Your Questions, Answered

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If you're a high-level employee or a key employee, your employer may offer you a contract with additional benefits or protections. For instance, the contract may say that you qualify for severance pay, unless you're terminated for cause. The contract may also have special bonus or incentive programs, or it may discuss your eligibility for stock options or other forms of equity participation.

These types of contracts can also impose additional obligations on you. While you may still be free to quit, there can be legal consequences for quitting, like the loss or reduction of severance pay or other types of compensation. These types of contracts may also impose restrictions, like noncompete or nonsolicitation terms, that impact you after your employment ends. And these types of contracts can also have terms, like arbitration clauses or attorney fee terms, that affect your legal remedies.

If you're not sure what you're getting under these types of contracts, or if you don't clearly understand your obligations and restrictions under such contracts, it may be the right time to seek legal help. A qualified attorney can help you understand legal language and negotiate effectively with your employer. 

Under Minnesota law, most employment relationships are "at will." That means either the employer or the employee can end the employment relationship for any reason, with or without cause. 

There are many exceptions to "at will" employment. That can include circumstances where an employer wrongfully terminates an employee in violation of anti-discrimination laws; where an employer wrongfully terminates an employee for certain types of whistleblowing activity; or where an employer terminates an employee for exercising certain workplace rights. This answer assumes none of those exceptions are involved.

Sometimes an employment agreement will contain terms about termination "for cause" and termination "without cause." Such terms can create an exception to "at will" employment, but not always. More frequently, "cause" affects whether an employee receives severance pay and other post-termination benefits. An employee terminated "without cause" may receive full severance and benefits, while an employee terminated "for cause" may receive reduced severance or none at all.

If an employment agreement contains terms about termination "for cause," then the agreement will usually define what employee conduct supplies cause for termination. Depending on what the agreement says, cause can be defined very broadly or more narrowly. When defined broadly, cause can include nearly all forms of workplace misconduct. If you're not sure what "cause" means in your employment agreement, or if you need help negotiating legal terms around termination for cause, you should discuss with a qualified attorney.

While high-level employment agreements often vary from employer to employer, many contain similar types of legal terms. Your issues will depend on what the terms say and what your priorities are. Some potential issues include:

• Base Pay and Bonuses: What's your base pay, and how does your employer determine your eligibility for bonuses or incentive compensation?
• Severance Pay and Benefits: If your employment ends, what do you get in your severance package? How does the severance package deal with bonuses, stock options, equity participation, healthcare benefits, or other workplace benefits?
• Termination for Cause or Without Cause: Are there terms about termination for cause, and if so, how do they impact your eligibility for severance pay and benefits?
• Resignation: Are there terms about resignation, and if so, how do they impact your eligibility for severance pay and benefits? Are there circumstances that will give you "good reason" to resign and remain eligible for severance pay and benefits, and if so, how and when do you communicate good reason to your employer?
• Stock Options and Equity Incentives: Are there terms that discuss your eligibility for stock options or other types of equity participation? If so, what are you actually getting? For more information about these types of benefits, visit my site's Stock Options and Equity Participation page.
• Noncompete and Nonsolicitation Terms: Are there terms that restrict your ability to compete or do business elsewhere? For more information about these terms, visit my site's Noncompete and Nonsolicitation Terms page.
• Dispute Resolution: If you have a dispute with your employer, does the dispute go to arbitration or to courts in a specified state? Are there terms about who pays for arbitration fees or attorney fees?

Whether you need to better understand the legal terms in an existing agreement, or you're negotiating a new or revised agreement with your employer, these issues can affect your both your current earnings and your future career prospects. A qualified attorney can guide you on what legal terms mean and help you negotiate effectively. 

Many employers offer their employees retirement benefit plans, such as 401k plans, that allow their employees to save for retirement. These types of retirement vehicles are "qualified" deferred compensation plans: you contribute a certain amount of your earnings to those plans, but you defer that compensation until you retire (or other requirements are satisfied). 

When you contribute to these types of "qualified" plans, you can make choices about how to invest your funds. But there are also many strict requirements for these types of investment vehicles, which are supplied by the Employment Retirement Income Security Act (ERISA) and related laws. Those laws limit the amounts you can contribute and the types of investments that are available, among other requirements. These plans are often administered by large financial services firms like Fidelity, Vanguard, and Empower.

When you're a high-level employee, you may make enough money that you quickly max out the contributions to ordinary retirement benefit plans. You may also want more flexibility with how you invest funds and handle your tax obligations, or you may want to withdraw funds before you reach regular retirement age.

Under these circumstances, some employers offer their high-level employees a non-qualified deferred compensation plan. Compared to ordinary "qualified" plans, these plans allow employees to contribute much larger amounts. They may also offer different investment choices, including investments that are riskier than those in ERISA-regulated retirement plans. While financial services firms can administer nonqualified deferred compensation plans, many companies administer them internally.

Non-qualified deferred compensation plans are subject to many strict legal requirements. These requirements impact how and when you receive funds and your tax obligations.

A qualified attorney can help you understand how non-qualified deferred compensation plans work, as well as how your rights and obligations differ from those under ERISA-regulated benefit plans. But if you have questions about your investment choices, you may also want to consult a financial advisor; if you have questions about tax compliance or tax consequences, you may want to consult an accountant or another qualified tax professional.