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Executive Employment Agreements: Understanding Tax Implications

executive employment agreement taxes

In this interview with Jennifer Rubin, Member, Employment, Labor & Benefits Practice at Mintz Levin, we discuss key tax implications in executive employment agreements including 280G and 409a. It is extremely important that you get an attorney that has expertise in employment and tax before finalizing and signing an executive employment agreement.

Jen focuses on C-suite executive compensation practices, and on meeting the increasingly complex employment needs of executives of public and private corporations.  When she isn’t negotiating employment, equity and severance arrangements, Jen leverages her twenty-five years of experience as a trial lawyer to help clients craft business solutions to legal problems.  Jen, who has an AV Preeminent ranking from Martindale-Hubbell, which publishes a highly respected Law Directory, that provides background information on United States lawyers and law firms.

She is also a member of the Board of Directors of Big Brothers Big Sisters of San Diego County and is a faculty member and advisor to The Honor Foundation, a non-profit organization that assists Navy Seals and other armed services special operators transition from military service to the private sector.  Jen is frequently quoted in the Wall Street Journal and other publications.

Jennifer:   This is very important overall to everything relating to employment agreements and change of control. There are certain tax provisions that are implicated in these agreements.

Patrick:     These are parachute payment type of tax situations.

Jennifer:   There is that, too. That is 280G of the Internal Revenue Code. I’m referring to Section 401-9A, which is another provision that penalize executives pretty heavily if an employment agreement is not compliant with the tax code.

My general advice, when you’re entering into an employment agreement is to either engage employment counsel with tax expertise or separately engage an accountant.

If your agreement doesn’t comply and then it turns out later that you’re triggering something, you could create a major problem for yourself. This is another reason to never cut and paste an employment agreement from someone else and sign on to it.

This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.