Negotiated termination

The Senior Executive Unit at Russell Jones & Walker is familiar with the specific issues affecting senior employees who agree to terminate their employment.

Our clients benefit from the breadth of our experience in dealing with complex and high value terminations. A key aspect of this is our comprehensive advice on the contractual, statutory, tax, pensions and regulatory implications of termination agreements.

Implications of termination

Our expert team provides a comprehensive service, advising our clients on all the implications of their termination, and considering in particular the contractual, statutory, tax, pensions and regulatory aspects.

Contractual implications are likely to include consideration of whether any benefits are payable to the departing executive, and the value of those benefits. There may also be non-financial benefit considerations, such as the return of a company car. We advise many senior executives on the termination implications in relation to share option and share save schemes.

Commonly, such schemes involve good leaver/bad leaver provisions, whereby an executive leaving voluntarily or dismissed for gross misconduct cannot enjoy the same rights in relation to exercising share options as an executive who is, say, medically retired. Our solicitors are not only experienced in clarifying the appropriate vesting entitlements but have also negotiated good leaver status for our clients to allow them to enjoy more beneficial rights in the exercise of their share options, regardless of the circumstances of their departure.

In order to minimise the potential tax liability on termination payments, our legal experts will consider whether the right to such compensation has been expressly stated in the contract of employment, since this may result in it becoming fully taxable as earnings under Schedule E. Our lawyers will advise on the appropriate strategy to minimise the tax burden payable on receipt of termination payments. This may involve timing considerations, such as when to conclude termination agreements and obtain board approval. Our lawyers are also alert to the tax implications of documentary references to any termination payment, since the terminology may impact on whether the payment is taxable.

The specialist team at Russell Jones & Walker is able to offer specific advice on the pension consequences of termination, in relation to our clients' individual schemes. Our lawyers will also advise executives on the specific regulatory implications of termination, such as a director's duty to notify the London Stock Exchange, for example.

Severance packages

At termination, our clients frequently engage us to negotiate 'golden handshakes' on their behalves. These are settlements on expiry of contracts, or compensation for loss of office, for example, in a senior level redundancy.

At Russell Jones & Walker, our team of legal experts are also able to secure such severance packages in dismissal claims, as agreed compensation. Where there has been an unfair or constructive dismissal, our clients frequently wish to avoid the inevitable publicity of a tribunal hearing. Given that this is generally the attitude of their employers also, our lawyers are able to negotiate generous packages in order to settle on favourable terms.

Information relevant to the size and value of the severance package will include benefits enjoyed under the contract of employment, such as car, medical and permanent health insurance, life assurance, pension, shares and share options, accrued holiday, and bonus or commission entitlements.

Compromise agreements

Following the negotiation of a termination package on departure, agreement is concluded on the employee signing a Compromise Agreement. The effect of this agreement will be to prevent the employee from bringing any proceedings against the company for employment law matters at any point in the future.