Somebody recently went through Sony’s hacked e-mails and found some that show Jennifer Lawrence and Amy Adams were paid less than the male leads in American Hustle. This prompted Jennifer Lawrence to write an essay titled “Why Do I make Less Than My Male Co-Starts?”
She blamed her lower pay partially on Hollywood being sexist and partially on her not wanting to appear “difficult” and feeling silly about negotiating regarding millions she didn’t really need. As you can imagine, the essay sparked a whole lot of indignation about the “wage gap” and the sexism in the workplace when it comes to salaries, not just in Hollywood, but everywhere.
However, many of these responses focused on gender issues and failed to address Jennifer’s glaring violation of the cardinal rule of employment negotiations – IF YOU DO NOT ASK FOR IT, YOU WILL NOT GET IT. This is not a gender specific rule, by the way. Some believe that men are better at asking or demanding to be paid according to their worth than women, but I personally do not think that’s true. In my experience, it’s more of a personality or experience issue than a gender-related trait. If your personality is like Jennifer Lawrence’s (by her own admission) and does not allow you to ask, find a person who will ask and negotiate for you, i.e. a lawyer or an agent.
I see too often executives (men and women) not asking for what they want in an employment agreement, not asking about what the terms in their employment agreements mean, assuming that their employment terms are not negotiable, or giving up on negotiations too early in the process. As in any negotiation process, knowledge is power. So, here is a list of terms that are often negotiable in the executive employment agreements and that you should at least discuss with your employer and your attorney before signing an employment agreement:
1. Severance – is the employer going to provide severance and, if so, how much? Is death or disability a severance trigger? What will happen to medical benefit continuation, prorated bonus, equity vesting acceleration, extension of the option exercise period, or other benefits if the employment is terminated?
2. Term of employment – most executive employment agreements will specify a term of employment, which is, of course, an exception to the at-will approach taken with respect to non-executive employees. If it is an at-will contract, ask for a specific term. Often, an employer will specify that the company may terminate the executive “for cause.” What constitutes “cause” is purely up to the parties.
3. Restrictive Covenants – what restrictions will be imposed on the executive after he leaves the company? For how long? The length, geographic scope, term of restrictions and other parameters can be negotiated to strike a balance between protecting the company and allowing the executive to earn a living after he moves on.
4. Cause – does the “termination for cause” clause define what the “cause” is? Does it allow for a cure period, i.e. a period during which the executive can address the company’s concerns before being terminated “for cause”? Is the company’s board involved in the termination process and what are the steps in that process that the company and the employee will have to follow?
5. Good Reason – a “good reason” separation provision allows an executive to resign for certain pre-approved reasons, such as demotion, relocation and other events that would materially change the terms of employment. What constitutes a “good reason” is negotiable.
6. Equity – will the executive receive equity in the company as part of the compensation? How much? When does it vest? What happens with it if the employee is terminated for cause v. employee leaves for a “good reason.” Are there additional restrictive covenants tied to the equity award?
7. Arbitration – if a dispute about the employment agreement arises, where will it be brought? If in court, will an executive want to give up his/her rights to a jury trial? If in arbitration, what arbitration body will decide the dispute and what rules will govern it? Who will pay for costs?
8. Assignment – what happens to the executive’s rights and obligations under the employment agreement if the company is sold or bought? Can the company assign the employment agreement to the new entity? Will it need the executive’s permission to do so?
9. 409A – When possible, severance, other payments and the employment agreement generally should be structured so as not to trigger coverage under Section 409A of the Internal Revenue Code. If the agreement is subject to Section 409A, it should be written to comply with. Failure to do so can expose the executive, among other things, to a 20 percent additional tax.
10. Other Provisions – there are many other employment provisions that an executive can negotiate. A little bit of planning and persistence in the negotiations at the front end of employment will pay ten-fold at the end of that relationship.
Leiza Dolghih represents both companies and employees in litigation and arbitration proceedings in state and federal courts. If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@GodwinLewis.com or (214) 939-4458.