In our last RealDealDocs blog entry, we discussed sales agreements, equipment lease agreements and proxy agreements. This week, we will cover three other types of agreements: executive employment agreements, non-competition agreements, and bonus plan agreements.
To review, an agreement can be defined as “a negotiated and usually legally enforceable understanding between two or more legally competent parties. Although a binding contract can (and often does) result from an agreement, an agreement typically documents the give-and-take of a negotiated settlement and a contract specifies the minimum acceptable standard of performance.”
Executive Employment Agreement
An executive employment agreement is used when a corporation hires a new executive to their organization. The terms of the employment such as salary, length of employment, possible commissions and payment schedule are included in the document. The job description for the executive is also included, with their rights and responsibilities, essential job functions and duties, and permitted activities. Typically this type of agreement may include a non-compete clause, as well as a confidentiality clause. Addition information may include employee benefits, such as vacation days, sick pay, pension, health insurance, etc. Agreements may also include bonuses upon signing on with the company and an annual bonus; if these exist, they will be covered in the contract. The document may include expenses, and how they will be handled when the employee incurs costs. An executive agreement may contain clauses regarding termination, what is considered a breach of contract, and how much notice shall be given upon termination. In the rare case an employee were to pass away during their employment, provisions regarding the death will be included.
A non-competition agreement is also known as a non-compete agreement. The document may be used when hiring a new employee (”Employee”) to an organization or company (”Company”), and prohibits the employee from working at a competitor (”Competitor”), after the employee is terminated or leaves the company. Non-competition agreements are designed to protect a company’s business practices and intellectual property from being provided to a competitor by a former employee. This agreement might be used by a soft drink company to prevent its employees from taking trade secrets to a competitor. A document will usually specify the time length in which the employee promises to not work for a competitor after leaving the company. The geographic territory and any prohibited activities may also be included. The laws surrounding the use and implementation of non-competition agreements may vary from state to state.
Bonus Plan Agreements
If an employer (”Company”) intends to award its employees (”Employees” or individually, ”Employee”) with a bonus, a bonus plan agreement (”Plan”) may be used. The agreement will cover what employees are eligible, who shall administer the bonus, and terms of receiving a bonus. If the bonus is a monetary amount, the contract will explain the terms of calculating the bonus, when it shall be paid, as well as how it shall be allocated. When a bonus is performance-based, the contract will contain what term or quota must be reached to receive a bonus. Clauses regarding indemnification, nontransferability, limitations of rights, and taxes will be included as well. The contract will specify what state of governing law the document shall follow. If a car salesman were to sell a certain number of vehicles in a month, the employee may be rewarded with a bonus incentive, and if so, an employee bonus plan agreement might be used. A company typically contains language regarding the amendment and termination conditions of the agreement.
Drafting an agreement from scratch can be a time consuming and daunting task – plus, without input from a qualified attorney, you may be poised to enter into an arrangement this not legally sound or in your best interest. Fortunately, RealDealDocs allows you access to thousands of agreements that have already been used in a myriad of different industries.