Executive Employment Agreement
(Pro-employer)


Summary

This template is an executive employment agreement between an employer and executive. The agreement contains most of the features that would typically be covered in an executive employment agreement but is weighted in the employer's favor. This template includes practical guidance, drafting notes, and alternate and optional clauses. This template is non-jurisdictional and should be tailored to suit the relevant circumstances of the agreement, including consideration of relevant state or local employment law issues. This executive employment agreement binds the executive to arbitration and contains a number of pro-employer restrictive covenants on the executive, including non-solicitation, non-disclosure, non-disparagement, and proprietary information restrictive covenants. Note that recent Federal Trade Commission rules will generally prohibit non-competition clauses when they become effective as of September 4, 2024 (although existing non-competes with senior executives will remain enforceable). See Drafting Note to Section for more information. FTC Ban on Noncompetes. The Federal Trade Commission (FTC) finalized a rule that essentially bans the use of non-competition clauses that prohibit a worker from (or penalize them for) engaging in competitive activities in the United States after the end of the employment relationship, with retroactive effect for non-senior executives. If the rule survives legal challenges, it would: • Prohibit entering into new post-employment non-competes (or forfeiture-for-competition clauses) with workers at all levels • Prohibit enforcing existing non-competes, except for clauses affecting senior executives that were entered into prior to the effective date –and– • Require employers to notify individuals subject to existing unenforceable non-competes regarding the effect of the rule. An exception applies for non-competes entered into pursuant to a bona fide sale of a business entity, the assets of a business, or a person's interest in a business entity. 89 Fed. Reg. 38342 (May 7, 2024). The wide scope of the rule is highly contentious and legal challenges have been made over the agency's authority under the FTC Act to regulate unfair methods of competition outside the arena of consumer protections. Note, however, that on August 20, 2024, the District Court for the Northern District of Texas set aside the rulemaking in its entirety, enjoining enforcement nationwide, 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 and U.S. District Court Issues Order Blocking the FTC's Non-Compete Ban Nationwide: Client Alert Digest. For a full listing of key content that can be used by in-house counsel to develop, revise, and implement a company's employee and third-party-related policies, see In-House Company Policies Resource Kit. For a full listing of related ancillary agreement content, see Ancillary Agreements in M&A Transactions Resource Kit. For an executive-friendly agreement, see Executive Employment Agreement (Pro-executive). For additional guidance, see the Executive Employment Agreement Resource Kit, which includes the practice notes Executive Employment Agreement Negotiation and Drafting (Pro-employer), Executive Employment Agreement Negotiation and Drafting (Pro-executive), and Executive Employment Agreement Insights: From High Stakes to Competing Interests. See also the related templates Executive Employment Agreement Term Sheet, Executive Offer Letter, and Section 280G Resource Kit. For video guidance on employment agreements and offer letters, see Employment Agreements and Offer Letters (Non-Executive Employees) Part I Video and Employment Agreements and Offer Letters (Non-Executive Employees) Part II Video. To compare state and federal laws on restrictive covenants and terminations in employment agreements, see the Employee Benefits & Executive Compensation State Law Comparison Tool. For a full listing of key content covering recruiting, screening, testing, hiring, and onboarding, see Screening and Hiring Resource Kit. For a practice note and chart that summarizes and describes market trends and key terms found within a sample of executive employment agreements entered into by public companies during the first quarter of 2023, see Market Trends 1Q 2023: Executive Employment Agreements. For this review, we used Market Standards—Employment Agreements to identify employment agreements filed by public and reporting companies with market capitalizations of at least $250 million during the first quarter of 2023. Click here to access employment agreements on Market Standards. For a full listing of key content covering executive employee agreement considerations, see Executive Employment Agreement Resource Kit. Executive Employment Agreement Precedents You can find precedents of executive employment agreements with Market Standards–Employment Agreements, the searchable database from Practical Guidance of publicly filed executive employment agreements that enables users to search, compare, and analyze over 7,700 agreements, dated from 2017 to the present, using approximately 75 detailed deal points to filter search results. For more information on Market Standards–Employment Agreements coverage, click here. Following are Market Standards links to the results page for recently filed agreements and the information/agreement page for selected agreements: • Results page for covered agreements filed with the SEC within the last 60 days • First American Financial Corporation, CEO (February 20, 2024) • Dyne Therapeutics, Inc. President & CEO (March 21, 2024) • SANUWAVE, Inc., CFO (March 26, 2024) • Nauticus Robotics, Inc., CEO (February 21, 2024) • Vimeo, Inc., CEO (March 26, 2024) • Shake Shack Enterprises, LLC, CEO (March 18, 2024) • DraftKings Inc., CFO (March 17, 2024)