A Retention Agreement is often given to valued employees to motivate them to stay with the employer during a period of transition or turmoil at the company.
The retention agreement may offer, among others, a bonus, enhanced severance, and/or equity if the employee remains employed with the employer for a set period of time.
Employees receiving a Retention Agreement will be required to sign it and return it to their employer. Before doing so, employees should have the Retention Agreement reviewed by an attorney to ensure that they will actually receive what is being offered to them if they meet the terms.
Specifically, the employee should understand the following issues, among others, that may or may not be addressed within the Retention Agreement:
- the time period that the employee must remain with the employer
- what happens if there is a change of control
- has a change of control been defined
- who is responsible to make payment of the bonus, severance, equity, etc. that is being offered
- what happens if the employee is terminated without cause during the retention period – will the employee still receive the reward?
- what happens if the employee seeks to resign or leaves with good reason- will the employee still receive the reward?
- when will the employee receive the retention compensation and/or benefits
- is the employee’s employment guaranteed during the retention period or is the employee considered at will
Retention Agreements generally occur when an employer is considering a sale of all or part of the business, or if there has been a mass exodus of employees departing from the company.
Employees may also consider requesting a retention bonus when there are periods of instability at their employer.
Depending on the value that they offer to the employer, employees may also be able to negotiate the terms of the Retention Agreement prior to execution.
A Retention Agreement is a legal and binding document. It should be reviewed prior to execution. For more information on these agreements or if you want to have your retention agreement reviewed, contact Sheree Donath to schedule a consultation.