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Changing control agreement can protect your rights at termination

On Behalf of | Dec 26, 2014 | Employment Contracts |

Employment contracts are executed between employers and employees so that the terms and conditions of employment, including severance pay in cases of termination, are clear to both parties. This is standard everywhere in the country, including Michigan. Today, most employment contracts signed by senior executives in U.S. corporations include a change-in-control clause.

A change-in-control agreement specifies what compensation will be paid to an executive in case he or she is terminated because of a change in who controls the company. A change can happen for a variety of reasons, including mergers, acquisitions, hostile takeovers or business restructurings. In many such ownership changes, top-level executives are replaced with new executives at the direction of the new owner.

Because of this real possibility, especially in industries with considerable volatility, top-level executives are wise to make sure a separate change-in-control agreement will protect their rights in case they lose their jobs. Typically, a change-in control-agreement will also help executives preserve their stock options, retirement benefits and performance bonuses as well as secure additional compensation for the sudden loss of a high-paying job through no fault of their own. Experts advise that any change-in-control agreement be as specific as possible so that it can be more easily enforced or litigated in the event the employer decides to renege on its provisions.

If you are a top-level executive in a corporation, it is advisable to execute a change-in-control agreement at the earliest opportunity to protect your employment rights against unforeseen changes in company ownership. A lawyer experienced in such matters can help you draft an appropriate agreement or help you negotiate relevant change-in-control provisions into your existing employment contract. Having good legal support could make all the difference in the world to you, your family and your business. For more information, see our executive and c-level legal services page.


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