Due diligence can avoid legal issues
When hiring senior executives, a lot of time and attention tends to be given to perfecting the remuneration package. A leading workplace law and strategy firm warns that it is important to give equal attention to exit strategies, to avoid costly legal battles if the relationship sours.
One aspect of the exit/departure process that is often disputed when senior executives move on is the restriant of trade clause, which sets out which organisations the executive is prohibited from working for after they leave the organisation and how long this prohibition lasts. For instance, some organisations prohibit executives from working for competitors for up to on year after moving on.
Appropriate exit clauses as well as remuneration arrangements need to be included in employment contracts and signed by the executive prior to commencing work. It may also be necessary to get legal advice, particularly for restraint of trade clauses, as they can be ruled to be void if they are not reasonably necessary for the protection of the employer’s legitimate business interests.
In addition, it is important to consider that benefits such as share options or bonuses can becoming difficult to navigate once the executive leaves the organisation. It needs to be clear how these benefits operate after termination of employment.
The basic message is that ill conceived strategies can result in legal issues for the organisation.
- Consider what is reasonably necessary to protect the business in restricting the executive should employment cease
- Ensure that all pre-contractual negotiations and representations are reflected in the contract.
- Consider impact of termination on payments, payouts and bonus schemes
- Be mindful of legislative impacts, particularly the Corporations Act and Competition and Consumer Act
Another take-home message for managing this risk is to employ executives who are most likely to be valuable, loyal employees who are well suited to the organisation.
RightPeople can help.
Our aptitude and employment testing service is backed by over 35 years of employment testing experience. Our psychometric tests are supported by 40 years of empirical research and our test developers have published more than 5000 articles in international, peer-reviewed journals.
- We are wholly Australia owned and our tests are developed locally
- Support is available 7 days a week
- Standardised results are available immediately
- Our test are legally defensible and culturally relevant
- We design and tailor specific products for specific requirements
- We have testing packages specifically designed for hiring executives
We can help you make risk managed hiring decisions. Contact us today to find out more.