Q. I’m leaving my company and they are putting together a severance package for me. I’m most concerned about my ability to find a new job and any restrictions my old employer may impose making finding a job more difficult. What should I be concerned about?
A. When someone receives a severance agreement from the organization they are leaving, the most common issues focus on salary continuation, benefit continuation and job search support. Often, when you are leaving a company, you will be asked to sign and acknowledge a document you signed back when you were hired; this is to remind you of the initial commitment you made. Based on your concern about your severance agreement, I contacted Attorney Todd Bennett, of Cambridge based Bennett & Belfort, P.C. Attorney Bennett notes, “One important consideration is whether or not your former employer will ask to you abide by a restrictive covenant, such as a non-compete restriction or non-solicitation restriction. In Massachusetts, non-compete agreements and non-solicitation agreements are generally enforceable, provided they are both reasonable and serve a legitimate business purpose, versus being solely designed to prevent competition.”
You might hope for a simple “yes” or “no” to determine whether a non-compete you are asked to sign is enforceable or not, but Bennett says the dreaded answer, “It depends,” typically applies. “Some of the more important factors that courts will review in analyzing the enforceability of a non-compete or non-solicitation restriction include: how similar your duties were to the duties you will have at a new employer; how much access to highly proprietary (such as trade secrets) information you had and how specialized your knowledge is in the industry; whether or not you had your own client base and how much contact you had with clients/customers; how much actual harm your former employer will suffer if you goes to a competitor and/or takes clients/customers with you.”
In order to be enforceable, non-compete restrictions must be reasonable in both geographic scope and with respect to the duration of the restriction. Most courts will frown on a former employer who tries to use over broad restrictions which may eliminate your chances of employability. For example, if your former employer wants to restrict you from working in a “similar” industry anywhere they do business, or in any industry that is “competitive” with that of your former employer, Bennett asks “What is the definition of a “similar” or “competitive” industry?” This definition should be clear from the outset, so you can distinctly understand what you can and cannot do. This also forces your former employer to think carefully about the legitimate business purposes it is trying to protect.”
Another important factor to consider is if your former employer conducts business throughout the United States or globally (via the internet or otherwise) with several different vertical markets. Bennett warns, “What if some of these markets were outside of the scope of your job duties and in which you had no involvement? The point is, by agreeing to an over broad, restrictive covenant, you may be unnecessarily foregoing numerous future job opportunities.”
Potential legal claims against your former employer might create leverage for you to negotiate a more favorable non-compete, or it could stop or slow down your search. Review what you sign on the way in and the way out of any employer to protect your career.