Review job contracts carefully after a merger

In this age of mergers and acquisitions, it’s increasingly common for employees to find themselves employed by a different entity almost overnight. When such changes take place, the new organization will often rewrite employment contracts or noncompete and trade-secret agreements to reflect the new employment reality.

If you do update and rewrite such employment contracts, be sure to include a statement that the agreement is the entire understanding between the parties. If you don’t, you may find your organization also bound by the terms of any earlier agreement.

Recent case: Donnie Williams signed an employment agreement when First Mercantile Bank hired him as a branch president. The contract included a stock-option incentive plan.

A year later, First Mercantile became Colonial Bank and Williams signed a new employment contract, retaining his prior title and job. The contract said it was the entire agreement between the parties.

Williams discovered later that the new contract didn’t include the stock-option plan. He sued, alleging breach of contract. But the 5th Circuit Court of Appeals sided with the bank. Because the new agreement said it was the entire contract, and because it covered the same parties and the same job, the new contract superceded the old one. The stock options were gone. (Williams v. Colonial Bank, No. 05-51650, 5th Cir., 2006)

Caution: Always use an experienced attorney to review contract language to make sure the agreement says what you intend it to say.