Chess and the art of the deal – Executive separation and negotiation of exit terms

What will commonly happen is that, once the company has considered its position, you will then be suddenly ushered into a meeting where you will be faced with either suspension or termination of your employment. A termination proposal will be put to you and you will be told that, if it is not accepted by the end of either that working day or the next, it will be withdrawn. You may even be handed a Deed of Separation and Release.

This tactic is, of course, deliberate, and is designed to engineer an early end to your employment on terms which are most advantageous to the company. Conversely, such an approach is likely to have serious financial and reputational consequences for you.

While some employers may allow several days for you to obtain your own independent advice, others may insist that the offer is only capable of acceptance within a limited time after which it will lapse.

In the circumstances, it can be very difficult to obtain legal advice before expiry of the deadline. Most lawyers will ask to see copies of the relevant contracts, correspondence and a Background Statement. A file then needs to be opened and retainer documents sent to the client.

In these circumstances, an executive can be left in an exposed position, not knowing how to respond and whether they should be accepting or rejecting any settlement offers.

Take early legal advice before the problem becomes acute

The best defence to this approach is to obtain early and timely advice while the “tremors” are still comparatively slight. The objective of such preliminary advice should be to clarify:

(a) your legal position under your Contract of Employment and whether there might be some other statutory cause of action under Commonwealth or State legislation;

(b) your position at common law under the law of contract in the event that you have no current contract with respect to the position you occupy within the company;

(c) what the settlement terms should be financially and reputationally – not to mention issues surrounding risk and post-employment restraint obligations; and

(d) what your reaction should be to any sudden settlement proposals – acceptance, rejection or counterproposal?

Offence may be the best defence

It is possible that, having obtained preliminary advice, you may be better off going on the front foot. This would involve arranging to speak to your reporting manager before he or she has had an opportunity to convene a meeting with you.

Such a meeting should be conducted on an “off the record basis”, and hopefully in the context of an atmosphere which is less formal and more relaxed. A meeting of that nature can often produce an outcome more advantageous than what otherwise might have been achieved.

To realise an optimal outcome, most executives will need to take advice and be coached on how best to approach such a meeting.

Negotiating an exit is like high-class chess

The fact of the matter is that, before accepting any settlement offer or making any settlement counter-proposal, you need to assess all of your “moves”. You should never lose sight of your goal. What you are trying to achieve is an advantageous financial and reputational outcome without risking the calamitous option of litigation.

In this regard, you need to know where you should pitch any exit counterproposal. If it is too low, you risk “selling yourself down the river”. If it is too high, you may overplay your hand, in which event, negotiations may come to an abrupt end.

The advice given by former international Chess Masters C.J.S. Purdy and G. Koshnitsky is highly relevant:

“High chess skill needs imagination and intuition. But you develop these qualities all the sooner by thinking methodically and you will avoid many blunders… [Before making your next move on the board] make a reconnaissance, eyeing quickly all the squares each (piece) on the board commands; how safe are the kings? and other pieces?” (page 51)

And again:

“In chess it’s not only the oversights you make in actual moves that harm you, but the oversights you make in the course of calculations and suddenly “tumble to” after waiting several minutes. If you notice beforehand every possible move of every (piece) on the board, your liability both to these oversights and the actual blunders will be markedly decreased.” (page 61). (Chess Made Easy by C.J.S. Purdy & G. Koshnitsky.)

So – review the entire board before you make the next move!