Executive compensation can involve much more than a salary.
Executives and other highly compensated employees may receive bonuses, commissions, stock options, restricted stock, equity awards, deferred compensation, incentive payments, benefits, and other forms of compensation. The terms governing that compensation can become especially important when an executive is promoted, terminated, resigns, or asked to sign a new employment agreement.
When compensation is tied to performance, company goals, vesting schedules, or specific employment conditions, disputes can arise over what an employee has earned and what the employer is required to pay.
Our North Carolina employment lawyers can help executives and other employees understand compensation agreements, negotiate employment terms, and address disputes involving compensation they believe they are owed.
With more than 70 years of combined experience, our North Carolina executive compensation lawyers deliver more.
Executive compensation refers to the various forms of pay and benefits provided to executives and other highly compensated employees.
Depending on the position and employer, compensation may include:
The terms of each compensation arrangement can vary significantly.
An executive compensation agreement is a contract or other written arrangement that establishes some or all of an executive’s compensation.
It may address:
An executive may have more than one document governing compensation. An offer letter, employment agreement, incentive plan, equity plan, company policy, and other documents may all need to be considered together.
Executive compensation is often negotiated as part of accepting a new position, receiving a promotion, or entering into a new employment agreement.
Negotiations may involve more than base salary.
Depending on the circumstances, an executive may negotiate:
The terms that make sense to negotiate depend on the position, employer, compensation structure, and executive’s goals.
The amount of compensation is only one part of an executive employment agreement.
Important provisions may include:
Executives should understand these provisions before signing an agreement, particularly when a significant portion of compensation is tied to performance or equity.
Performance-based compensation is pay that depends on meeting certain goals, targets, or other requirements.
For example, an executive’s compensation plan may provide a bonus based on:
Disputes can arise when an employer and executive disagree about whether the conditions for earning a bonus were satisfied.
The language of the compensation plan can be particularly important in determining when compensation becomes earned.
Whether an employer can withhold or cancel a bonus depends on the terms governing the bonus and whether the compensation has already been earned.
Some bonuses may be discretionary. Others may be promised under an employment agreement, compensation plan, or other arrangement.
Important questions can include:
A disagreement over a bonus should be evaluated based on the actual compensation arrangement rather than simply the employer’s description of the payment.
An employer may have the ability to change certain compensation terms prospectively, depending on the employment agreement and applicable law.
However, changing a compensation plan does not necessarily mean an employer can take away compensation that an employee has already earned.
North Carolina law also contains requirements concerning promised wages and advance notice of certain changes to promised compensation.
The timing of the change and whether the compensation had already been earned can be important.
The answer depends on the terms governing the bonus.
Some compensation plans require an employee to remain employed through a specific date. Others may provide that a bonus is earned based on performance during a particular period.
An executive who is resigning or has been terminated should review the compensation plan carefully to determine what happens to unpaid or partially earned compensation.
Equity compensation can be particularly complicated when employment ends.
Depending on the type of equity award and the governing documents, leaving a company may affect:
The consequences can also differ depending on whether the employee resigns, is terminated without cause, or is terminated for cause.
Executives should review the applicable equity plan and award documents before making decisions about leaving a position.
Stock options may be subject to specific rules concerning vesting, exercise periods, and what happens after employment ends.
For example, an employee may have a limited period to exercise vested options after leaving the company.
The applicable terms depend on the stock option agreement and plan documents.
Because the financial consequences can be significant, executives should understand their options before allowing an exercise deadline to pass.
A clawback provision allows an employer to seek repayment of certain compensation under specified circumstances.
Clawback provisions may appear in executive compensation agreements, bonus plans, equity agreements, or other employment documents.
The circumstances triggering a clawback can vary. An agreement may address issues such as financial restatements, misconduct, violation of company policies, or other specified events.
The specific language of the provision matters when determining whether an employer can seek repayment.
Some executive compensation agreements provide additional compensation or benefits if the company undergoes a significant transaction or change in ownership.
These provisions may address:
Change-in-control provisions can become particularly important during a merger or acquisition, when an executive’s employment and compensation may change at the same time.
Potentially.
An executive who is leaving a company may have several different forms of compensation that need to be considered together.
A separation package may involve:
The value of the overall package may depend on more than the severance amount offered by the employer.
If an employer fails to pay compensation that an employee has earned, the employee may have legal options.
The appropriate legal claim can depend on the type of compensation involved and the agreement or plan governing it.
North Carolina law addresses promised wages, while contractual compensation may also be governed by an employment agreement or other enforceable contract.
An executive should preserve compensation agreements, pay records, bonus plans, commission statements, and other documents related to the compensation dispute.
Potentially.
An executive may have a legal claim when an employer fails to pay compensation that was contractually or legally owed.
Depending on the circumstances, a dispute may involve:
The specific documents governing the compensation will often be important in determining what an employee is entitled to receive.
The cost of legal representation depends on the circumstances and the type of assistance involved.
Some matters may involve reviewing an employment or compensation agreement before it is signed. Others may involve negotiating compensation terms, resolving a dispute over unpaid compensation, or addressing compensation as part of a separation from employment.
During a free case evaluation, you can discuss your situation and learn more about your potential legal options.
