At WealthChoice we know that for many of us our professional success will dictate our financial choices.
A recent conversation I had with a dear friend of mine underscored the need for us to prepare for the worst when it comes to our jobs so that we are financially protected. After 18 years with the same company, my friend found herself looking at unexpected unemployment and in the frustrating position of negotiating her severance.
Guest Blogger Jen Rubin, Partner and Member of Mintz Levin’s Employment, Labor and Benefits Section shares some very valuable tips on how to prepare in advance to avoid the negative financial issues that can come with “corporate divorce.”
DON’T LET LOVE CLOUD YOUR JUDGMENT
Love doesn’t lend itself to the pragmatic and business aspects of marriage. A prenuptual agreement establishes the financial and property rights and obligations of spouses before they get married and provides a roadmap for the distribution of property when the marriage ends. It is the type of contract that, while inherently unromantic (who wants to talk about splitting up while walking down the aisle), is boldly practical because it makes the couple think in advance about the resolution of future disputes.
Prenups aren’t just for the wealthy – they provide transparency regarding the ownership of assets, streamline complicated modern relationships, such as subsequent marriages and inheritance rights, and may even protect spouses against debts or obligations that predate marriage. As unsexy as it may sound, prenups just make good business sense.
Employment contracts are really no different. The contract — and that term may mean any document or series of documents (preferably and sometimes mandated to be in writing) that spell out the important terms of the parties’ employment arrangements. And while it may seem incongruous to think about the end of the employment relationship at the beginning, this is where the prenup concept becomes relevant in the employment realm.
ALWAYS PLAN AHEAD
There are really three main things you should think about at the beginning of a relationship that may impact how it ends: severance, restrictive covenants and the treatment of equity.
- Severance: The concept of severance – a payment stream intended to cushion the blow of an unexpected termination (and perhaps compensation for giving up other employment opportunities) – is typically only found at the upper echelons of management and the executive ranks. But its length and payment terms invariably should be discussed before starting employment because the parachute won’t grow any larger on the way down.
- Restrictive Covenants: Non-competes, non-solicitation and non-interference provisions likewise should be addressed before starting work because the best leverage to modify those provisions (or delete them completely) exists before the employment relationship begins.
- Equity Interests: If you have any notion that you can cash out your equity or modify the existing terms of an equity repurchase, the time to do that (if you can at all) is before you start work, not on your way out.
Stated another way, think about where you would like to be in the case of a break-up, even if the breakup seems unlikely. Addressing these matters in advance makes even a sudden break-up more manageable.
WHEN SHOULD YOU NEGOTIATE?
There is no doubt that the best time to negotiate the employment terms that are key to a termination is before you “walk down the aisle.” While it might seem both counterintuitive, counterproductive and even unromantic to focus on the end of the relationship at the beginning, it is just good business to be practical about a relationship’s end. Don’t worry that it will spoil the mood. Instead your new employer will respect you for your thoughtful and pragmatic approach to something that you hope will never come to pass, but that you logically recognize just might happen.
Career and business management is one of the Five Fundamentals in our financial planning process at WealthChoice. Let us know if you have questions about how to deal with these employment challenges. We’d love to share some of our outstanding employment and business coaching resources with you so you are prepared and stay on track financially and personally.
This post was written by guest blogger Jen Rubin, Partner and Member of Mintz Levin’s Employment, Labor and Benefits Section. If you would like to learn more about Jen, please visit her LinkedIn page.
