I began thinking about negotiating job security terms into employment agreements as a result of a recent conversation with a friend who was positioned like a typical much-sought-after passive candidate. I concluded this may be a useful item for the creative recruiter’s toolkit.

This man had a long, promotion-filled tenure with his current employer, which is a well-established, fast-growing, and relatively recession-proof company. A startup was offering him a higher-paid position with more responsibility and upside potential, possibly including equity. But the job was definitely higher risk. He was not at all interested in making the move unless he got a written employment agreement with job-security protections. Such requests run counter to most employers' current employment practices.

It should be common knowledge that, unlike our counterparts in many other countries around the world, the vast majority of American employees, even many very-highly-paid ones, work without a contract as “at-will” employees. This means employers may terminate employment for any reason, or no reason -- as long as they do not do so for an unlawfully discriminatory reason or a reason falling within another relatively narrow exception to employment at will (such as a violation of public policy).

Employment at will defined
Under employment at will, no violation of an employee’s legal rights is established by evidence that the employer’s termination decision was unfair, misguided, or based upon false information -- again, unless such evidence supports a claim of unlawful discrimination or otherwise brings the termination with an exception to employment at will.

Employers often take pains to preserve the right to terminate at will through express disclaimers of any kind of contractual obligations to employees. These disclaimers are often found in employee handbooks. Likewise, employers typically avoid entering into written employment agreements or contracts, in order to maximize their workforce flexibility, a practice that correspondingly minimizes employee job and income security.

The harsh reality
The potential harshness of this reality, often surprising and shocking to terminated employees seeking legal relief, is typically reduced in only a few categories of employment: union-represented bargaining units, some government jobs, and highly-paid executive positions.

As is well known, the last category of employees (think multi-million-dollar CEOs) not only typically negotiate written employment agreements, but also ensure that these agreements contain generous severance packages, which provide income security, if not job security per se.

What does this have to do with so-called "passive candidates"? Plenty. These are people who may have a lot to lose by taking an offered position. Like my friend, who ended up turning down the offer because of its perceived risk relative to the stability of his current position, they may be preoccupied with the worst-case scenario: leaving satisfactory employment for the attractive new position only to find themselves unemployed within a relatively short time, which could occur for numerous reasons.

Negotiated employment agreements – with a caveat
Enter the negotiated employment agreement with a severance-pay feature. Under its terms, the employer may terminate employment “for cause” without any obligation to pay severance. "Cause" is defined, and the parameters of this definition may become critical points of negotiation. The employer's right to terminate at will, without cause, is technically preserved, but if it is exercised, the employer must pay a predetermined amount of severance pay. In exchange, the employee must sign a complete release of all legal liability. This allows for a nice clean, litigation-free termination for any reason, at a known cost to the employer, in contrast to one that may result in costly litigation at a highly unpredictable ultimate cost. If the price is right, this can be a “win-win” agreement. Of course, the employee remains free to reject the severance and retain the right to sue.

Typically, this type of agreement has been limited to high-level executives. In my view, this is a function of their bargaining power, as well as a specialized market in which it has become normative. A reluctant and much-desired passive candidate may have similar bargaining power, though the amounts of severance of course will be less than for top executives, in proportion to the applicable pay range. Such agreements are not normative, but this could change if they are demanded frequently enough by individuals viewed as must-have talent. They could also be the quid pro quo for noncompete agreements that passive candidates may be reluctant to sign.

I’m not saying that I’ve seen this occurring frequently. But I am saying that it makes sense and may be an arrangement that a resourceful recruiter can use to seal a deal with a reluctant, but highly desired "passive candidate."