Executives should seek advice on compensation before signing

Executives should reject Canada’s handshake-deal culture when it comes to compensation review and contract negotiation, says Toronto employment lawyer Ellen Low.

Low, principal of Ellen Low Employment Law, says the idea of obtaining employment counsel is a relatively new concept in this country.

“In my personal experience, it’s not that long ago that a handshake was enough to seal a deal, and committing things to writing was rare,” she tells AdvocateDaily.com. “But I am concerned these days, when people are signing off on contracts, assuming the employer is looking out for their interests.

“It’s only when they’re terminated that they discover the employer was only concerned about their own best interests,” Low adds.

She says the unique nature of an executive’s role only increases the necessity for a contract’s review by a set of legally trained eyes.

“There’s a specialized set of contractual provisions that can come up when you’re dealing with higher-level executives,” Low says.

For instance, she says many employers will provide extra insurance, premium health benefits and other perks for company executives.

“You want to make sure the employment agreement matches up with your expectations — and we have a whole list of things to check that are included — and to ask why, if not,” Low says.

Still, she says things appear to be changing, and executives are becoming increasingly savvy in terms of knowing and asserting their employment rights, adding that most of her retainers in the area fall under three broad scenarios:

  • Initial offer: “There are a whole bunch of things to take into consideration when looking at a brand new offer of executive employment,” which may vary depending on the individual’s existing employment status, Low says.
    Even at this early stage, she says clients should also be considering the end of the employment relationship, since many employers will want to include a termination clause, limiting executives to minimum entitlements available under Ontario’s Employment Standards Act. “It’s not always suitable for someone at that level.”
  • Mid-employment: “If you’re promoted, or the terms of employment have changed, those new arrangements should be committed to in writing,” Low says, explaining that employers typically favour “entire agreement” provisions, essentially limiting entitlements to what is explicitly included in the contract. “This is where things like premium health coverage and company cars need to be mentioned,” she says.

    Termination clauses are often a focus of her review at this stage, as many employers may be tempted to include one if none was present before. “You also want to make sure past service is being recognized, and that creative compensation structures providing long-term or short-term performance-related incentives are properly considered,” Low adds.
  • Termination: When the employment relationship falls apart, executives who have engaged counsel at the earlier stages should be able to reap the benefits of their due diligence, Low says. “When someone is looking to exit a company or is being terminated, our starting point is always to go back and look at what the employment agreement says,” she explains. But it isn’t the be-all and end-all, Low says, noting that there may be grounds to challenge unreasonable termination clauses.

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