Solana Beach Lawyer—Contract Terms of Agreement

TERM OF THE AGREEMENT CAN VARY - by Blumberg

Ideally, the term of the contract should be for no less than three years. Anything less than three years is not sufficient to allow the executive time to implement policies. Short-term association contracts also don? generally benefit association employers, as they don’t instill confidence in the employee and promote employment stability.

Automatic renewal is a customary option for establishing the term of the agreement. It is usually advantageous to both parties to have the term of the employment automatically roll over unless one of the parties notifies the other of its intention to terminate or renegotiate. The executive should try to establish that the notification take place anywhere from three to six months in advance to provide an adequate time to find new employment in the event of termination. If severance is provided in the event of notification of termination, then the timing of this period is not so crucial.

Some executives have been successful in negotiating evergreen clauses, which cause the agreements on an annual basis to automatically roll over for another full term. An evergreen clause provides maximum employment security and is especially helpful to avoid a crisis resulting from board and leadership changes.

Here is an example of an evergreen clause: “The term of this agreement will be for three years beginning on July 1, 2012, and it will be automatically extended by twelve (12) additional calendar months on July 1, 2013, and every July 1st thereafter, unless 180 days prior to July 1, 2013, or 180 days prior to any subsequent July 1st thereafter, the employer delivers to the employee written notice of its intention not to extend the term of this agreement.”

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