NEVER START A JOB BEFORE EMPLOYMENT AGREEMENT IS SIGNED

September 13, 2016

BY G. A. FINCH

Too many times, a situation in which an executive starts a job with an unfinished employment agreement does not turn out well.  Not always the case, but often the case.  An executive does not want to be in the percentage of employees who get terminated without a back-on-the-marketcompleted, signed employment agreement.   The executive’s relying on the employer to do the right thing in terms of what the employee thinks the deal was, is not a good choice.

Obviously an executive has the most negotiating leverage when a company is seeking to hire the executive.  At the start of the relationship, there is good will between the employer and prospective employee and there are high, positive expectations on both sides.happy_lady

An executive is eager to demonstrate trust and enthusiasm by agreeing to start while an agreement is being finalized.  I know of executives who have quit their prior jobs, forsaken substantial benefits, and relocated to distant cities without a signed agreement.  Two scenarios usually are the case.  One scenario is that the executive and the employer are still hashing out contract terms after the executive has started employment.  Another scenario is the executive has started working and has never received a signed agreement – it falls through the cracks so to speak.

There is an old saying that “Familiarity breeds contempt.”  An employer’s shiny new executive now has blemishes and scratches upon closer inspection.  The sense of urgency has dissipated once the employer has gotten its prized employee.  It is human nature to value something less after it has been obtained.

Accordingly, an executive must never start a job without a completely finished, signed agreement in hand.  Moreover, whatever “final” employment agreement is tendered to him, the executive’s attorney must review it one last time to ensure that the final draft reflects the latest iteration of the negotiated contract terms.  Last minute language insertions or failure to include agreed-upon provisions can and do happen, sometimes carelessly and in good faith by the employer and sometimes by design.  An executive’s insistence upon having in hand an executed agreement prior to work commencement is prudent and makes common sense.  In order for the executive to be able to maintain a congenial relationship with his prospective colleagues or bosses, the executive’s attorney should take the responsibility for requiring a signed agreement.legal-document-2

An executive does not want to be in the more difficult position of proving up the terms of an unsigned, draft contract in a court of law than the easier position of proving up a final, signed contract.

 

 

POWER WORD PLAY (A Term, Word, or Concept an Executive Ought to Know): MORAL RIGHTS

May 13, 2016

BY G. A. FINCH

To the uninitiated, the term “moral rights”, would at first blush (pun intended), seem to suggest having something to do with bad character, improper behavior or religious and philosophical subjects.

Actually it has to do with intellectual property rights of an author, artist, or creator beyond mere copyright interests.

Moral Rights is beginning to appear more often in employment agreement provisions pertaining to intellectual property rights.  The employer usually seeks to obtain a waiver of the employee’s moral rights to works subject to copyright which works are made by the employee within the scope of employee’s employment or using employer’s resources or confidential information.

It is a European legal concept and not rooted in American jurisprudence, although similar and analogous concepts have been asserted or litigated in the United States from time to time.  I believe burgeoning multinational corporations and global trade have facilitated the infiltration of moral rights provisions into American legal documents. The American version of moral rights became codified as the Visual Artists Rights Act of 1990 (VARA) pursuant to the mandates of the Berne Convention.

VARA provides that the author of visual art has the right:

 

A) to claim authorship of his work,

B) to prevent the use of his name as author of any visual art that he did not create,

C) to prevent any intentional distortion, mutilation or other modification of his work that would prejudice his honor or reputation,

D) to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of the right.

 

Under VARA, only the author of the subject visual art has these rights whether or not the author owns the copyright. VARA does not provide moral rights for authors of literary or musical works.

Black’s Law Dictionary sets out the most succinct global definition of Moral Rights:

“Moral rights include rights of (1) attribution (also termed “paternity”): the right to be given credit and to claim credit for a work, and to deny credit if the work is changed; (2) integrity: the right to ensure that the work is not changed without the artist’s consent; (3) publication: the right not to reveal a work before its creator is satisfied with it; and (4) retraction: the right to renounce a work and withdraw it from sale or display…”  Black’s Law Dictionary, p. 1030 (Eighth Edition, 2004).

