Published on July 12th, 2016 by Alan L. Sklover
“When you come to a fork in the road, take it.”
– Yogi Berra
ACTUAL CASE HISTORY: Ailyn, 58, was the Chief Technology Officer of a mid-sized telecommunications company in the Southwestern U.S. She had been hired four years earlier, and given something that many people seek: an employment contract with a term of four years.
For her three and a half years with the company she enjoyed the calm and confidence that only job security brings: no job loss unless she committed some kind of “cause” for termination, such as theft, conflict of interest, or harassment, which of course she knew she would not do. She also had the confidence of someone whose annual performance appraisals each year were “exceeds expectation.”
With her contract coming up for renewal, she spoke with her manager, the company’s Chief Operating Officer, who assured her that he would be her advocate, and that she had nothing to be concerned about. Being pleased with her job, compensation and role, and not having any “dark clouds on the horizon,” Ailyn waited for news of her contract extension. And waited. And waited.
With her contract set to expire in just three weeks, Ailyn pressed the COO for an explanation for the delay. His explanation was simple: it was “held up” somewhere in General Counsel’s office, due to some kind of new regulation that had to be ironed out.
Two weeks later, she got the true story: a new Chief Technology Officer had been recruited for his internet marketing experience, and had been hired to replace her. Apparently her employer was negotiating the new CTO’s contract, and things had taken longer than they had expected. She was then given notice of just one week that her employment contract was not going to be renewed.
This was not the way she had expected things to go. She wondered to herself, “Where did I go wrong?”
LESSON TO LEARN: (A brief note: While “contract renewal” (which means “a new contract, beginning the relation again, on all the same terms”) and “contract extension” (which means “adding a number of months or years to the duration of the existing contract”) are technically different, for the purposes of this newsletter, we are using them interchangeably. We also refer to “agreements” and “contracts” interchangeably in this article.)
Employment agreements or contracts usually set down a certain period of time for which both parties agree to remain in the relation, commonly called the “Term.” For this reason, having an employment agreement or contract in place is seen as a source of valuable job security, for the employee, and valuable employee retention, for the employer, at least for that specified period of time.
However, toward the end of the contract term, for both employer and employee, “navigating” the issue of contract extension or renewal can be fraught with risk and anxiety. On the one hand, if you are interested in remaining with your present employer, you don’t want to seem “pushy” or mistrustful, and so may be inclined to be patient by waiting for your employer to make up its mind as to continuing the relation, or providing you with a written extension document. On the other hand, being patient might leave you with little time to find a new position elsewhere if your contract extension or renewal does not come to be. The employer who wants to keep the employee may be in an equivalent position of risk and anxiety.
It is for this reason that we encourage all clients who have an employment agreement, or who seek an employment agreement, to request that a “Renewal Notice” provision be inserted in it.
A “Renewal Notice” is just what it sounds like: (i) a written notice, (ii) to be provided by both employer and employee, (iii) at least six or so months before a contract expiration, requiring that each give notice of his, her or its intension regarding contract renewal or extension. Secondarily, a Renewal Notice should also provide for the commencement of discussions of the terms of renewal or extension to commence promptly, if both sides want to renew or extend.
Having a Renewal Notice provision in a contract (a) substantially lowers the chance that either employer or employee will be left “in the lurch,” that is, at risk for an unexpected end of the relation, and (b) provides both sides with a pre-arranged framework in which to openly and amicably examine – and navigate – contract extension.
The “Renewal Notice” provision in an employment agreement sets up a “win-win” dynamic in the employment relation. Why not ask for one, whether you are seeking an employment agreement, negotiating an employment agreement, or have one already, and considering improving it.
If you are going to have an employment agreement, it might as well be a good one.
