Employment agreement checklist

This checklist is used to negotiate employment agreements between employer and

employee.
1. Job description and specification
What is the title of the employees job?
Is employee guaranteed a seat on the board of directors while an employee?
Where is the place of employment? What are the regular working hours?
Can employee be relocated unilaterally to another city or only with the employees
consent?
Is the employee allowed to be in!ol!ed in other acti!ities "e.g. a directorship on other
boards in!ol!ement in community acti!ities#?
What are the employees responsibilities?
Can the employee be demoted? Can employees responsibilities be substantially
modified decreased or increased?
2. Wage and Salary
What is the base salary? What about o!ertime? What about commissions?
$oes the salary go up each year by a designated amount or by cost of li!ing increases?
%re there designated times for performance re!iews?
When is it payable?
3. Benefits
Will the employee participate in all benefit plans of the company?
Which of these plans should be in place for the employee? %re all of the payments for
the benefits the responsibility of the company? such as&
' (ealth and medical "including spouse and dependent co!erage#
' )ducational reimbursement
' e*ecuti!e financial counseling
' $isability
' +,-"k#
' .ension
' Cafeteria plan
' /ife insurance
' 0tock option1stock grant
' $ental !ision
' .rofessional liability insurance
%ny special loans or forgi!eness arrangements?
%re some of the benefits ta*able to the employee? 0hould employee be reimbursed for
the ta*?
(ow much !acation per year is employee entitled? $oes unused !acation continue to
accrue for the benefit of employee and payable on termination of employment?
Is there a designated sick pay policy?
4. Bonus
%re there bonuses to be tied to objecti!e performance standards?
%re target bonus le!els or minimum bonuses to be established?
$oes employee get a signing bonus?
Is employee entitled to a guaranteed bonus?
. !eimbursement of e"penses
%re mo!ing e*penses to be reimbursed?
Is there a relocation package a!ailable for employee "e.g. the company purchasing
employees house on a mo!e?#
Will the employees business e*penses be reimbursed promptly?
Is there a car or car allowance cellular phone pro!ided or other such amenities?
#. Stock option grants
$oes the option e*ercise period terminate 2, days after termination of employment or
can it be longer?
%re the shares obtained upon e*ercise of an option subject to repurchase on termination
of employment? If so at what price? "from the employees perspecti!e repurchase rights
should not be included or should be limited.#
%re the shares obtained upon e*ercise of an option subject to a right of first refusal? If
so on what terms?
Is the option a ta* ad!antaged incenti!e stock option?
$oes !esting of options accelerate on a change of control of the company? 3r on other
e!ents such as termination of employment by the company without cause?
Will employee get stock options?
What percent of the company do the options represent? "note& in !enture capital backed
pri!ately held companies the usual price for common stock options is -1-, of the price
for the latest round of preferred stock issuance.#
What is the e*ercise price for the options?
%re any options deemed automatically !ested upon grant?
(ow long will un!ested options !est? 4onthly? 5early cliff !esting?
(ow long is the option e*ercisable?
$. Stock grants
$oes !esting accelerate on a change of control of the company? 3r other e!ent such as
termination of employment by the company without cause?
$oes employee ha!e to pay anything for the grant?
What ta* will the employee ha!e to pay for the grant? Will the company also pay
employee an amount to co!er the ta*?
$oes employee ha!e a right of first refusal for future company stock issuances to a!oid
dilution?
Will the employee be granted stock?
Is this stock subject to !esting? What is the !esting period?
Is this stock subject to repurchase rights or rights of first refusal?
0hould employee file a 6 78"b# irc election?
%. &onfidentiality restrictions
If there are confidentiality restrictions on the employee are the following e*cluded
from the definition of 9confidential information:?&
(ow long do the confidentiality restrictions last? Indefinitely? % set number of years
after disclosure to the employee?
What restrictions ha!e been imposed on the employee by the prior employer?
The employee must be careful not to use or di!ulge confidential information of a prior
employer ; the new employer will often want a co!enant from the employee prohibiting
such use or disclosure.
'. (n)ention assignment issues
What is the scope of the companys rights to the employees de!elopment of new
in!entions trade secrets and ideas? %re these the companys only if they specifically
relate to company business and de!eloped during company time?
$o the in!ention assignment pro!isions comply with the california labor code or other
applicable law?
1*. +erm and termination
(ow long is the employment term?
What are the circumstances that the employee can be fired 9for cause: such as&
Con!iction of a felony or any act in!ol!ing moral turpitude< Commission of any act of
theft fraud dishonesty or falsification of an employment record< 4aterial uncured breach
of the employment agreement< =ailure to perform reasonable assigned duties< and1or
Improper disclosure of the companys confidential information< /ost of licenses<
$isability
%!oid 9for cause: definitions that gi!e the company too much latitude for termination.
Is employee entitled to se!erance pay on termination? (ow much?
If the employee is terminated without cause is it clear that employee will get all salary
and benefits that employee would otherwise ha!e been entitled to for the remaining term
of the agreement?
If terminated without cause is the company re>uired to continue paying for benefits or
cobra benefits for some period of time?
Is employee gi!en the right to terminate at the employees discretion prior to the end of
the term?
$oes the agreement get renewed automatically on a year'to'year basis unless the
company gi!es the employee notice of non'renewal at least 2, days in ad!ance of the end
of the term?
Is the employment 9at will:?
What are the grounds if any on which employers can terminate?
What are the terms if any for compensation in the e!ent of early termination?
11. ,iability protection for the employee
$oes the companys articles of incorporation limit the liability of officers and directors
to the ma*imum e*tent permitted by law?
Is there an indemnification agreement that protects the employee co!ering&
Indemnification protection for claims< automatic ad!ancement of legal e*penses<
.rotection e!en if the employee is no longer employed by the company?< "note statutory
limitations on indemnification.#
$oes the company ha!e directors ? officers "9d?o:# insurance co!erage? Is the
company re>uired to maintain a minimum amount of such co!erage?
$o the company bylaws pro!ide for indemnification protection for officers and
employees?
12. Breach of agreement
Is the company re>uired to gi!e notice to the employee of any alleged breaches of the
agreement and an opportunity to cure?
13. -isability and death
What is a disability e!ent?
What happens on death? Can medical and other benefits continue for some period for
the spouse and children?
What happens on disability? $oes the employee continue to recei!e salary and benefits?
14. .olden parachute
What are the ta* implications of the golden parachute payment? Will the company also
gross up the parachute payment to co!er the ta*?
Will the company reimburse the employees e*penses in connection with an irs audit
claiming additional ta*?
In the e!ent of a change of control of the company is employee entitled to terminate
employment and recei!e a 9golden parachute: payment "e.g. two or three times the
yearly salary#?
1. !epresentations and /arranties of the company
%re there specific representations and warranties of the company that should be set
forth "e.g. financial resources !enture capital backing#?
(as employee been promised something orally that should be reflected in the
employment agreement?
1#. 0ost1employment limitations
%re there limitations on the employee soliciting company employees? =or what period?
Is there a co!enant not to compete after termination of employment?
1$. -ispute resolution
(ow are disputes to be resol!ed?
0hould arbitration be considered?
In what city must disputes be brought if litigated or arbitrated?
1%. 2iscellaneous pro)isions
Choice of law
Integration clause
Is the company prohibited from assigning the agreement?
Is there an attorneys fees clause where the pre!ailing party in a dispute would be
entitled to recoup its attorneys fees incurred?