While the country scrutinizes bonuses given to corporate executives of failing companies during the economic slump, employee retention agreements for merging successful companies fly under the radar. The employee retention agreements for San Francisco’s Genentech Inc. executives stands to garner top level employees over $18 million should the deal be finalized by June 2010.

Consistent  customer of the government bailout, AIG stands to give $160 million of the $170 billion dollar bailout funding to high ranking executives in line with their employee retention agreements. After the Obama administration puored over the AIG employment retention agreements, they were upset to find they the payments were indeed legally binding and have to stand aside while AIG execs who had mighty roles in the financial crisis walk away with millions.

As the security of an employee retention agreement has been well tested and prevailed, employees of many companies and corporations are looking to solidify their contracts. As these employee retention agreements are drafted, amended and restated, they are often also released to the public via online legal document resources such as RealDealDocs.com.

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Much has been made recently in the news about the ironclad nature of employee bonus agreements. The federal government’s recent bailout of AIG has shown new light on how vitally important the phrasing of these documents can be, so when crafting one yourself, you may want to keep such extreme bailout scenarios in mind.

The typical employee bonus agreement begins by stating the employer and the employee (sometimes an individual, other times a group of employees or an entire third party), and then delves into the definition of what the bonuses are and how they can be obtained. A great amount of care needs to be taken with this section of the agreement as complex numbers can lead to typos that could theoretically lead to years of lawsuits and legal wrangling.

The next few sections of the agreement are optional and often spell out how the bonus will be paid (cash, escrow, stock). There is almost always a section that goes over termination of employment and how bonuses are (or aren’t) paid under those circumstances.

In some complex employee bonus agreements, there is also a section that spells out what the tax obligation is of the person receiving the bonus and sections on arbitration, severance and amendments (if they are allowed or not).

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SmartRules provides step by step guides to local rules and civil procedure for state courts & federal courts throughout the country.

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Chances are, if you had never heard of an Employee Bonus Agreement before the beginning of 2009, you have now. The infamous bonus agreements dished out by AIG have been front page news, but what exactly is an employee bonus agreement and why are they sometimes so controversial?

The root of that explanation lies in the fact that bonus agreements are created, issued and signed at the time an employee is hired. In the case of AIG, a government bailout like the one that occurred was not foreseen so language specifically related to an outcome such as that was never written into the contract. AIG had their legal hands tied and the bonuses were, for the most part, still paid, although some were later returned by good-hearted employees.

In general, an employee bonus agreement is a straight forward and very brief document. They begin by stating the name of the company and the name of the individual employee (or group of employees) that the document covers. The first proper section of the agreement spells out what the bonuses are and under what circumstance they can be earned. This section can either be quite short, if the bonuses are straight forward and automatic, or it can be quite lengthy if there are several strings attached. Some bonus contracts than have sections that spell out how the bonuses are paid (cash, stock, other assets) and when they are paid. One section that every agreement like this has is a part on termination. In some cases, termination prior to the completion of the requirements to receive a bonus can result in a complete forfeit of any bonus monies, but other contracts are pro-rated and you receive a percentage of your bonus based on what percentage of your goal you obtained before your dismissal. There is also a separate section stating how the company in question is obligated to notify you of your termination.

The final part of the contract often spells out what sort of tax obligation the employee would have for their bonuses, what kind of severance package a terminated employee would receive and if amendments to the initial agreement are allowed or not. Overall, an agreement such as this is very straight forward and quite simple to write, read and follow. However, as was seen in the recent AIG bailout, these simple documents can make a huge impact on the way a company does business.

RealDealDocs.com is a division of Practice Technologies, Inc. the creators of SmartRules.com.
SmartRules provides step by step guides to local rules and civil procedure for state courts & federal courts throughout the country.

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The employee bonus policy that allowed $165 million in bailout funds to be doled out to AIG executives posed a legal quandry for the Obama Administration. The AIG employee bonus policies were indeed legall binding agreements and thus could not be taken away from the corporate executives.

In answer to the demands of government and taxpayer alike who were outraged at this prosectof employee bonus policy that could not be stopped, the Democratic-led House proposed and recently passed a vote to implement high taxes on those who benefited from the AIG employee bonus policy.

The Associated Press explains that the, “bill would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at American International Group and other companies that have received at least $5 billion in government bailout money.”

It would appear under this taxation that the remainder of funds from the employee bonus policy will then be taken by local and state governments, thereby nullifying all of the bonus pay.

To read over what is pertained in a typical employee bonus policy and see why and how it is a legally binding contract, visit a legal document resource, like the RealDealDocs.com webiste, where actual execution copies of top corporations are available.

RealDealDocs.com is a division of Practice Technologies, Inc. the creators of SmartRules.com.
SmartRules provides step by step guides to local rules and civil procedure for state courts & federal courts throughout the country.

Popularity: 6% [?]