Executive Employment Agreement Term Sheet

Summary

This template is an executive employment term sheet that can be used for negotiating the terms of an employment agreement between an employer and an executive or to formally memorialize the intent of parties once the terms are finalized. This template includes practical guidance, drafting notes, and alternate clauses. Restrictive Covenants. In most cases, an employer will apply restrictive covenants for the period of employment and, if permissible, a period following termination. Sometimes, the post-employment period varies based on the reason for the termination. For example: "Executive shall be subject to (i) non-competition covenants during the term of employment and (ii) non-solicitation of employees and non-solicitation of customers covenants during the term of employment and for 24 months thereafter (or 6 months thereafter if the Company terminates Executive's employment without Cause, Executive terminates employment for Good Reason, or the Company elects not to renew Executive's term of employment)." State laws may place restrictions on the ability of the employer to require certain restrictions, particularly noncompete clauses. See More States Join the Trend in Restricting Use of Noncompete Agreements. Note that the Federal Trade Commission has finalized a rule (subject to legal challenge, see below) that would essentially ban the use of non-competition clauses that prohibit a worker from (or penalize them for) engaging in competitive activities in the U.S. after the end of the employment relationship. 89 Fed. Reg. 38,342 (May 7, 2024). See FAQs on Federal Trade Commission's Rule Banning Worker Noncompete Clauses and Federal Trade Commission Approves Final Rule Banning Most Noncompetes. However, the District Court for the Northern District of Texas has set aside the rulemaking in its entirety, enjoining enforcement nationwide, on August 20, 2024, shortly before the effective date. Ryan LLC v. FTC, 2024 U.S. Dist. LEXIS 148488 (N.D. Tex. 2024). See Texas Judge Blocks FTC's Impending Ban On Noncompetes. For a full listing of key content covering executive employee agreement considerations, see Executive Employment Agreement Resource Kit. For a full listing of key content covering recruiting, screening, testing, hiring, and onboarding, see Screening and Hiring Resource Kit. For additional information on basic provisions of an executive employment agreement, see the following practice notes: Executive Employment Agreement Negotiation and Drafting (Pro-employer) and Executive Employment Agreement Negotiation and Drafting (Pro-executive). For related templates, see Executive Employment Agreement (Pro-executive), Executive Employment Agreement (Pro-employer), and Executive Offer Letter.