Senior Executives
Senior executives can face employment issues that are significantly more complex than those arising in an ordinary employment relationship.
Executive contracts frequently contain detailed provisions dealing with remuneration, incentives, termination, confidentiality and post-employment restrictions. A dispute about leaving a senior position can therefore involve not only salary and notice, but also substantial bonuses, deferred compensation, equity, regulatory obligations and professional reputation.
These issues can arise for executives working within:
- Financial services
- Banking
- Technology
- Telecommunications
- Media
- Sales
- Professional services
- Healthcare
- Large corporate organisations
- Smaller privately owned businesses
The value of the role is not the only consideration. The contractual and commercial consequences of leaving can be equally important.
Employment Law Issues Affecting Senior Executives
Common issues affecting directors and senior executives include:
- Bonuses
- Restrictive Covenants
- Complex employment contracts and service agreements
- Notice and garden leave
- Settlement Agreements
- Shares and Stock Options
- Deferred remuneration
- Gross Misconduct
- Job References
- FCA and other regulatory references
- International Employment
- Whistleblowing
A dispute in one area can also affect several others.
For example, resigning or being dismissed may influence whether a bonus is payable, whether share awards vest, how a leaver is classified under an incentive plan and whether restrictive covenants can be enforced.
Protecting Your Financial Position and Reputation
For a senior executive, the terms on which employment ends can have consequences extending well beyond the termination payment itself.
It may be necessary to consider:
- Outstanding salary and benefits
- Contractual notice
- Payment in lieu of notice
- Bonus entitlement
- Deferred bonus arrangements
- Share options and restricted stock
- Good-leaver or bad-leaver status
- Pension arrangements
- Restrictive covenants
- Confidentiality obligations
- Announcement wording
- Internal and external communications
- Reference wording
Professional reputation can be particularly important where an executive works within a relatively specialised industry or intends to move quickly into another senior position.
The circumstances and wording surrounding a departure should therefore be considered alongside the financial package.
Negotiating an Executive Exit
Where the employment relationship is ending, negotiations may take place directly with:
- Senior HR representatives
- Board members
- In-house legal teams
- External solicitors
The issues can be commercially sensitive and may involve significant financial and reputational considerations.
Negotiations might address matters such as:
- Termination compensation
- Notice arrangements
- Bonus payments
- Deferred remuneration
- Equity treatment
- Restrictive covenants
- Reference wording
- Confidentiality
- Public announcements
If terms are agreed, they will commonly be recorded in a Settlement Agreement.
Before signing a settlement agreement, an employee must receive advice from an appropriate independent adviser for the agreement to validly waive relevant statutory employment claims.
Senior Executives in Financial Services
Executives working in regulated financial services can face additional issues where FCA or PRA requirements apply.
In particular, a departure may affect:
- Regulatory references
- Fitness and propriety assessments
- Certification
- Conduct-rule issues
- Investigations
- Deferred remuneration
- Malus and clawback provisions
Under the FCA regulatory-reference regime, relevant firms may be required to obtain employment references when considering individuals for specified controlled functions, certification roles and certain other regulated positions.
This means that an ordinary agreement to provide only a short factual reference may not prevent a regulated employer from disclosing information that it is required to provide under FCA or PRA rules.
Where regulatory issues are involved, the terms of any settlement and agreed reference should therefore be considered particularly carefully.
International Senior Executives
Additional complexity can arise where an executive:
- Works outside Great Britain
- Works across several countries
- Is employed by an overseas group company
- Is seconded internationally
- Has contractual rights governed by more than one jurisdiction
The fact that an employer is British, that a contract refers to English law or that salary is paid through a UK payroll does not automatically determine whether all UK statutory employment rights apply.
For further information, see International Employment.
Getting Advice at an Early Stage
For senior executives, it is often important to consider the overall exit strategy before making decisions such as:
- Resigning
- Responding to allegations
- Accepting a settlement proposal
- Starting work for a competitor
- Agreeing reference wording
Actions taken at an early stage can affect later negotiations, contractual entitlements and legal claims.
A senior executive should therefore consider the complete position, including compensation, equity, contractual restrictions, regulatory requirements and reputation, rather than focusing only on the immediate termination payment.