| You have been terminated! - involuntarily and | | | | relationship, involuntarily and without cause, then |
| without cause. A former employee often is | | | | New York Courts will examine the reasonableness |
| presented with a severance agreement in | | | | of the restrictions of the |
| exchange for securing certain post-employment | | | | forfeiture-for-competition clause. |
| benefits. It is important to consider how a | | | | Under a reasonableness analysis, a court must |
| severance agreement may affect the rights and | | | | first determine whether the employer has a |
| benefits of a former employee, many of which | | | | legitimate interest to protect, and whether this |
| may already be contracted to during the course | | | | interest will protect the employer from economic |
| of the employee's employment. For example, a | | | | injury caused by "unfair or illegal" conduct by the |
| non-competition agreement may have been | | | | former employee. Thus, the agreements may be |
| previously executed or the former employee | | | | enforced "to the extent necessary (1) to prevent |
| may be a participant in an incentive compensation | | | | an employee's solicitation or disclosure of trade |
| plan containing a forfeiture-for-competition clause. | | | | secrets, (2) to prevent an employee's release of |
| Often, these operative documents are drafted at | | | | confidential information, or (3) in those cases |
| different times and by different attorneys who | | | | where the employee's services to the employer |
| may not be aware of the existence of such prior | | | | are deemed special or unique." Courts will then |
| agreements. A hodge-podge of written | | | | balance the employer's interests against the |
| agreements may result in ambiguities and be open | | | | extent to which the non-competition agreement is |
| to multiple interpretations - negating the very | | | | unreasonable in "time, space or scope." In other |
| purpose for which these documents were | | | | words, "such [restrictive] covenants will be |
| originally created. The intent of these documents | | | | enforced only [to the extent it is] reasonably |
| and the very purpose for their creation is to set | | | | limited [in time and geographic scope], and then |
| forth a roadmap in the event of a dispute. If such | | | | only to the extent necessary to protect" the |
| documents do not achieve their intended purpose, | | | | employer's legitimate interests. |
| responsibility for ambiguities, and language that | | | | It is important to remember that, in all likelihood, a |
| may be susceptible to more than one | | | | former employer is not interested in continuing to |
| interpretation, lies with the drafter. Thus, in | | | | distribute payments to a former employee after |
| reviewing a severance agreement, a former | | | | his/her employment has been terminated. When |
| employee should ascertain whether he/she is | | | | negotiating a severance agreement, it is important |
| signing away any right to an already vested | | | | to ascertain the effect of the operative clauses |
| benefit. Careful consideration and negotiation with | | | | on the rights to benefits previously contracted to |
| one's former employer may be appropriate and | | | | and with a now former employer. Taking the |
| necessary. | | | | appropriate course of action to assure receipt of |
| In the case of a person who has already been | | | | all benefits due, will avoid unnecessary concern |
| terminated, involuntarily, without notice and | | | | and, hopefully eliminate the possibility of a long and |
| without cause - there may still be a way to | | | | protracted legal dispute. |
| recover benefits that have been potentially | | | | The content of this article is intended to provide a |
| "forfeited." In New York, courts disfavor | | | | general guide to the subject matter. Specialist |
| non-competition agreements involving employees | | | | advice should be sought about your specific |
| on public policy grounds. "Our economy is | | | | circumstances. |
| premised on the competition engendered by the | | | | For more information or to contact the authors, |
| uninhibited flow of services, talent and ideas. | | | | visit our Web site. |
| Therefore, no restriction should fetter an | | | | Citations: |
| employee's right to apply to his own best | | | | [1] Leninger v. Gibbs & Hill, Inc., 730 F.2d 903, |
| advantage the skills and knowledge acquired by | | | | 905 (2d Cir. 1984) (To the extent that the |
| the overall experience of his previous | | | | contract is ambiguous... the court must apply "the |
| employment. This includes those techniques which | | | | well-established rule that contractual ambiguities |
| are but 'skillful variations of general processes | | | | should be construed most strongly against the |
| known to the particular trade.'" | | | | drafter.") |
| It is important to note that under the | | | | [2] Reed, Roberts Associates, Inc. v. Strauman, |
| employee-choice doctrine, a restrictive covenant | | | | 40 N.Y.2d 303, 307 (1976). |
| will generally be enforced without regard to its | | | | [3] Lucente v. Int'l Bus. Mach. Corp.. 262 F.Supp.2d |
| reasonableness if the employee has been | | | | 109, 113 (S.D.N.Y. 2003). |
| afforded the choice between not competing (and | | | | [4] Id. (citing American Broadcasting Companies, |
| thereby preserving his benefits) or competing | | | | Inc. v. Wolf, 52 N.Y.2d 394, 404 (1981)). |
| (and thereby risking forfeiture). This is the | | | | [5] Id. (citing Ticor Title Ins. Co. v. Cohen, 173 F.3d |
| underlying premise of forfeiture-for-competition | | | | 63, 70 (2d Cir.1999)). |
| clauses found in incentive compensation plans and | | | | [6] Id. (citing American Broadcasting Companies, |
| applies to an employee terminating his/her | | | | Inc. v. Wolf, 52 N.Y.2d 394, 403-4 (1981)). |
| employment relationship, voluntarily. If it is the | | | | [7] Id. (citing Columbia Ribbon & Carbon Mfg. |
| employer who has terminated the employment | | | | Co. v. A-1-A Corp., 42 N.Y.2d 496, 499 (1977)). |