Big Red Car here. Another lovely day in the ATX. Cool morning and hot afternoon. Yesterday not so hot with a nice cloud cover and a bit of rain.
Today I am going to the beauty parlor — haha, a Big Red Car does not go to a beauty parlor, we go to the freakin’ car wash. But still those lovely ladies caressing and drying my bright cherry red paint job. Well, Old Sport, that is my own little bit of heaven.
This will be the last post on the C Level Employment Agreement and we will wrap things up by noting that a typical C Level Employment Agreement includes several provisions and restrictions which set some guard rails after the Agreement is terminated or expires.
The departing CEO will be required to refrain from competing directly with the company for some specified time period after departure. Typical, usual, fair.
These type of agreements are the subject of much legal controversy as to their enforcement with the legal argument often focusing on the lack of independent consideration in attaining the agreement particularly it it was inserted in a renewal and was not included in the original Employment Agreement.
These non-compete provisions are also subject to much interpretation as to what actually constitutes competition. You will know it when you see it. Look for it.
The Big Red Car advises caution and care in negotiating these provisions up front but steadfast and perfect compliance thereafter. Do not get drawn into the splitting of hairs or any such “sharpness” — just agree and adhere to your agreement thereafter.
Hey, Old Sport, you are an honorable CEO and you knew what you were getting into up front. Honor your commitment which will typically be a single year.
As part of your employment, dear CEO, you will have been exposed to and have developed confidential, proprietary and trade secret information. This information is owned by the company. Hell, they’re paying you to do exactly that.
The departing CEO will be asked to safeguard this confidential, proprietary and trade secret information and likely not to use it in the course of subsequent business endeavors.
In many instances, this is subject to the same type of time frame as the non-compete agreement.
Pragmatically there is information which obviously falls into this category — customer lists, internal processes — and there is information which does not such as the operating instructions for the Keurig coffee machine.
Think carefully about what does and does not constitute confidential, proprietary and trade secret information. Don’t take chances but don’t get intimidated either. If in doubt, seek clarification.
Tampering with employees
As part of the departure restrictions and covenants, a departing CEO will likely be asked not to “tamper” with the relationship between the company and any other of its employees. This is reasonable and typical. Again, this is likely to be constrained by a similar time period as outlined above — typically a single year.
It is not unusual for a departing CEO to have developed a close working relationship with colleagues and subordinates. In many instances, the CEO has hired or participated in their hiring or has mentored, advised or coached them. These personal bonds and loyalties are normal.
The departing CEO must be absolutely pure in not violating this restriction. The safe harbor is simply not to engage in any contact or behavior which would suggest that you are considering an employment relationship with any employee of the company.
This is not something to equivocate about. Just honor your commitment even if it means limited contact with folks you would love to have a BBQ or beer with.
It is not unusual for a C Level Employment Agreement to include a non-disparagement provision. That is a fancy term for not talking smack about your former employer. This provision is typically mutual. You promise not to talk smack about your employer. Your employer promises not to talk smack about you.
While this seems like an adolescent consideration, it is where the emotion comes to live after a messy departure. The Big Red Car counsels saying nothing publicly — NOTHING — about one’s former employer.
This provision also may be time constrained — that same year which controls competition, information and tampering.
The Big Red Car sees nothing to gain by ever speaking ill of a former employer. Look at the good times and the lessons learned and focus exclusively on those considerations. After all, dear CEO, you were the one guiding the ship, no? Stay classy, CEO.
The consequences of violating these provisions is likely a legal dispute with attendant damages which could be prosecuted in District Courts or through arbitration. The Boss is generally a fan of arbitration as a dispute resolution methodology.
Do not expect your former employer to be particularly flexible or likely to overlook these restrictions particularly if you have parted company with less than amicable feelings.
I urge you not to tempt or provoke your former employer. A year is a very short period of time. Just wait it out and maintain your commitments with your honor intact. Hey, Old Sport, you ARE an honorable chap. I know it. [Haha, Big Red Car, you don’t really know spit.]
Self help remedy
Perhaps the smartest thing any departing CEO can do is to engage with the company should any question come up during that first year after departure. Do not be afraid to ask the company in writing whether any of your proposed actions will jeopardize the restrictions and your adherence to them. This will only happen during that first year when they are live.
Even if the company fails to respond — which they may do if there are hurt feelings being nursed — this is at least an indication of their views on things.
So, Old Sport, we have extracted the last drop of juice out of the C Level Employment Agreement. We have compiled all the posts on that subject here at the C Level Employment Agreement Series. Read it at your leisure and see if you can’t mine a nugget of useful information from it. There are a total of 13 posts on the subject.