CONTRACT PRIORITIES CENTER ON SEVERANCE
By far the most important parts of the association executive’ contract are the sections that deal with termination and severance. From your perspective, the termination and severance clauses of the contract should provide at a minimum the following commitments on the part of the employer (along with the continuation of health insurance, retirement contribution, and other such benefits):
Pay the Employee a Defined Amount of Severance in the Event the Employee is Terminated for any Reason Other than Cause
“Cause” should be clearly defined in the contract. The goal from your perspective is to ensure that cause is defined in a way that does not permit a reasonable disagreement between the executive and the leadership over policy or business decisions to be considered to be cause resulting in termination without severance.
Here is an example of a paragraph that clearly defines cause: “For the purposes of this Agreement, the term cause shall be defined as (1) acute alcoholism or drug addiction that interferes with the performance of the employee’ duties for which treatment has failed; (2) demonstrated and documented acts of willful misconduct, sexual harassment, dishonesty, or fraud; (3) conviction of a crime involving moral turpitude; or (4) demonstrated and documented acts of clear and repeated refusal to follow the express directives or policies of the board of directors or its chairman.”
Provide for a Severance of Least Six Months Salary
If six months can’t be negotiated, then try to get the employer to agree to at least three months, with one month added for each year of employment, to a maximum of 12 months.
In subsequent negotiations, try to get the severance period increased to 12 months. This is especially important as your salary increases, since the increase may have an impact on the length of time that it takes to obtain a similar position in the event of termination, and additional severance is an important financial protection against this eventuality.Another goal is to negotiate contract provisions that provide for severance in the event that the association notifies the employee that it is not going to renew the contract. This is especially important if the notice that the association must give the employee of its intention not to renew is shorter than the severance period. For example, if the contract provided for a six-month notice of intention not to renew the contract and a 12-month severance in the event of termination, the severance provision is trumped by the six-month notice clause.
Here is an example of a severance clause that rectifies the mismatch: “If the association terminates its obligations under this agreement at any time for reasons other than cause, or if the association gives notice to the employee of its intention not to renew or not to renegotiate this agreement in accordance with the provisions stated herein, the association shall pay the employee as severance, twelve (12) months salary at the then rate of compensation, and maintain the employee’ full insurance, fringe, and other benefits during this twelve (12)-month period.”