Employment Separation Agreements are important contracts and as such they should be reviewed with an attorney. Separation Agreements generally provide, at a minimum, severance pay that a terminated employee would not otherwise receive in exchange for a release of the employer by that employee. Depending upon the circumstances of the employment termination, the employee may not have any claims against the employer and believe that the decision to sign such an Agreement is an easy one. However, all the terms of the Agreement should be reviewed carefully to determine whether or not there are any long-term obligations within it which would encumber the employee’s ability to find gainful employment.
For example, non-solicitation or non-competition terms may prohibit an employee after leaving the company from either soliciting or accepting business from the former employer’s customers or generally from competing with the former employer. An employee agreeing to such a term as a condition of employment should expect the courts to narrowly construe the term so that it will only be enforceable as necessary to protect the legitimate business interests of the employer. For example, if you are a sales person and have an employment agreement prohibiting you from doing any sales in competition with your former employer within a certain area for two years after your employment termination, that employer may have a difficult time enforcing such a broad agreement. However, if you agree to such a term as part of a Separation Agreement where you already knew your employment was terminated and you were signing in exchange for severance payments, it is possible a court might, in that circumstance, enforce the agreement strictly based upon its own terms.
Therefore, even if an employee already has a non-competition agreement as a condition of her continued employment, the new term as part of the Separation Agreement may be more enforceable. Employees should obtain legal advice to assist them in determining whether the severance benefits in the Separation Agreement are worth the obligations therein.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].