 

INTERNAL REVENUE CODE SECTION 409A

May 13, 2016

 

BY G. A. FINCH

If your employment agreement has deferral of compensation provisions, you may very well see a section or paragraph captioned “Internal Revenue Code Section 409A” or simply “409A.”  Its official citation is 26 U.S. Code Section 409A – Inclusion in gross income of deferred compensation under nonqualified deferred compensation plans.

This section is too complex and tedious for most lay person executives to understand and figure out.  Your reading Section 409A of the IRS Code is certainly an instant cure for insomnia.080914_jmanscratchhead_tnb

At the outset, before you execute an employment agreement, your retaining an attorney is necessary to interpret and apply Section 409A to the various scenarios of deferral of compensation to ascertain whether such compensation adheres to Section 409A’s deferrals and distributions timing rules.

Failure to comply with the rules concerning deferred compensation has onerous consequences of 1) inclusion of such deferred compensation as gross income for the subject taxable year, 2) payment of the amount of interest on the underpayments, and 3) a penalty amount equal to 20% of the deferred compensation which is required to be included in gross income.IRS_tnb

Accordingly, employers often have a Section 409A provision in the employment agreement that allows the employer to adjust payments under the agreement to comply with Section 409A and allows the employer to disclaim any liability to the employee.

A typical provision can be lengthy paragraphs and include some language like the following:

 

“Anything in this Agreement to the contrary notwithstanding, the parties intend that   all payments and benefits under this Agreement comply with Section 409A of the Code and the regulations promulgated thereunder and, accordingly, to the maximum extent permitted by law, this Agreement shall be interpreted in a manner in compliance therewith.  To the extent that any provision hereof is modified in order to comply with Section 409A, such modification shall be made in good faith and shall, to the maximum extend reasonably possible, maintain the original intent and economic benefit to you  and the Employer of the applicable provision without violating the provisions of Section 409A.  Notwithstanding the foregoing, the Employer shall not be required to assume any increased economic burden in connection therewith.  Although the Employer intends to administer this Agreement so that it would be exempt or comply with the requirements of Code Section 409A, the Employer does not represent or warrant that this Agreement will be exempt from, or otherwise comply with, Code Section 409A or any other provision of applicable law.  Neither the Employer, its affiliates, nor their respective directors, officers, employees or advisers shall be liable to you (or any other individual claiming a benefit through you) for any tax, interest, or penalties you may owe as a result of compensation paid out pursuant hereto, and the Employer shall have no obligation to indemnify or otherwise protect you from the obligation to pay taxes pursuant to Code Section 409A.”

 

The point of this blog post is that your deferred compensation provisions could trigger 409A tax consequences and your employer, through its employment contract with you, is shifting the risk to you as employee.

I WROTE IT SO WHY CAN’T I USE IT?

April 5, 2016

BY G. A. FINCH

You are leaving your job or you have already left. After you leave, you want to use all of your power point presentations, white papers, newsletter articles, and blog posts that you did for your employer. Not so fast. Are you allowed to do that? Who owns the written work that you produced? Increasingly I am called to advise incoming or departing executives and professionals on how to preserve and protect their intellectual property rights or understand how to avoid violating the intellectual property rights of their former employers. This post focuses on copyrights, not trademarks or patents or trade secrets.

quill_writingYou need to know the copyright laws. You also need to know what confidentiality/intellectual property agreements you may have signed either in an employment agreement or in a separation/severance agreement or both.

The basics for a copyright are:

  • A work must be original
  • A work must be completed and in tangible form like a written article
  • A copyright holder has the right to reproduce, to distribute, to modify the work, and to perform or display it
  • A copyright holder does not have to register his\her\its work to gain copyright protection and does not have to display the copyright symbol

An employee should note well that ordinarily the employee’s work authored within the defined scope of employee’s employment constitutes a work made for hire. Although the employee physically created the work, the employee may not own it, rather the employer does. Most savvy employers will eliminate any legal ambiguity of copyright ownership by having the employee sign intellectual property and invention assignment agreements.

