Change of Control Agreements – Creating a Win-Win for Employer and Employee
By Carman J . Overholt , Q . C ., and Victoria Petrenko
Carman J . Overholt is a senior litigation lawyer and the founder of Overholt Law in Vancouver . He has extensive experience in employment law , labour relations law , and civil litigation , with a special focus on advising employers on resolving workplace disputes .
Victoria Petrenko is an articled student with Overholt Law in Vancouver , where she assists the firm ’ s lawyers on all aspects of labour relations law , employment law , and human rights law .
Awell-drafted employment contract outlines the requirements for ending the employment relationship . The “ termination provisions ” will usually provide for how much notice or payment in lieu of notice an employee is entitled to receive in the event of a termination of employment without just cause . Similarly , a written employment contract may stipulate the amount of notice that an employee must provide their employer should they wish to end the employment relationship . In the absence of express terms , employers and employees are generally required to give reasonable notice when terminating employment . An employer may dismiss an employee , absent just cause , subject to statutory , common law , and any contractual requirements being satisfied . There is one very important caveat , however : The reason for the termination of employment cannot be discriminatory and contrary to human rights legislation , or contrary to other legislation that prohibits termination of the employment relationship in certain circumstances . This article focuses on those instances where a business may be subject to a substantial change as a result of a purchase / sale of assets or business shares . In such cases , both employer and employee can benefit if a clear “ change of control ” clause is included in / added to the employment contract .
Understanding change of control agreements A change of control agreement is often used by a business to encourage employees to continue on in their employment at least until the completion of a purchase , sale , reorganization , or other significant change in the business . As the term suggests , a change of control agreement contemplates what will happen should the business undergo a material change in ownership . What constitutes a change of control is usually defined by the parties in the employment contract . Accordingly , a change of control agreement often sets out the types of events that will and will not constitute a change of control , and it may provide for a number of different triggering events , such as a change in share ownership or in the composition of the business ’ s board of directors . shironosov / iStock / Thinkstock
30 CPABC in Focus • Sept / Oct 2016