Hiring and Firing the Big Brass: Executive Terminations

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1 Hiring and Firing the Big Brass: Executive Terminations Presented by: Cathy Lahey Jennifer Ronalds JUNE 13, Stewart McKelvey. All rights reserved. Not to be copied or used in whole or in part without the express written consent of Stewart McKelvey

2 I. The Executive Employment Agreement 1. Duties/reporting relationships change of control? 2. Compensation including bonus/ltip/share arrangements 3. SERP 4. Termination no cause severance arrangements 1

3 II. Termination No Cause 1. Meeting the statutory minimum New Brunswick s. 30 (1). 2. The trend towards term contracts succession, retirement, the importance of appropriate early termination clauses. 3. Severance Compensation: the executive premium? reasonable notice range based on court decisions market circumstances 2

4 4. The duty to mitigate vis-à-vis severance compensation must be explicit 5. Compensation as part of the reasonable notice period what is included? 6. Bridging and transition to other employment non-compete / non-solicit 4

5 IV. Supplemental Executive Retirement Plans (SERPs) Funding Arrangements: not funded / pay as you go letter of credit retirement compensation arrangement trust life insurance policies annuities (purchased at time of retirement) 5

6 V. Change of Control Move towards double trigger : 1. Change of control 2. Good reason 6

7 Good Reason constructive dismissal change in position or responsibilities (other than promotion) reduction in salary, benefits or remuneration failure to maintain any compensation plan relocation reduction in vacation entitlement breach of failure to assume the employment contract company ceases its activities in the normal course of business 7

8 VI. Bonus and Profit Sharing Issue: does a bonus or profit sharing have to be paid for common law notice period where the employee is no longer actively employed with the organization? Where employee would have met any eligibility conditions if he had received working notice of termination, damages will generally be allowed unless the contractual terms clearly state otherwise. 8

9 Where contractual terms do not clearly disentitle employee to payments: If notice period expires before full bonus period: employee may receive a prorated amount of the bonus. If notice period covers multiple bonus periods: employee may be entitled to a full bonus for any completed bonus period and a pro-rated bonus for a partial bonus period. 9

10 VII. Stock Options Employers can limit vesting of stock options and the exercise of stock options during period of reasonable notice with the use of extremely clear language. Terminated for any reason, whether the termination was voluntary or involuntary presupposed that the termination was lawful and, therefore, termination was interpreted as being the end of the period of reasonable notice: Veer v. Dover Corp. (1999, OCA). 10

11 Ceases to be employed read as contemplating a reasonable notice period: Gryba (2000, OCA). Contrast: The employee s right to exercise stock options ended when he ceases to perform services without regard to whether [he] continues thereafter to receive any compensatory payments therefrom or is paid salary thereby in lieu of notice of termination. : Kieran v. Ingram Micro (2004, OCA). 11

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13 These materials are intended to provide brief informational summaries only of legal developments and topics of general interest. This constitutes legal advice and is protected by solicitor-client privilege. The materials should not be relied upon as a substitute for consultation with a lawyer with respect to the reader s specific circumstances. Each legal or regulatory situation is different and requires review of the relevant facts and applicable law. If you have specific questions related to these materials or their application to you, you are encouraged to consult a member of our Firm to discuss your needs for specific legal advice relating to the particular circumstances of your situation. Due to the rapidly changing nature of the law, Stewart McKelvey is not responsible for informing you of future legal developments. 13

14 Catherine Lahey Rough seas, safe passage Cathy is committed to securing the best possible outcome for her clients interests. She helps them fulfill their objectives by assisting them in the development of policies and procedures designed to avoid claims and minimize liability. When litigation is required, Cathy develops strategies to secure the best possible outcome. Representative matters Commercial and employment-related litigation are two issues facing Catherine s clients, who include financial institutions, commercial creditors, employers, retailers, manufacturers, professional service firms and institutional clients. Some of the ways she helps these clients minimize their exposure to liability include: Providing in-house training for clients and their employees regarding litigationmanagement issues, such as litigation-response strategies, document preservation and disclosure obligations and e-discovery process. Advising institutional clients on administrative law issues, risk management, policy development and regulation, litigation-related issues and access to information issues. Providing in-house training for clients and their employees on various employmentrelated issues, such as occupational health and safety, workplace harassment, performance management, discipline and termination. Contact information Suite 1000, Brunswick House 44 Chipman Hill P.O. Box 7289, Postal Station A Saint John, NB E2L 4S6 Direct Dial: Direct Fax: clahey@stewartmckelvey.com

15 Areas of practice Litigation Labour and Employment Environmental Insurance Corporate Restructuring and Insolvency Occupational Health and Safety Education Dalhousie University, LL.B., 1991 University of New Brunswick, B.A. (honours), 1988 Bar admission(s) New Brunswick, 1992 Languages English Ratings Best Lawyers: Corporate and Commercial Litigation, Martindale-Hubbell (CV) Law society memberships Law Society of New Brunswick Activities Member, Canadian Bar Association Regional managing partner, New Brunswick, 2008-present Presentations Speaker, Canadian Bar Association NB, Women Lawyers Forum: Climbing the Ladder to Partnership, 2011 Speaker, Canadian Bar Association NB, Health Law Developments Panel, 2010 Speaker, Canadian Bar Association NB, E-Discovery Instructor, New Brunswick Law Society Bar Admission Course, Civil Procedure section, ongoing

16 Jennifer Ronalds It is our choices that show what we truly are, far more than our abilities. J.K. Rowling Helping businesses thrive The regulatory framework surrounding labour and employment is complex. It creates rights and obligations for employers which impact their operations and business decisions. By having a thorough understanding of the client s business, Jennifer ensures they clearly understand this framework and finds practical solutions that achieve the client s business objectives. Jennifer s practice areas include labour and employment, litigation and workplace human rights. Representative matters Understanding the legal implications that could arise from workplace issues are a challenge Jennifer s clients face. Working with banks, communications firms, insurers, municipalities and the public sector, Jennifer helps her clients navigate these stressful situations. Her past experience includes: Representing a municipal employer at an interest arbitration. Acting for a business in the mediation of a human rights complaint. Making a judicial review application to have the decision of a licensing body overturned. Representing an international shipping company in collective bargaining negotiations. Acting as defence counsel in personal injury and property damage claims. Contact information Suite 601, Blue Cross Centre 644 Main Street P.O. Box Moncton, NB E1C 9N4 Direct Dial: Direct Fax: jronalds@stewartmckelvey.com

17 Areas of practice Labour and Employment Litigation Employment Law Workplace Human Rights Labour Relations Education Dalhousie University, LL.B., 2006 Dalhousie University, B.A., 2003 Aix-Marseilles Trois (Diploma in French Studies), 2001 Bar admission(s) Nova Scotia, 2007 New Brunswick, 2010 Languages English French Law society memberships Nova Scotia Barristers Society Law Society of New Brunswick Activities Member, Canadian Bar Association Human Resources Association of New Brunswick, 2010-present Board member, North End Community Health Center, Halifax, Publications Regular contributor, Atlantic Employers Counsel Presentations Presenter, Navigating Social Media in the Workplace, July 2011 Presenter, Workplace Investigations, November, 2010 Presenter, Hiring (and Firing) Temporary Foreign Workers, Panel presentation at CBAns Annual Professional Development Conference, January 2010 Regular presenter, Labour and Employment Client Seminars, Stewart McKelvey