Although they can vary in length from three sentences to two pages, an assignment of intellectual property provision typically looks like the following:

“ASSIGNMENT OF INVENTIONS. I agree that I will promptly make full written          disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company ….”

no_copyrightPrior to commencing employment, an employee would do well to carve out in a written agreement any invention, original works of authorship, etc. to ensure such work product or invention is not assigned or deemed owned by employee’s new employer. Also prior to any departure, the employee should set out in an agreement what works employee created that were not created on the job or are not assigned to the company.

When the employee does not own the written work employee created, the most obvious and practical thing to do is simply ask permission from the previous employer.

Lastly, there is a limited way to use copyrighted material without permission and not infringe. This way is called “fair use.” For example, if you fairly and reasonably use a short quote and credit it for commentary and criticism, news reporting, teaching, research or parody, you are probably okay. The evaluation includes whether your use adversely affects the market for or value of the work. When in doubt, consult an attorney.

POTTY MOUTH IN THE WORKPLACE

August 24, 2015

By G. A. FINCH

Does boorish behavior matter? As part of our daily work routine, we all experience instances where co-workers, bosses, clients, customers, and vendors use profanity, recount indelicate stories, tell off-color jokes, or over share personal information. It seems that decorum and verbal restraint are neither required nor in vogue anymore. Verbal boundaries have all but disappeared.angry-boss-cursing-grimacing-5343683

Does anybody else miss polite conversation in the work world that used to be the norm? I am not a prude and have myself used profanity on occasion in work-related situations. I would like to think that the few times I use profanity, it is to emphasize a point or to provide colorful context to a story or an experience; maybe my perceived degree of use is a distinction without a difference and I am rationalizing my own verbal indiscretions no matter how limited they may be.angry-cursing-phone-concept-20381448
I know that I am turned off by an excessive use of profanity or habitual tellers of dirty or ethnic jokes. I also get uncomfortable when a work-related person over shares personal information or unusual circumstances, when it is clearly not appropriate to the circumstance or the relationship.  The initial entertainment value of an over sharing story begins to lose its appeal pretty quickly, especially from repeat offenders.  What may have seemed funny or salacious can then make us cringe.

cursing-prohibited-foul-language-poster-52201792
Despite the increasing coarseness of our popular culture, I think there is something to be said for etiquette – it makes people more comfortable and it reduces the likelihood of offending people. I think those executives and professionals who use no or little profanity, who do not over share, and who resist off-color humor do set themselves apart in a positive way. Crude behavior does have consequences.

POWER WORD PLAY (A Term, Word, or Concept an Executive Ought to Know): UNIT APPRECIATION RIGHTS

August 19, 2015

BY G. A. FINCH

Unit Appreciation Rights (for limited liability companies and known as Stock Appreciation Rights for corporations) are a form of executive compensation tied to the performance of a set amount of units or shares within a set time period.  They could include only compensation tied to the amount of increase in the value of equity,  or compensation that comprises both such increase and the original value of the equity.

The compensation may be cash payments or equity equivalent based on the original full value of a number of units that an executive holds and/or any increase in value (the difference between the price of the units at the time of grant and the price of the units upon exercisability). When an executive exercises his right, a company’s Unit Appreciation Rights Plan may allow the company to pay in cash or real common equity of the company or a combination thereof.

The units granted under Unit Appreciation Rights are not real units of ownership in a company entity, but rather are hypothetical “Phantom Units”. The company will grant an executive a number of units, e.g. 3,000 which will have an initial price per Phantom Unit, e.g. $30.00. The units will vest after a set period, e.g. two years after the date of grant while the executive is still employed. After vesting and before any expiration date, the Unit Appreciation Right becomes exercisable by the executive either in partial amounts or in the full amount depending on the terms and conditions of the company’s Unit Appreciation Rights Plan. If not exercised during the executive’s lifetime and assuming that an expiration date has not occurred, then any person empowered under the deceased executive’s estate ordinarily could exercise the Unit Appreciation Right.

