Lawyers at our Executives and Professionals Practice Group have experience advising executives of private and public companies and can help review and explain the above contractual clauses. It is equally important that we be able to help leaders achieve achievable goals and plan (or conduct) negotiations on behalf of the executive. These agreements are generally developed in the interest of the company as a management. Among the general areas in which we have managed to negotiate additional conditions for the protection of individual managers are the terms of remuneration, capital provisions, severance pay, guaranteed terms of employment, the “good reasons” listed for terminating the relationship, the “good reasons” listed for the executive to withdraw while receiving severance pay and equity , as well as competition and non-recruitment rules. Although the agreement is not exhaustive, it should carefully consider how the following ten important considerations are dealt with in its employment contract: if the agreement does not meet the requirements of Section 409A, the compensation is subject to certain additional taxes, including an additional income tax of 20%. Given these high stakes and the complex requirements of Section 409A, the goal is generally to avoid coverage of 409A. This can be done by paying premiums in mid-March or mid-March, by not exceeding certain ceilings or late payments, and by complying with detailed stock option requirements. Each situation is unique and is generally fuelled by the relative influence of the parties in the negotiations. However, the employer often intends to offer great benefits, but does not do so because poor elaboration or lack of attention to detail.
Our efforts by our lawyers have been particularly successful in these situations to ensure that the benefits and incentives to be offered are effectively applicable. Executive compensation agreements are not written for warm feelings and good stewards relations on the recruitment phase. Instead, they must be written to resist the acid grapes and scorched earth tactics that the company can apply at the end of the relationship. Potentially costly tax problems may arise in an officer`s contractual arrangements. The internal revenue code section 409A applies to a salary that an employee earns in a year, but which will be paid in the coming year. It is called unqualified deferred compensation. If deferred compensation complies with Section 409A requirements, this does not affect the employee`s taxes. Compensation is taxed in the same way as it would be taxed if it were not subject to Section 409A. However, if the deferred compensation does not comply with Section 409A requirements, compensation is subject to certain additional taxes, including an additional 20% income tax.