“Integration” or “Entire Agreement” Clause – Nothing Spoken Counts

“If we could sell our experiences for what they cost us,
we’d all be millionaires.”
– Abigail Van Buren

ACTUAL CASE HISTORY: Enrique, Marketing Director for a Providence, Rhode Island-based mutual fund company, was pleased when an executive recruiter called to invite him to interview for a Senior Vice President position with the largest firm in his field. At 38, he had devoted 11 years to building his marketing skills, business relationships and considerable reputation in the mutual fund industry. He never missed an opportunity to meet a business prospect, or to speak at an industry conference. Things were going well for him, and his years of effort now seemed to be paying off.

One thing Enrique didn’t have in his present job, and was determined to acquire in any new job, was long-term incentive, commonly called “equity,” such as a block of stock, that would reward him handsomely for long-term effort and loyalty. While Enrique did save and invest money, he felt acquiring substantial equity on the job would help him develop long-term financial security.

Enrique’s interviews went well, and he was offered the position and a compensation package that would be more than double his current income. The compensation package included a base salary, an annual bonus based on the sales of the eighteen members of his team, and – as he hoped – a large grant of restricted stock in the firm that would vest over five years. He was also given a liberal expense account, and an executive-level benefits package. Enrique was also told he would receive comprehensive relocation assistance, because the new position was at Boston headquarters. The amount of restricted stock would provide Enrique the significant nest egg he longed for. After a handshake with his new bosses, Human Resources provided Enrique with an Offer Letter for his signature. He then contacted us to review the Offer Letter, and advise him on the transition.

Enrique’s Offer Letter was not at all unusual. We had seen many like it. However, his Offer Letter presented one major problem that caused us great concern: it didn’t mention the offer of restricted stock, and it contained what is called an “integration clause,” that is, a clause that read something like this: “This agreement is the entire agreement between the parties. It replaces and supersedes any and all prior and simultaneous discussions, representations, understandings, and agreements, all of which are hereby rendered null and void, and of no further effect.” The reason lawyers call it an “integration clause” is that it brings together all points of agreement into one “integral” document. It makes all other understandings “outside” no longer valid, or “disintegrated.”

After our discussion with Enrique about the Offer Letter, he asked us what could be done to make the situation right. We told him this: “Because there is an integration clause in the Offer Letter, nothing outside the offer letter is binding on the company. Anything else said to you, or even in writing, is of zero effect. There is only one thing you can do: ask that the promise of restricted stock be inserted into the Offer Letter. Otherwise, it is ineffective.” It was rather simple.

Enrique simply requested that all of the details of the restricted stock offered to him be placed into the Offer Letter. The response from HR was “classic:” “We can’t place into writing that promise for several reasons: first, it’s got something to do with the lawyers; they won’t allow us to do that; also, we never do that; it would violate company policy; and, also, we may be changing details of the restricted stock plan soon, so we’d rather wait ’til then. It shouldn’t be more than a few months. Don’t worry, it’s not going to be a problem.”

Enrique didn’t accept that answer, but instead went directly to the Executive Vice President who was hiring him, with a straightforward request for clarity and confirmation of the restricted stock discussed and promised. . . to be placed right in his Offer Letter. No where else was sufficient. His request was granted, over the objection of both the HR department and the company’s legal staff. We were glad for Enrique, because he received what he interviewed for, what he was promised, and what was his primary objective in making the move.

We were even happier for Enrique when he called six months later. It seems that HR was being at least one-half honest: the Restricted Stock plan was, indeed, being changed, although in a way not mentioned: no longer would Senior Vice Presidents receive Restricted Stock. Chances are, they knew what was coming, but couldn’t tell us. Chances are, Enrique was the last Senior Vice President to receive restricted stock. And chances are, if we didn’t make note of the “Integration Clause,” and share its meaning and effect with Enrique, he would have “gone with the flow,” trusting vague and worthless assurances, to his great dismay and detriment.

LESSON TO LEARN: You’ve heard it many times before: “Make sure to get it in writing.” It’s always important to get important promises and agreements placed into writing. That’s because memories can fade, the person who made you a promise may be gone from the scene, and sometimes good faith can later turn into bad faith, without prior notice. So long as you have some good proof of a promise or agreement – a clear email, a simple letter, or a signed agreement – you’re usually “safe.”

But an “integration clause” in an agreement changes all that, for it makes all other agreements, understandings, assurances and/or promises, whether oral or written, which are outside of that one agreement, entirely worthless, null and void, and of no value or effect. An “integration clause” says, in effect, “If a promise, assurance or agreement is not in this agreement, it simply doesn’t count.”

