Welcome to the latest installment in my corporate divorce series. In my last article I gave some practical advice about how to handle an unexpected firing – a corporate break-up. Now I’m moving to the other end of the employment life cycle: hiring and negotiation of the employment contract.
Once again I observe that while I am not a divorce lawyer, the analogies of divorce law to my employment practice are startling. Two parties meet (the interview), they realize how many things they have in common (the job requirements and qualifications), and then they fall in love and get married (the job offer and acceptance).
While I’m not professionally qualified to give advice about dating, marriage, relationships or even legal advice about divorce, I do know one thing: planning in advance for the worst may make a very difficult and stressful process – the breakup – more tolerable, or, at the very least, more predictable.
Don’t let love cloud your business judgment
Love doesn’t lend itself to the pragmatic and business aspects of marriage. A prenuptual agreement establishes the financial and property rights and obligations of spouses before they get married and provides a roadmap for the distribution of property when the marriage ends. It is the type of contract that, while inherently unromantic (who wants to talk about splitting up while walking down the aisle), is boldly practical because it makes the couple think in advance about the resolution of future disputes.
Prenups aren’t just for the wealthy – they provide transparency regarding the ownership of assets, streamline complicated modern relationships, such as subsequent marriages and inheritance rights, and may even protect spouses against debts or obligations that predate marriage. As unsexy as it may sound, prenups just make good business sense.
Employment contracts are really no different. The contract – and that term may mean any document or series of documents (preferably and sometimes mandated to be in writing) that spell out the important terms of the parties’ employment arrangements. And while it may seem incongruous to think about the end of the employment relationship at the beginning, this is where the prenup concept becomes relevant in the employment realm.
What would you want to know going in to the relationship before coming out of it?
There are really three main things you should think about at the beginning of a relationship that may impact how it ends: severance, restrictive covenants and the treatment of equity.
- Severance: The concept of severance – a payment stream intended to cushion the blow of an unexpected termination (and perhaps compensation for giving up other employment opportunities) – is typically only found at the upper echelons of management and the executive ranks. But its length and payment terms invariably should be discussed before starting employment because the parachute won’t grow any larger on the way down.
- Restrictive covenants: Non-competes, non-solicitation and non-interference provisions likewise should be addressed before starting work because the best leverage to modify those provisions (or delete them completely) exists before the employment relationship begins.
- Equity Interests: If you have any notion that you can cash out your equity or modify the existing terms of an equity repurchase, the time to do that (if you can at all) is before you start work, not on your way out.
Stated another way, think about where you would like to be in the case of a break-up, even if the breakup seems unlikely. Addressing these matters in advance makes even a sudden break-up more manageable.
The best time to negotiate is before you walk down the aisle ….
There is no doubt that the best time to negotiate the employment terms that are key to a termination is before you “walk down the aisle.” While it might seem both counterintuitive, counterproductive and even unromantic to focus on the end of the relationship at the beginning, it is just good business to be practical about a relationship’s end. Don’t worry that it will spoil the mood. Instead your new employer will respect you for your thoughtful and pragmatic approach to something that you hope will never come to pass, but that you logically recognize just might happen.
This article was previously posted on LinkedIn.