WHAT YOU CAN DO: Consider the wisdom or requesting a “Renewal Notice” provision in any employment agreement or contract you have, or want to have, with your employer, with these things in mind:
1. Here is what a “Renewal Notice” provision generally “looks like”: Although each and every agreement and provision of an agreement must be carefully crafted to address each fact and circumstance, this is generally what a “Renewal Notice” provision should look like:
“Regardless of anything else in this Agreement, the Company and the Employee agree that:
(i) at least six (6) months before this Agreement’s expiration, they each will notify the other whether that party wishes to extend or renew the Agreement, which notice will not, itself, be binding,
(ii) if they both wish to do that, then at least five (5) months before the Agreement expires they will begin discussions about extension or renewal,
(iii) with a mutual goal of signing an extension or renewal at least two (2) months before the expiration of the Agreement.”
2. A “Renewal Notice” provision is a true win-win for both employer and employee, and should be presented that way. So many employees seem to be reluctant or fearful to “ask” for something. To my mind, the “Renewal Notice” provision is just as much a gift to the employer as it is a request for an employee. Both sides benefit from clarity, certainty and trust, and the “Renewal Notice” provision provides both sides with them all.
Because it is such a “win-win” proposition, it needs to be presented as such to your employer. It should be presented more as a suggestion than a request, and “Sales 101” teaches us, the “sales pitch” should start off with the benefits to the listener, not the speaker. Said differently, it is easier to sell toothpaste with “This will make you attractive” than by saying “We want and need your money.” So, stress the advantage to your employer.
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3. If there is one “downside,” it is that employers and employees need to be mindful of the expiration dates of employment contracts, which is a wise thing to do in any case. I have heard some employers and their attorneys express “No, thank you; that would impose on us a requirement to be careful about the end date of your employment contract.”
My response is this: “Let’s think about your office lease, which also expires on a certain date. Would you rather your landlord come in one day and tell you to leave tomorrow because today is the lease expiration date, or would you rather the landlord remind you six months earlier, so that you have an opportunity to renegotiate, or have six months to find a new space?” The logic is inescapable: it is wise to know and treat carefully the scheduled ending of any business relation, whether is seems to be an asset or a liability.
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4. Perhaps the best way to explain a Renewal Notice provision is to refer to Yogi Berra’s famous quote: “When you come to a fork in the road, take it.” Imagine, for a moment, that there is a fork in the road a mile ahead of you. First, it is best to know – before you get to the fork in the road – that the fork in the road is there, and also which way you want to go: left of right. Second, it is safest to put on your turn signals, so that other cars are aware of your intentions, and so will be less likely to collide with you.
Having advance notice of the upcoming “fork in the road,” knowing which way you will go when you get there, and then signaling to the other cars in the road, is just like a Renewal Notice provision, and in the interests of all “drivers” on the highway.
5. Request for a “Renewal Notice” provision is appropriately raised at any time, both in “new-contract” negotiations, or to amend an existing employment contract. As a “request” that costs nothing, and acts to the benefit of all parties, the request for a Renewal Notice provision to an Employment Contract “has no season.”
If you have, or are about to get, an employment agreement, it may pay to use our Model Letter entitled “Renewal Notice Provision” that, months before the time period of employment is over, has the employer and employee notify each other whether they want to renew. A true win-win. This shows you “What to Say, and How to Say It.™ – Delivered by Email – Instantly! Just [click here.]
Properly presented, I have never once seen a request for a “Renewal Notice” provision result in a negative reaction. Sure, some employers and their attorneys say, “No, we would rather not do that,” or “That is not part of our usual form contract,” but I have never seen an employer express that it is an inappropriate, unwise or a selfish request.
P.S.: If you would like to speak with me directly about this or other workplace-related subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations. (Even 5-minute “Just One Question” calls). Just [click here.] Evenings and weekends can be accommodated.
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SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. Knowing the several alternative paths available to you if your first path does not lead directly to success is one way of navigating and negotiations wisely.
Always be proactive. Always be creative. Always be persistent. Always be vigilant. 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.” Requesting a “Renewal Notice” provision in an existing or new employment agreement is one way to do just that. Learning the “tricks of the trade” is what 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.
Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.
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