NETWORKING – UUUUUGH!

April 3, 2015

 

BY G. A. FINCH

 

 
I hate the term “networking”. It is a hackneyed phrase and suggests a mercenary and self-promoting activity. Most people feel networking means going to events, making small talk, collecting business cards, and promising to follow-up. Other people would include informational interviews and requests for lunch or coffee as “networking.” Although there is a certain randomness and hit or miss, scattershot quality in these approaches, it can be more effective and serene than that.

 

 
Purposeful and Natural

 

 
What some people call networking, I call flying your flag and meeting people. Flying your flag is seeing and being seen to let people know you exist or remind them of your presence. It is like the old famous philosophical question in solipsism: If the tree falls in the forest and makes a crashing sound and no one is around to hear it crash, does the tree make a sound? Go ponder that. Similarly, if you do not get out and about and no one sees you, how do they really know you exist? In other words, out of sight, out of mind. A certain portion of your going out and about for business reasons should be limited, strategic, and purposeful. The rest should be just a part of your daily life.

 

 
Not only do you want to meet new people, but you want to maintain connections with people who you already know or have met. I was recently at an event where four people from the same office came together, talked together, and left together. What was that all about? I know they had families and other commitments, so why did they waste their precious time talking to each other and not promoting their organizations or making connections for themselves? It would have been more useful for them to have skipped the event and gone about their personal activities.

 

 

 

Business Lunch
Being There and Luck Finds You

 

 
Sometimes opportunity presents itself because you happen to be at the right place at the right time. I know a guy that when he sees me will tell people that I am responsible for his job because I had invited him as a guest to an event at which he connected with a person who got him his job and I do not even remember that particular event. However, to his point, I, too, have, on occasion, benefited serendipitously from attending an event – e.g., like my college reunion, during which a classmate, upon learning of an area of my professional expertise and writing experience, placed me on an editorial board of an industry magazine. Another time, as a favor, I was teaching a public speaking workshop, and an observer, unbeknownst to me, quietly recommended me as an attorney to a CEO who then called me out of the blue to represent him in his employment contract. You never know from where opportunity will come.

 

 
Some forums are better than others. Some forums are not obvious business or professional development opportunities, but abound in potential. You can develop solid relationships from your kids’ school and extracurricular events and neighborhood related activities like block and holiday parties.

 

 
An executive’s going to an officially described “networking” event, I believe, is a waste of time and diminishes the executive’s brand. It smacks of being a used car salesman trying to make a sale (no offense to used car salesmen).

 

 
Now we all know of certain trade or business organizations whose major benefit is meeting people to possibly do business, but they are smart enough not to use the term “networking” – people know that everyone present is there to represent or promote his or her company, firm or business and they do so unabashedly but graciously.

 

 
Divide Your Efforts

 

 
Through trial and error, you can discern which groups, associations, or clubs seem to offer the greatest yield in terms of business, professional or personal opportunities and information. As you have only so many hours in a day and numerous personal and work commitments, you should narrow your focus to three to four organizations that you enjoy and that prove to be productive. As for the remainder of your efforts, they should be a natural part of your  social sphere like church, school, social clubs, and kids’ activities. They should be natural and effortless by simply participating, being friendly, being helpful and letting people know what you can do, only if you are asked.

 

 

 

 

picnic 3

Love Thy Neighbor

 

 
Finally, be open and willing to help people when asked with no expectation of any benefit to you. Without being preachy, this is kind of a variant of the commandment to “love thy neighbor as thyself.” The best way to love your neighbor is to help him. Even when it is inconvenient and time-consuming, it is always good for your soul to give and benefit another. Your “get” will take care of itself from some other, unexpected source, even if it just feeling great in helping another. Having said that, you do not want to indulge a repeat favor taker (user) who never offers to help anyone else – not a good use of your time, resources, energy and emotions. That was my long way of saying that networking should be more about being helpful to others than about seeking to help oneself. Capiche?

