When you leave your executive position, you are often asked to sign a “standard” severance document which reminds you of restrictions binding upon you, and addresses your entitlements upon leaving employ. Sometimes, the form of this document is set forth as an attachment to your original employment agreement or is in a company handbook. These letters or formal agreements typically contain a release of all claims against your employer.
In a just-decided Massachusetts Appeals Court case, a departing executive signed such a general release and failed to except out his right (contained in his option grant agreement) to exercise his fully vested stock options for a period of time after employment terminated. The court held that the executive forfeited his vested options and could not exercise them. In Massachusetts, a general release will be literally enforced. The former employee must expressly list those rights that survive.
While there is no standard check-list of surviving exceptions, and while companies present these agreements as boilerplate, the employee needs to record everything that is not being paid on the spot. Clearly stock options and rights in other deferred comp plans need to be listed. How about these: rights in all health, insurance, disability and like plans; rights to unpaid and accrued compensation and bonuses and expenses; unpaid sick or vacation days; rights under any company-funded coverages; rights to exoneration, indemnity and defense under any charter, by-law, company policy or contractual provision that protects the executive from claims for breach of duty or wrong-doing; right to retrieve any personal property left on premises; rights under any out-placement program or understanding for maintenance of an office or support services; right to purchase a company vehicle. This list is suggestive; departing employees need to think about what they are to retain, and employers typically will permit modification of the general release to reflect those things to which the executive is in fact entitled.