Sometimes, Severance Comes With Unacceptable Conditions
Is a 3-month Severance Worth a 2-year Non-Compete? Should I Sign a Severance Agreement If It Includes a Noncompete Covenant?
This is a very serious question, indeed.
If you do not already have a non-compete, and wish to continue working in the same industry, you need to think VERY carefully about this.
If you do already have a non-compete, and are being asked to "bless" that agreement in a severance document, you must understand that you are increasing the potential enforceability of the non-compete restrictions by signing the severance contract (not to mention increasing the anger level of your former level when it finds out you took the money and ran into the arms of its arch competitor!).
Simply Stated: If You Sign a Separation Agreement that Contains a Non-Compete Covenant, a Company Will be More Likely to Pursue You if You Violate the Non-Compete, and a Court Will be More Strongly Inclined to Enforce the Non-Compete
You can think of this in a number of ways.
If You Agree to a Non-Compete In Exchange for a Severance Payment, Your Former Employer Will Be Angry if You Turn Around and Violate the Non-Compete
Companies are made up of people. People get upset when they feel that someone has treated them in a dishonest way. Companies will support angry employers. Companies have the money to support angry employees.
Suzy Creamcheese, who works in HR, offered you the severance agreement, and felt she had completed a job well-done when you signed it and sent it back. Suzy had included the non-compete upon the instructions of Bob Bagadonuts, who was pleased when Suzy tol him you had signed.
Now, you turned around and, after taking the company's money, spat in their face by violating the non-compete? Angry people with a lot of money will take vengeance in the courts. Suzy and Bob don't have to worry about the money coming out of their pocket. They will use the company's wallet to exact retribution. Just human nature.
You Can't Do That!
If You Sign a Non-Compete as Consideration for a Severance Payment, and then Engage in Competition, Courts will be More Likely to Enforce the Noncompetition Agreement
Judges do not like non-competes. They are often signed when an employees starts a new job, employees are not paid for them, they stifle an employee's ability to continue on in his/her chosen field if they are separated from employment. Hence, they are disinclined to enforce them by putting someone out of work merely because they agreed to the clause at the outset of employment (unless they have stolen and used confidential information, or solicited former clients while in their new job, that is).
That said, they take a different view when someone agrees to a non-compete in exchange for severance. Hence, they do not feel as bad ordering someone to quit their new job in such circumstances. "You were paid to sit on the sideline, and to the sideline you go."
Consequently, as we discuss in the below articles, one must think quite carefully about signing a separation agreement containing a non-compete, particularly if you had not previously signed one with your soon to be former employer!
Click to read: Secrets to Severance Negotiations in Pennsylvania Revealed: Philadelphia Employment Lawyers' Guide to Severance Laws and Strategies
Click to read: Voluntary Severance Offers - How to Negotiate and What to Look for When a Company Offers Severance
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