Item 1.01 Entry into a Material Definitive Agreement.

On June 26, 2006, Integrated Electrical Services, Inc. (the “Company”) entered into an employment agreement with Michael J. Caliel (the “Employment Agreement”). The Employment Agreement provides that Mr. Caliel shall commence employment with the Company on July 12, 2006 (the “Effective Date”). The Employment Agreement has no definitive employment term and may be terminated at any time, upon written notice to the other party for any reason, at the option either of the Company or Mr. Caliel. Pursuant to the Employment Agreement, Mr. Caliel will serve as the President and Chief Executive Officer of the Company and will also serve as a member of the Board of Directors of the Company during the employment term.

The Employment Agreement provides for (i) an annual base salary of $500,000 per year (which may be increased in the sole discretion of the Company’s Compensation Committee), (ii) an annual bonus (the “Annual Bonus”) with a target annual bonus opportunity of 100% of annual base salary (the “Annual Bonus Opportunity”). For fiscal year 2006, however, there is no Annual Bonus and for fiscal year 2007, the Annual Bonus shall be comprised of (a) $250,000 and (b) an Annual Bonus Opportunity of 50% of annual base salary, and (iii) a retention bonus (the “Retention Bonus”) if Mr. Caliel is actively employed with the Company on September 28, 2007 of (a) a lump sum of $350,000 and (b) a grant of Company common shares under the Integrated Electrical Services, Inc. 2006 Equity Incentive Plan (the “Equity Plan”) with a Fair Market Value (as defined under the Equity Plan) on such date of $350,000. If after receiving the Retention Bonus, Mr. Caliel’s employment is terminated by the Company for Cause (as defined in the Employment Agreement) or if Mr. Caliel resigns without Good Reason (as defined in the Employment Agreement) on or prior to the two-year anniversary of the Effective Date, Mr. Caliel shall pay to the Company, within thirty (30) days of such termination, a lump sum of $350,000.

On the Effective Date, Mr. Caliel shall receive grants of (i) 25,000 restricted Company common shares (“Restricted Shares”) under the Equity Plan, which shall vest 1/3 on each of the first, second and third anniversaries of the Effective Date and (ii) a nonqualified option to purchase 100,000 Company common shares (“Option”) under the Equity Plan, which shall vest 1/3 on each of the first, second and third anniversaries of the Effective Date. The terms of the Restricted Shares and Option shall be governed by the Equity Plan and their respective award agreements to be executed on the Effective Date.

Mr. Caliel shall be eligible to participate in the Company’s employee benefit plans as in effect from time to time, on the same basis as such employee benefit plans are generally made available to other senior executives of the Company and shall be entitled to an automobile allowance of $1,500 per month.

If Mr. Caliel terminates for Good Reason or if he is terminated by the Company without Cause, he is entitled to receive: (i) continued payment of base salary then in effect for 12 months immediately following the date of such termination, (ii) the greater of (x) a pro rata portion of his Annual Bonus Opportunity for the fiscal year in which such termination occurs or (y) the most recent Annual Bonus awarded to him, (iii) Company paid COBRA coverage, continuation of automobile allowance and outplacement services, each for twelve (12) months immediately