Executive terminations: managing the exit of senior personnel

The termination of a senior executive is rarely a simple dismissal. It engages the Labour Relations Act, the executive’s service agreement, the Companies Act where the executive is also a director, and — increasingly — the interests of shareholders and regulators. Our team specialises in executive terminations and high-level disciplinary issues involving directors, executives and other senior personnel.

Substantive and procedural fairness still apply

Seniority does not dilute the protections of the Labour Relations Act. An executive dismissed for misconduct or incapacity is entitled to a fair reason and a fair process, and awards of compensation at this level are substantial. That said, the courts have accepted that the form of a fair process may differ for senior employees, particularly where the relationship of trust has broken down at board level.

Key considerations

• Review the service agreement for notice, restraint and incentive provisions before any approach is made;
• Separate the employment question from the directorship — removal as a director under the Companies Act is a distinct process;
• Consider whether a negotiated separation, properly recorded, better serves the organisation than a contested hearing;
• Attend to the treatment of unvested share awards and deferred remuneration; and
• Manage announcements to staff, shareholders and the market in a coordinated manner.

We regularly chair and initiate disciplinary hearings at this level, and represent employers and executives in the Labour Court, Labour Appeal Court and Constitutional Court.