In employment and labor attorney Scott Connolly‘s new article “Firing Executives for Cause: Recent Case Offers Lessons“, Scott discusses how the outcome of Eric Balles v. Babcock Power, Inc. offers contract drafting lessons for corporate and employment attorneys who represent executives and companies. Much can turn on whether an executive is fired “for Cause”. If Cause exists, an executive’s employment contract almost always provides that the executive shall receive no severance benefits – typically post-termination salary and health continuation and, less commonly, accelerated vesting of stock. In addition, stock agreements may provide that, when Cause exists, an executive’s stock is subject to repurchase by the Company at a minimal price.
Because the stakes are so high, employment lawyers tend to fight the hardest during contract negotiations on termination and severance provisions and the definitions of Cause and “Good Reason” (the corollary that allows executives to leave, but still receive severance benefits).
To continue reading about firing executives for Cause, read the full article.