POWER WORD PLAY (A Term, Word, or Concept an Executive Ought to Know): VESTING

March 19, 2015

BY G. A. FINCH

 

As the saying goes, the only dumb question is the unasked question. Sometimes employees and sophisticated executives are unsure about the concept of “vesting.” The terms “vest” and “vested” are part and parcel of any employee benefits system. It pertains to when an employee’s right to a benefit becomes ripe and irrevocable.

 
For example, “vest” is a term that is used in describing and accessing employee benefits like retirement payments or grants of stock to employees.

 
Vesting is the time when specified benefits provided to an employee become certain and complete and are no longer contingent on the employee continuing to work for the employer.  When vested, the entitlement to the benefit becomes an absolute right.  Obviously, this right to a benefit may not mean much if the employer  becomes insolvent.

 
When an executive leaves his employment for any reason, he must scrutinize his benefits materials, employment contract, if any, and his separation agreement, if any, to ascertain what benefits to which he is entitle and which benefits have vested. If the benefits materials are dense and confusing, then he should consult his benefits or human resources department to ensure his understanding. If the employee has engaged an attorney to represent him in his separation, the attorney may also help the employee to evaluate what benefits have or have not vested.

FIVE SUCCESS LESSONS FROM MOM

December 26, 2014

BY G. A. FINCH

My mother, Louise Antoinette Finch, passed away last month just two and half months shy of her 100th birthday. She is survived by all six of her sons and one daughter. As an older brother gave a eulogy and the priest gave a homily about my mother and what she represented spiritually, I ruminated about her legacy and the impact of her teachings. Although we are far from perfect as individuals and have had our own share of ups and downs, and some of the siblings may be viewed as more materially successful than other siblings, she obtained the same result from each of her children: all finished college and graduate or University_hatprofessional school. How did she do that? She had a few maxims to live by that she drilled into us. These aphorisms would benefit anyone (executive, professional, and others) seeking to get a leg up in life. I share five of the most salient ones below:

1. When you start something, whether it is a project, a task, a job, an extracurricular activity, or a degree program, you must complete it. My mother abhorred quitters and lack of follow through. She correctly knew that the lack of follow through was a serious impediment to success. So despite unfair teachers, mean camp counselors, arbitrary coaches or a tedious activity, we had to finish whatever program we started. To this day, my siblings and I talk about the little voice in our heads, when times got tough in medical, graduate or law school or in a demanding job, that repeated the mantra: “When you start something, you must finish it.”

2. When we complained of being sick, whether severely or lightly, real or imagined, my mother would say, “Get up, wash your face, brush your teeth, put on your clothes, eat some breakfast, go to school, and, if you are still feeling lousy, then call me.” By the time we did all those things, our ailments seem to Smile Face with Colddisappear or become sufficiently mitigated that we forgot that we were physically or psychologically under the weather. This was her ways of saying a) have a strong work ethic, b) “show up” to where you are supposed to be, and c) adjust your attitude. This anti-slacker and anti-lazy approach again carried me and my siblings through many a school and work day.

3. Surround yourself with quality people and people of integrity. Your friends and peers will make or break you and you will be judged by the company you keep. I think of the hyper academic high school that I was fortunate enough to be able to attend; the super intellectual students forced me to up my game and pull myself up from the mud of mediocrity. Counterintuitively, I did not find the competitive atmosphere intimidating because it actually inspired and stimulated me. My siblings and I have never gotten into serious trouble or arrested because our friends are sensible and have a lot of impulse control.HandcuffsMany a prison inmate laments associating with the “wrong crowd” or corrupting friend that landed him in jail.  In short, choose your friends, associates and peers very carefully.

4. Don’t lie or cheat. Being an honest person meant a lot to my mother. A person of character was the benchmark by which my mother evaluated people. She had an expression, “Pretty is, is as pretty does.” A variant was “Pretty on the inside is more important than being pretty on the outside.”

