Executive Termination Solicitors in Malton, York & Wetherby
The main concern with the dismissal of ordinary employees is likely to be ensuring that the process is carried out fairly in order to avoid costly claims. For senior executives, the need for a business to act swiftly may outweigh good employment practice. The imminent departure of a senior executive may be highly sensitive, from a commercial point of view, so businesses will want to avoid a potential dispute coming out into the open or becoming protracted. Any settlement offer made to a senior executive will reflect not only the potential claims that they may have but the commercial advantage to the employer in securing an amicable and swift departure.
In this guide, Gillian Reid sets out the key legal and practical points for businesses to consider.
Reason for Dismissal
Correctly identifying the reason for the termination at the outset is essential and will be key to the overall management of the process, whether it’s redundancy, poor performance or conduct issues. Correctly categorising the reason not only impacts on the executive’s contractual entitlements and potential claims but can also influence the strategic direction of termination discussions.
Checking the Contract
The next step is to review the executive’s service agreement together with any corporate documentation and applicable policies. In particular:
- What termination procedures apply?
- Can the employment be terminated without notice (summarily)?
- How long is the notice period and can the executive be paid in lieu of notice?
- How does the termination affect company shares?
Executive terminations can often be sensitive and it may not always be commercially feasible for the business to follow good employment practices. Of course, failing to follow a fair procedure can increase the risk of claims against the business such as:
- unfair dismissal
- wrongful dismissal or breach of contract.
In these circumstances it is wise to consider offering a settlement agreement to settle any contractual or statutory claims against the business, usually in return for a financial package.
Costing the Termination
These will vary according to the seniority and remuneration package of the departing executive and may well be the subject of negotiation typically looking at:
- Contractual entitlements – notice pay, accrued holiday pay, bonus, benefits and pension
- Ex-gratia (tax free) payments to compensate for loss of office
- Corporate entitlements such as shares and share options
- Legal costs to contribute to, or cover, the requirement to take independent legal advice.
Protecting Business Interests
It’s important to address issues of confidentiality, the terms and enforceability of any restrictive covenants, and whether placing the executive on garden leave is appropriate. Similarly, details of how the publicity surrounding the executive’s departure will be handled will need to be considered.
The settlement agreement can include specific obligations regarding confidentiality and reiterate the restrictive covenants in the executive’s contract of employment or director’s service agreement. Wording for an agreed reference and announcements to colleagues and clients can also be set out.
Our Employment Experts Can Help You With
- Drafting or reviewing directors’ service agreement
- Pre-termination strategy
- Identifying the reason(s) for termination
- How to follow a fair procedure and minimise the risk of a claim
- Reviewing shareholder agreements or bonus/commission schemes
- Drafting and negotiating settlement agreements