New Jersey Employment Lawyer Blog

Under New York law, non-compete agreements and other restrictive covenants in employment contracts are disfavored, and are enforceable only in limited circumstances. New York courts enforce non-competes only if all three of the following conditions are met:

1. The non-compete is reasonably limited in scope and duration;

2. The restrictions are no greater than necessary to protect the employer's legitimate interests;

3. The non-compete is not harmful to the general public;

4. The non-compete is not unreasonably burdensome to the employee.

Even when those four requirements are met, an employer seeking to enforce a non-compete agreement has to prove it is not merely seeking to use the non-compete agreement to prevent competition. Instead, it has to show the non-compete is necessary to protect its legitimate interests, such as to prevent the employee from using or disclosing its trade secrets or confidential information, to protect the company's goodwill, or to prevent special harm due to the unique nature of the employee's job.

There are few bright line rules regarding when a non-compete agreement is reasonable. In deciding whether a restrictive covenant is reasonable, courts consider a number of factors and balance the right of the employee to work and earn a living against the importance of the restrictions to protect the employer's business. In terms of duration, covenants not to compete for 6 months or less are generally reasonable. New York courts have approved non-competes lasting up to two years when the restrictions are otherwise reasonable and not too burdensome for the employee.

If an employee is receiving compensation from her former employer during the period when she is supposed to refrain from competition, such as severance pay or garden leave pay, the non-compete is more likely to be upheld.

Even when a non-compete agreement is reasonable, it is still unenforceable if the employer fired the employee without good cause. Likewise, a reasonable covenant not to compete is unenforceable if the employer breached the employee's employment contract.

Attorneys, as well as stock brokers and other registered representatives under Financial Industry Regulatory Authority (FINRA), should be aware that special rules apply to their non-compete agreements in New York. For example, agreements that restrict attorneys from practicing law are unenforceable, except as a condition for receiving retirement benefits. Likewise, contracts that prohibit customers from continuing to use the services of their registered representative are not enforceable.

Continue reading "Is Your Non-compete Agreement Enforceable in New York?" »

Many companies offer severance pay to certain employees who they have laid off, downsized, or fired. For example, some companies pay severance to employees who lose their jobs as part of a mass layoff or other reductions in force. Severance is often based on one or two weeks of pay for each year you worked for the company, but the way severance pay is calculated can vary greatly from one job to the next.

Severance pay can help soften the blow of losing your job. However, most severance agreements require you to sign away important legal rights. As a result, it is very important to make sure you understand all of the terms of your severance offer before you agree to it.

In New York and New Jersey, there is no legal obligation for companies to pay any severance to employees. However, if a company has a severance policy, it must follow it. Similarly, if you have entered into an employment contract which entitles you to severance, then your employer must comply with your contract.

What Should I Look Out For Before I Sign a Severance Agreement?

There are many things you should understand before you decide whether to accept a severance offer. Below are some of the most common questions employees have about their severance agreements.

Is my employer offering me enough severance pay?

Perhaps the most common question employees have about a severance offer is whether the employer has offered them "enough" severance. There is usually no simple yes or no answer to that question. However, some important factors to consider include:

What am I entitled to receive if I reject my severance offer?

In some situations, if you reject your severance offer, you will receive nothing. In others, you might be entitled to receive some severance pay even if you do not sign the agreement. Similarly, some companies have policies that entitle you to be paid for your unused vacation, sick, or holday time even if you turn down a severance offer. Others do not.

Has the company offered me everything I am entitled to receive under its severance policy?

In general, a company is required to follow its written severance policy. Under certain circumstances, a company can establish a severance policy by having an established practice of paying severance to its employees who meet certain conditions. It is usually a good idea to make sure your company has included everything you are entitled to receive under its policy or past practice.

Do I have a legal claim against my employer?

Most severance agreements require you to give up all of your legal claims against your former employer before you can receive severance. For example, if you were fired because of your age, race, national origin, gender, disability, religion, or some other unlawful reason, then an employment lawyer may be able to negotiate a better severance package to settle your legal claim. If you sign a severance agreement, you might be waiving your right to sue for discrimination, retaliation, harassment, breach of contract, or any other claims you may have against your former employer.

Is the amount of severance I have been offered reasonable or fair?

Frequently, the amount of severance you have been offered seems unfair or unreasonable, especially considering how long you worked for the company, and how much you have contributed to it. Similarly, your severance offer might not seem fair compared to what your coworkers or peers have been paid in the past.

Unfortunately, companies are not required to be fair or reasonable. If they were, you probably would not have been fired in the first place. However, if your company has not made a fair severance offer, it might be possible for an experienced employment lawyer to negotiate a better severance offer for you.

What rights am I giving up if I accept my severance offer?

Every severance agreement is different, but most require you to waive all of your legal claims against your employer. As a result, it is usually a good idea to talk to an employment law attorney before you decide whether to accept your severance offer. That is one of the reasons why severance agreements usually recommend you consult with a lawyer before you sign it.

Severance agreements often require you to give up other important legal rights. For example, they might require you to agree not to compete with your former employer, or not to solicit your former customers for a period of time. If your severance agreement contains a non-compete or a non-solicitation provision, then you should consider how that provision might effect your ability to find another job, or open a new business, before you decide whether to accept the severance offer.

You should make sure you understand and agree to all of the provisions in your severance offer before you sign it. This is yet another reason why it is usually a good idea to speak with an employment lawyer before you sign a severance agreement.