Legal Question in Business Law in California

Employment Agreement

My husband and I own a construction company. On 10/1/03 we had the foreman sign an Employment Agreement for 1 year to see if he would work out. We put in a clause for after the 1 year, he had the option to purchase 49% of the company. We no longer want to sell the 49% and no longer want him to have this option. Are we stuck? Can we just evaluate the company at an impossible price so he doesn't have the option to buy? Thank you.


Asked on 5/09/04, 1:53 pm

6 Answers from Attorneys

Donald Holben Donald R. Holben & Associates, APC

Re: Employment Agreement

You need to have an attorney read and evaluate your agreement.

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Answered on 5/10/04, 11:56 am
Roy Hoffman Law Offices of Roy A. Hoffman

Re: Employment Agreement

I MUST agree with Mr. Whipple. Moreover, I suggest you run, not walk, to the nearest business law attorney to have them review your "employment contract." Only then will an attorney be able to competently and intelligently advise you on what options you have (or do not have).

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Answered on 5/10/04, 1:49 pm
Christopher M. Brainard, Esq. C. M. Brainard & Associates - (310) 266-4115

Re: Employment Agreement

I'm not sure, I'd need to see all the contracts. I need more facts. You may be stuck. I may have other options. Contact me.

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Answered on 5/09/04, 2:00 pm

Re: Employment Agreement

Any lawyer would want to see the contract before giving any advice. If you want a local lawyer, my office is in San Jose.

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Answered on 5/09/04, 2:47 pm
Michael Olden Law Offices of Michael A. Olden

Re: Employment Agreement

Well, well, well. You get the chutzpah award for the month. If you don't know what that means let me give you an example. The young man who killed both of his parents and then threw himself on the mercy of the court based on the fact that he was an orphan. You're asking a bunch of ladies and gentlemen who are officers of the court to participate in a fraud with you. Mary because you don't wish to live up to a contractual obligation at this point in time you're asking us to give you different forms of advice that may not necessarily be legal. I.e., place such an exaggerated price on the 49 percent wage is not correct, falls, misleading to attempt to get this individual to back away from exercising an option. Do you really think, at least as to myself, that either to participate in a fraud for someone who minimally I don't even know, but who attempts to do this openly on the Internet. You better be very careful that the person with them you now have contracted doesn't find out about the situation. Now what you should have done was sought the advice of attorney to see if the attorney could in some manner after reviewing very carefully the contract see if there was some legitimate method of finding some invalidity in the contract. More likely, it will now look like anything we you're going to do is clearly violating the spirit of the contract in numbers of different ways. Your intent is clear. It may cost you money to get out of the contract is this person wishes to exercise his option. Any kind of fall to find with him will be questioned without any hesitancy. So you understand, I would rather represent him in the situation given this set of facts as of right this moment. Under normal circumstances I wish people good luck but in this situation, well you probably get the jist.

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Answered on 5/09/04, 4:41 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Employment Agreement

I can't imagine why anyone would offer someone who was on trial a one-year employment contract, much less an option (the probationary employee's option!) to become a singificant part owner. This defies all logic. Did you draft this document yourselves? If so, it may be sufficently deficient in contractual specifics to be unenforceable. For example, if there is no provision for valuing the 49% interest, it might be unenforceable for that reason alone.

You didn't say what the structure of your business is......is it incorporated? I assume it is not an LLC since they can't be used for businesses requiring a contractor's or other professional license. I sure hope it isn't a partnership or proprietorship.

Selling someone a 49% interest in a corporation where you own the other 51% is a mixed bag, assuming you get a decent price. You pocket a wad of cash, and the other person gets a pretty piece of paper. However, the 51% holder has control, and if careful, can run the show including deciding whom to hire for all officer and other positions, including foreman.

A 49% minority shareholder for sure has some rights, but if the 51% owner knows the limits, he can pretty well dominate the 49% shareholder.

Nevertheless, you seem to be running your business without a whole lot of business-law savvy, and before the option exercise date draws near, you should get a full legal check-up from a competent, experienced small-business lawyer.

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Answered on 5/10/04, 12:03 am


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