ACC’s Breakfast and Small Law Roundtable

Employment Contracts and Agreements

Cornell, Smith, Mierl & Brutocao LLPJune 22, 2016

Presenters:Steven Mierl and Betsy Chestney

Contracts Overview

• OFFER LETTERS/MOU• EMPLOYMENT • COMMISSIONS• BENEFITS/OPTIONS/EXTRAS• NDA/PIIA• SEPARATION

Contracts 101• Any Agreement Between Parties

• Written/Oral Contract• Letter/Email• Authority/Apparent Authority

• Consideration• Promises, Promises• Money• Act or Performance

or . . . . • Detrimental Reliance

• What is it Worth?

What is in your Contract?

• Clear Terms!• Qualifications• Term of Employment• Forfeiture• Calculations• Retention• Amounts

• Ambiguity? Employer Pays!• If you are reading it later . . . .

Offer Letters/MOU’s

• Can be a Binding Contract• Delineates Terms• Signed by a Employer• Reliance

• Conditions• Authorization to Work• More Formal Contract• Benefit Plans

Employment ContractsSpecific provisions

• Position and duties • Compensation

• Base pay• Incentive comp• Commissions• Benefits

• PTO• Insured• Savings

• Duration • At-will• Fixed term vs. Indefinite• End date or Renewal terms

• Termination provisions • “Cause” • “Good Reason” • Change in Control• Severance

Employment Contract: More provisionsArbitration/mediation/jury waivers

-Commercial/Employment Rules-Panel of 1 or 3-Who is covered? Executive/worker-Assignment of Expenses cut both ways-Pick a Service-Jury waiver

Choice of law/forum

Indemnification-Significant for executives-Residual liability on:

SEC MattersPay PracticesFiduciary Duties

ModificationSuccessors/Assignment

Personal ServicesRelation to CIC

Taxation (280G/409A)

Other Employment Agreements• Signing Bonus• Moving Bonus• Stock Options/Awards• Commissions• Deferred Compensation• Bylaw/Stock/Member

Agreements

Texas Pay Day Act• Requires Prompt Payment of Wages

After Employment

• Wages Include all forms of Compensation Owed

• Most Compensation/Bonuses Can be Paid Based on Written Agreement

• Ambiguities

• TWC Administrative Forum

NDAs, PIIAs, & Non-CompetesProtecting employer confidential info, goodwill, and IP

What are you trying to protect?PROVISIONS Disclosure of 

Conf. info &Trade Secrets

Goodwill Customer Relationships

Employees from being recruited

Rights in intellectual property

NDA/conf. provision X X X X X

Employee non‐solicit x X X

Customer non‐solicit x X X X

Non‐Compete x X X X

Proprietary Info & Inventions 

x x

Non-Disclosure/Confidential Info

• Duty not to disclose confidential info/trade secrets• Bolsters common law protection• TUTSA and DTSA

• DTSA requires language be added

• Assign rights in confidential info to employer• Duty to return confidential information

• Upon request• Upon termination

Intellectual Property Provisions

• Assign rights in developments• “inventions, discoveries, ideas, concepts, copyrightable works, other

developments”• On work time/off work time, on company property or off• “work made for hire”• Carve out prior inventions, if necessary

• Cooperation clause

Non-Competes (Must Comply with Tex. Bus & Comm. Code § 15.50)Consideration• Confidential Information• Goodwill• Stock Options

NOT just money.

CAN’T be imposed when employment is terminated.

Non-Competes Must Comply with Tex. Bus & Comm. Code § 15.50• Limitations imposed must be reasonable as to

• Length of time• Geographic Scope

• Customer base

• Scope of Activity

• Restraints “not greater than necessary to protect the goodwill or other business interest” of the employer

Non-solicitation

• Customer non-solicits• Limit to customers with whom EE had contact

• Employee non-solicits• Limit to employees with whom EE had contact• Limit to current employees and those who recently left

Other provisions

• Non-disparagement• Notifications

• Company of new job• New employer of the Agreement

• Arbitration or jury waiver• Equitable relief• Choice of law and forum• Reformation/Severability• Successors and assigns

Separation Agreements

Consideration• Lump-sum or pay out of severance• Forgiveness of loan• Pay out of PTO not otherwise entitled to• Employer promise (e.g., not to disparage)

Anything employee is not otherwise entitled to can be consideration to support a release

Condition payment on return of ER property & confidential information!

Release• Only for claims based on conduct through the release date

• Transition Agreements• Consulting Agreements

• Define “Released Parties”• Company, parents, subs, officers, directors, agents, employees, etc.• Customize

• Specific federal, state, and local law• Multi State Employers - beware• OWBPA (next slide)

• Catch-all provisions

OWBPA

• One employee, over age 40• “terms are understandable and understood”• “Employees has been advised to consult with an attorney and has to

extent she wants to”• 21 days to consider the agreement• Seven days to revoke

• Lay off of more than one employee, one over age 40• Same terms as above• 45 days to consider, seven to revoke• Chart of employees considered for lay off and those retained vs. not

BC1

Can’t Release

• Rights to unpaid minimum wage or overtime• Right to file claim for workers’ comp• Right to file claim for unemployment• Right to file or participate in a charge

• But can release right to monetary relief

EXCLUSIONS IN SEPARATE PARAGRAPH, EXPLICIT

Other provisions

• Confidentiality of Agreement• Non-disparagement

• Instead of mutual, neutral reference

• Cooperation clause• “No obligation to reemploy” • Continuation of benefits• Adequacy of Consideration• Choice of Law/Venue

• No admission of liability• Jury waiver or arbitration

agreement• Modifications

• In writing• Signed by ER rep & EE

• Disclosure of knowledge of violations of law/false claims

Entirety clause

• Supersedes all previous agreements, written or oral• But carve out

• NDAs/non-competes• Stock restriction agreement• Proprietary Info/Inventions Agreement• Arbitration Agreement/Jury Waiver• Promissory note

QUESTIONS?

Thank You!Cornell, Smith, Mierl & Brutocao LLP1607 West Ave., Austin, Texas 78701

(512) 328 - 1540www.cornellsmith.com