While employment contracts can seem pretty boilerplate with little room for negotiation are creativity, there are multiple options available for those willing to explore options in employment contracts. Ancillary agreements provide several important options that can benefit both employers and employees.
What is an ancillary agreement?
As its name suggests, an ancillary agreement in the context of an employment contract is an agreement that provides necessary support to the primary agreement. Ancillary agreements can be solidified in separate contractual language or through existing Human Resource policies.
Valuable ancillary agreements
There are several common, valuable ancillary clauses that can provide security and benefit for everyone involved:
- General ancillary clauses: Ancillary agreements can include any number of incentives, including commission levels and bonuses, stock options, employee ownership options and other factors.
- Restrictive covenants: Noncompete, nondisclosure, nonsolicitation agreements and other restrictive covenants are increasingly under fire in the legal community. However, there are benefits both ways in these agreements. For employees who stay long-term with the same company, there is tremendous benefit in the security provided by these agreements when other employees leave the company. For an employee leaving, there is benefit to having the details spelled out clearly regarding solicitation, competition and IP restrictions. Knowing what is allowed and what is prohibited helps a former employee avoid mistakes than can lead to lawsuits or criminal sanctions.
- Severance agreements: It is critical for employers and employees to have the severance packages spelled out when the initial employment contracts are signed. Having these details spelled out on the front end helps avoid legal challenges and expenses when the contract is severed.
Ancillary agreements are an area that allow for greater negotiating freedom and incentivization that can provide better incentives and protection for employees, while providing greater access to the finest employees for corporate employers.
For both employers and employees, the most important thing you can do is think outside the box. Rather than assuming the stock employment contract is all that is possible, consider the importance of ancillary agreements to get the most out of employment agreements.