If you find an “integration clause” in any offer letter, agreement, letter of intent or understanding, or even a confirmatory memo or email, be cautious. Think to yourself: “what is missing from this agreement that is important to me?” Insist that anything important be inserted in that same agreement, and don’t be swayed by other vague assurances, because they “don’t count.” The only safe thing you can count on is that you won’t see that promise fulfilled.

WHAT YOU CAN DO: If you have an employment offer letter or agreement, read it over carefully. If it contains an “integration clause,” this is what you can do:

1. Understand that integration clauses have no “special words.” Integration clauses are not usually difficult to identify. Many offer letters and employment contracts give titles to their sections. The most common title for an integration clause is “Entire Agreement.” But they may not have such titles, or be so obvious. Don’t expect integration clauses to have little red flags saying “Here I am.” Just look for the concept that “this is the only agreement that counts; all others don’t count.”

2. Ask that every significant assurance, understanding and promise be clearly inserted. If you find an integration clause in your offer letter or employment agreement, your first task is to decide what is important to you, and what is not. If five weeks’ vacation is your most important goal, it’s got to be clearly set down in the agreement. If you don’t care whether your title is Managing Director or Principal, don’t make a big deal of it. But, in an agreement with an integration clause, everything important to you must be “inside” the agreement, or considered lost. Ask to have the important items inserted, clearly.

3. The easiest way to overcome an “integration clause” is to “incorporate by reference.” Imagine that the integration clause in your agreement says this: “This agreement is the entire agreement between the employer and the employee regarding employment compensation and benefits.” The easiest way to insert an additional item promised you, or an additional agreement, is to ask that the integration clause says, “This agreement, along with the terms of the email dated June 5, 2007 that is attached, which is incorporated by reference, are the entire agreement between the employer and the employee regarding employment compensation and benefits.”

4. Read carefully for the words “prior,” “simultaneous” and “later.” Some integration clauses say “prior” agreements are ineffective. Some say “prior and simultaneous” agreements are ineffective. Others say “prior and simultaneous agreements are ineffective and future ones are ineffective, too, unless both parties sign them.” Read the words carefully, for the precise wording must be dealt with.

5. A subsequent agreement or amendment may require both sides’ signatures. As noted above, some integration clauses provide that future agreements don’t count unless signed by both parties. That makes oral agreements ineffective, emails and letters useless, and confirmatory memos inoperative, null and void. Though it may sound trite, “Signature” means “signature,” not initials.

6. Resist lame excuses by Human Resources and Legal Representatives. Don’t be surprised if your employer’s Human Resources and Legal representatives of your employer come up with such lame excuses for not including key terms in an agreement such as these: “We never do it that way,” “You have to have some trust in us,” “We have a rule against that,” or “No one ever asked for that.” We’ve heard those, and one thousand other lame excuses for not being clear and comprehensive in preparing an offer letter or employment agreement. Unless it makes total sense to you, simply resist it. There is no substitute for perseverance, no alternative but to be polite, but persistent resistance.

7. Don’t be afraid to raise the issue to the highest level. Should your insistence on inserting into clear words that memorialize a promise or understanding made to you be met with resistance, don’t be afraid to take the matter “upstairs.” Be direct, be frank, be clear that you are not asking for anything in addition to what was promised to you, but only for a clear record of what that promise was. Be clear you are not trying to negotiate, but to ensure that there are no later disputes. So long as you are respectful, you should have no downside risk.

8. Don’t be embarrassed, but be proud of your prudence. Finally, though you may sense that people are considering you “unnecessarily difficult,” don’t fall prey to a sense of embarrassment. Don’t be coerced into giving up on your insistence by such words as “the deal is the deal.” Your employer should want employees who are not pushovers, but ones who are capable of persevering, and ones who are not easily intimidated. It is such prudence in your approach to your duties on the job that naturally will manifest itself in your own affairs, as well. Be proud that you don’t give up until the task at hand is done “just right.”

If you would like to obtain a “model” memo, letter or checklist to help you  negotiate terms of employment, or related issues [click here].


Our SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. If you feel you’ve been shortchanged or treated improperly, whether it regards a bonus, promotion, discriminatory treatment, or otherwise, don’t be afraid to move forward with a complaint and efforts to resolve it. There’s problems in every aspect of life. Intelligence in resolving them may make or break your career. Gaining maximum rewards without unnecessary risks is what business is all about. But it takes more than luck to make that happen. It takes forethought, care and prudence, the essential ingredients in good negotiating.

Always be proactive. Always be creative. Always be persistent. Always be aware. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what our SkloverWorkingWisdom™ is all about.

A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

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