Severance agreements are contracts. Employee Choice Doctrine appies.

Employee choice means that an employee makes a choice.

One example of an unreasonable non-compete covenant might be as follows. A physician is barred from practicing internal medicine within 100 miles of his former employer. In New York such a restriction would almost certainly be unreasonable. It would be unenforceable. But if that physician accepted severance pay, the Employee Choice Doctrine most likely applies and converts what would have been an unreasonable and unenforceable covenant into one that the physician chose to purchase. The physician accepted consideration in the form of severance pay and therefore ratified or accepted an otherwise unenforceable restriction.

Employees who resign or quit are analyzed differently from ones who are fired without cause. The employee who quits is usually bound to restrictive covenants which are reasonable. Whereas the employee who is fired without cause might not be held to such covenants. It all depends on a careful analysis of the facts which is the case in most all employment cases.

With severance agreements I examine 3 things right off the bat:

  • Who is the employer? Will they likely pay? Employees are often surprised to learn that some employers don’t care and don’t pay.
  • Is the proposed severance agreement actually a contract? Some employers are very clever. They might draft a “contractor agreement” to lead an employee, who is no longer welcome, to think they will become a consultant or independent contractor for a while when such a relationship might be legally impossible.
  • If something goes wrong, how will either side enforce the agreement, in what forum will enforcement occur, and who will pay and when?

There is a lot more to reviewing an 8, 10, or 12 page severance agreement than most employees anticipate. It’s not uncommon for an employee to have restrictive covenants with a prior employer while concurrently being concerned with covenants which a prospective employer is proposing. For example all of the following may apply to each:

  • Non-solicitation agreements
  • Trade secrets – duties of loyalty to all employers
  • Work product and the employer’s right to own it
  • Client or customer lists which might be transferred to a new employer
  • Special or extraordinary services
  • Non-compete clauses
  • The Defend Trade Secrets Act
  • Alternative Dispute Resolution
  • Choice of Law other than the state in which work is performed

Timing is everything. The sooner employees call severance or employment lawyers the better.

Sometimes severance agreement reviews lead to potential discrimination charges but not frequently. Sometimes employees recover more money. Often times employees protect their immediate unemployment benefits by having a severance lawyer review and propose improved language within agreements.

The best thing employees can do is to call and speak with many severance or employment lawyers.

Read some of my blog articles if they interest you and you will see why employment law is nothing like personal injury or any other type of law. Facts matter and they are often extensive and involved. Never sign a legal document without having a lawyer review it thoroughly and discuss it with them.

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