“Risk and Reward” are the two ultimate challenges of our working lives. Note that in the phrase “risk and reward,” the word “risk” comes first. That is no coincidence, as the identification, assessment and reduction of risk in our lives are primary and paramount concerns.

Ever wonder why we all gladly pay for many different types of insurance?. . . it’s because each is a “risk limiter” against significant harm that may appear without warning, and if not in place, may lead to devastation of personal finances.

A. What is Executive Indemnification?
It is a contractual right from an employer (or an employer-paid insurance policy) that provides protection from the costs of a possible lawsuit, criminal charge or regulatory penalty that might arise out of your workplace duties. Ideally, the Indemnity is for both (a) the legal expense of defending yourself, and (b) the amount you could be held personally liable for.

B. Who Can Get Indemnification?
Commonly, the “articles of incorporation” or “charter” of incorporated businesses and other organizations provide that Officers and Directors are entitled to indemnification, but that is not always the case; prudence requires that it be confirmed to be in place.

As to executives and managers who are not Officers or Directors, an organization can provide such protections for them, too, either (a) out is its own coffers, or (b) in the form of an insurance policy, too, if only the right request is made in the right way at the right time based on a proper rationale.

C. Can You Request Indemnification?
Any Executive or Manager can request indemnification protection, and all should. Such requests are made most commonly (i) when negotiating a new job offer, (ii) at time of promotion, (iii) when a specific need for it arises on the horizon (such as a notification that a regulatory investigation has commenced) or when a class action lawsuit has been filed.

We have negotiated many, many executive employment agreements over the past 40 years, and in each and every instance, we have asked for an indemnity clause. In most instances, it’s been granted.

D. As to Legal Expense, Request “Advancement,” Not “Reimbursement.”
Would you rather lay out the tens or hundreds of thousands of dollars in legal expenses from your own pocket as the legal fee invoices come in, or have your employer (or its insurer) do so “in advance,” on your behalf? Surely, the latter is preferable. So, we don’t request legal expense “reimbursement,” but rather we request legal fee “advancement.” We also advise clients to resist the imposition of a “cap” on total expenses, especially in cases of possible regulatory or criminal investigations, as they often last a very long time.

E. Post-Employment Protection is of Critical Value.
Just like any other employment benefit, indemnification protection in executive employment agreements generally ends when the employment terminates. However, potential liability risk may exist for years. Care should be taken to request prolonged, post-employment indemnification by means of employment contract and/or what’s called a “tail” indemnity insurance policy.

F. As in all Contracts and Contractual Provisions, “The large print giveth and the small print taketh away.”
Frankly, all legal documents should be reviewed by someone with substantial experience. The same goes for drafting a contract provision in a legal document. A word here, a comma there, can make all the difference. In indemnification provisions, references to the law of different states, and to provisions in corporate by-laws are quite common, and so very often quite obtuse and opaque.

The work world can be a risky place. Attention must be paid to the multitude of risks that might arise in various circumstances, even those we cannot at this moment imagine.

When negotiating executive employment, we focus ourselves on risk identification, assessment and reduction, so that our clients can focus their attention on obtaining the maximum rewards available.

Always go with the firm hand of experience and expertise, especially in employment transitions and other “shaky times.” We are here to help you.