waiver and release of claims, confidentiality statement, nondisparagement statement, transition services, and continued availability.
9. The employment contract should include specifics to keep the organization protected – examples: including a noncompete; including a stipulation that the executive cannot recruit existing employees for some designated amount of time; a note that the executive cannot solicit donors; etc.
10. A contract helps mitigate the risk of an executive leaving an organization (i.e. perhaps they are recruited) without a solid transition plan in place. It’s a hardship to an organization when an executive leaves without a plan.

Thank you to Jalenna Francois & Chris Linn of Feeding Matters for their TakeAways.

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