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Non compete clause in a severance agreement

Bronx, NY |

I was a highranking exec at a nonprofit member assoc. I was terminated "for cause" (the cause was shared but not the rule allegedly broken) after a new president was hired, w/o appeal and my employee file was w/o blemish until that point. They offered a severance package. Original terms were for 1 yr. and restricted me from having ANY business activity with ANY member of the association. Negotiation and redraft - they agreed to fairer terms but their new draft increased the term to 2 yrs, continued to restrict ANY business w/ members AND barred me from starting ANY business that includes of the same services as the assoc. These terms essentially nullify all business contacts I made during my tenure and employment in my field. There are several existing for-profit businesses that provide similar services as the nonprofit. These questionable negotiations have caused delays in my severance (3 months since being terminated). Are these terms enforceable? Can I sue for my severance and how would the terms potentially be interpreted under NYS law? Thank you!

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Attorney answers 1


You situation is one that happens frequently. Here are some answers:

1. You have no right to any severance, unless you have a contract, or there is some employee benefit plan, that specifies severance. If there's no such contract or plan, you get what you can negotiate, and the company will always want a quid pro quo -- as you're seeing.

2. Non-compete's are hard to evaluate. They need to be reasonably limited by time, geography and subject matter. But there is a lot of variability in how a court may interpret "reasonable". Also, a court can "blue-pencil" the non-compete, meaning it can modify it to make it enforceable, instead of throwing the whole thing out. Finally, the costs of litigating the enforceability of a non-compete can be daunting. So I always advise my clients to assume that the non-compete being negotiated will be enforceable. (Obviously, it's a different analysis after the fact, when a client comes in with an already-executed non-compete).

3. YOu need to evaluate the cost of the potential future business you are being asked to give up, compared to the value of the severance package the company is offering you

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