Term

One of the most important sections of an employment contract is the one setting forth the term, and the renewal conditions (if any). It is important to ensure that the company first decides whether the employment contract is for a specified term or if the employment is still at-will. In the majority of cases, the employment contract will be for a term, thereby not at-will employment, but sometimes it simply outlines certain aspects of the employment relationship and does not change the at-will nature of it.

Assuming it is a specified term, what is the term going to be? 💡 Think about the considerations a company may need to take into account when determining the term it would like to set. Once a term (ex. 3 years) is established, one has to decide what happens upon expiration of that term, i.e. whether there will be an opportunity to renew and if so, pursuant to what terms?

Some contracts simply expire at the end of a term. More typically, what I’ve seen for executives is “evergreen” contracts – those that renew automatically unless one of the parties gives notice that they do not want to renew. Standard renewal notice provisions provide that one of the parties gives 45-days notice if they do not wish to renew the contract.

This section, while it seems basic, is one of the most important sections of the contract. 💡Thinking beyond the timing, how does this section impact the employment relationship?