Employment Law Attorneys

Employment Agreements-"Good Reason" Defined1 min read

Executive employment agreements provide security and direction for the executive. However, the operative provisions can have different meanings. Employment agreements typically provide that if the executive wishes to resign for good reason, he will collect a severance. But only under the specified cirumstances contained in the agreement.
Specifically, the performance based “Good Reason” provision can be written broadly to favor the employer and the board of directors. When the agreement states that “good reason” means a material change in the executive’s job duties without his consent, it is too broad and less protectionary for the executive.
The executive should and must negotiate a narrower provision that spells out the details of what constitutes a “material change” in job duties. Typically, the job description should be included in the contract language under the scope or duties sections. The more precise the provision reads the more protection is provided to the executive, and less for the employer.
In addition, the preciseness of the above provision also has a direct effect on whether severance will be paid. The meaning is in the verbage, so get it right the first time. Do not wait until the “reorganization” notice arrives.
What are your thoughts, we would like to know?
Mark P. Carey
Carey & Associates P.C.
71 Old Post Road, Suite One
Southport, CT 06890
(203) 255-4150 tel.
(203) 255-0380 fax.