Contingent Contract

A contingency agreement is any contract that depends on one or more events that may or may not take place. If specified events occur, the party may have a binding contract or the contract may be invalidated depending on the nature of contingency.

Contingent contract with regards to work comes in the form of job negotiations. It usually involves the opportunity to discuss salary, position, promotion etc. however contingent contracts can often include negotiations regarding flexi time, job sharing, responsibilities etc.

The following issues are considered when negotiating an employment agreement

1] Compensation

Compensation is the most obvious and key issue. This includes

Basic salary

Does the basic salary increase every year?

Circumstances under which the employee’s basic salary be reduced eg when a company is in financial distress.

2] Scope/conditions of employment

The scope of employment and responsibilities raise a number of issues like

a] Work status [part time/full time].

b] What is the title of the employee’s job?

c] What are the employee’s responsibilities?

d] Can the employee’s responsibilities be substantially modified, increased or decreased? Can the employee be demoted?

e] Place of employment.

f] Can the employee be relocated unilaterally to another city or only with the employee’s consent?

g] Is the employee allowed to be involved in other activities [eg directorship on other boards, involvement in community services etc].

h] Terms [length of contract], renewal or future negotiations.

3] Fringe benefits

Health a medical [including spouse and dependent coverage], sick leave, maternity leave, pension, vacation per year and how much vacation can be accrued or can be carried forward? Can accrued vacation be encashed on termination? Are these benefits taxable? etc

4] Terms of termination

The circumstances under which the employee’s employment can be terminated and the resulting consequences will raise the following issues

a] how long is the employment or is it employment at will?

b] What are the grounds on which the company can terminate the employee?

c] What are the terms if any, for compensation in event of early terminatiom?

d] What are the circumstances that the employee can be fired “for cause” such as, conviction of felony involving moral turpitude, any act of theft, fraud. Dishonest or falsifications of employment record, breach of employment agreement, failure to perform reasonable assigned duties, improve disclosure of the company’s confidential information.

e] Is an employee entitled to severance pay on termination without cause? How much and in how much time? If employee is to receive severance pay, should he be required to sign a release of liability for the benefit of the company?

5] Reimbursement of expenses

Reimbursement of expenses include

a] Will the employees business expenses be reimbursed within a set period of time?

b] Is there a car allowance, cellular phone provided, or any other such amenities?

c] Are moving expenses to be reimbursed?

d] Is there a relocation package available for employees?

6] Confidentiality restrictions

The employer will want a Confidentiality provision in the employment agreement. The employee must be careful not to use or divulge confidential information of a prior employer.

7] Invention assignment issues

Companies expect that any inventions or business ideas developed by the employee related to the company’s business during the employment period, will be owned by the company.

8] Disability and death

The contract has to define disability and compensation for it [either as a lump sum or retrieve salary and benefits for some period of time].

The contract has to include what happens on the death of an employee [ie can medical and other benefits continue for some period of time for the spouse and children?]

Understanding the agreement

Make sure you understand the compensation package being offered. Do not hesitate to ask questions about unfamiliar or unclear terms or to probe for specifics. If the employer is unwilling to clarify information or provide more details, you may want to reconsider the offer.

Posted in Mpm