5. Lastly, my mother was a big one in standing up for yourself when another is perpetrating a wrong upon you or a family member or trying to diminish you or a family member. Mom taught us not to look for fights but not to allow ourselves to be victims. She led by example and did not wait around for my father to get home to go address an injustice at any level or push us out the door to face a bully.Boxing_glovesShe made it clear that this attitude and posture must be based on our position being legitimate and righteous as well as our being without fault.

 

Often times you do not have to travel far to learn self-evident truths; they can be found within the four Home-clipartwalls of your own upbringing without ever stepping outside your own front door. I hear my mother’s voice as I counsel my young daughter and young son about how to stand up to bullies and admonish them to finish their activities.

EXECUTIVE WRITING

October 27, 2014

BY G. A. FINCH

We know that it is important that an executive have good speaking skills whether it is one-on-one conversation, small group discussions or large meetings.  An executive must know how to make small talk as well as know how to give presentations.

What about writing?  Is your writing up to snuff?  Whether it is a note, memo, letter or lengthy report, and, especially a resume, your writing cannot be filled with misspellings, poor punctuation, bad grammar, or inappropriate use of vocabulary.  It leaves a poor impression and people will judge you, even if they themselves do not know the difference between “its” and “it’s.”Business Woman with laptop

An executive need not be a Pulitzer Prize winner, but she must write effectively and in an educated manner notwithstanding the declining writing standards in texts, tweets, emails, and posts.  Her using the vernacular and improper grammar simply will not do.

Unfortunately, thorough training in writing can be missing in one’s high school, college, and graduate school training.  The level of writing skills is very uneven.  For many educated people, they must teach themselves punctuation and grammar.  As there are plenty of good books and articles available on grammar, punctuation and vocabulary, this article will focus only on providing some practical guides to have in mind when writing for business.

There are many elements of effective business and professional writing.  Here are a few to start:

  1. Generally, shorter sentences are better than longer sentences; sometimes a complex thought requires a complex sentence.
  2. Shorter paragraphs are better than longer ones.
  3. The fewer pages you can make a document without omitting critical information, the better.
  4. An active voice is more powerful than a passive voice; sometimes a passive voice just sounds better.
  5. Simpler words are better than complicated words, e.g. “walk” is better than “ambulate.”
  6. The fewer adjectives in your writing, the better, as the facts should be compelling enough for both writer and reader to form conclusions and recommendations.
  7. You should make sure you know how to use a word, e.g., when something is funny, it is “hilarious” and not “hysterical.”
  8. For long documents, your using headings and sub-headings will help guide the reader and break up dense writing.
  9. It is best to state your proposition or request at the beginning and then follow with arguments and evidence to support your proposition or request.
  10. If you have compelling data, use charts and graphs to illustrate your points as many people are visual learners.
  11. Triple check your numerical calculations and data; faulty numbers and simple numerical mistakes will destroy the credibility of your piece; a lack of attention to detail could be seen as a red flag of your possible sloppy habits and thinking.
  12. You should double-check to spell correctly a person’s or organization’s name  or place-name as people are sensitive about their names, affiliations, hometowns, or countries; and, again,  inattention to detail lowers the reader’s confidence in the writer.
  13. Never totally rely on word processing spell check as it cannot tell the difference between correctly spelled but wrong words like “to” and “too” or “be” and “bee” or “of” and “or.”
  14. Whether it is a four-sentence letter or a 30-page document, read it with a ruler at least three times and have someone else proof read it too; if you have the time, set the document aside a few days before doing a final proof read.
  15. Unless you are a novelist, poet, screenwriter, or playwright writing in those respective genres, do not use profanity, crude words, or off-color references in your business or professional writing.typing
  16. In formal writing, it is better to write out words fully and not use contractions like “can’t” and “don’t,”   because it adds a certain solemnity to the communication and shows respect for your audience.

As an executive or professional you are presumed to be educated, and your bosses, colleagues, clients, customers, and patients expect that you know how to write well.  You do not want to disappoint them.

Oh, and by the way – the only way to improve your writing is by writing.  Like anything else, practice makes perfect.