Severance Packages – Non-Compete Clause

Sometimes, when you are about to lose your job, your employer may offer you a “severance” package or “separation” package – an amount of money that is meant to temporarily offset your job loss.

None-Compete Clause

A non-compete clause prevents you from competing with your previous employer in the same type of business. These clauses can be held valid and enforceable. However, there is a public policy of not restricting someone from earning a living. In this regard, a non-compete clause, in order to be enforceable, cannot:

  • Be too broad in its scope – meaning that, for example, if your past employer made women’s shoes, but you would like to start your own line of menswear including mens shoes, this would be considered permissive and your past employer will not be able to stop you from competing.
  • Be too long in its term – meaning the time period of the restricting provision must be limited in duration. The courts have held that two-years is a reasonable time.
  • Be too broad geographically – meaning your past employer might be able to stop you from opening your competing business within the same city, but will be unable to restrict you from competing in other locations. The courts have held that a 25 mile radius is reasonable.
  • Note: The above rule regarding geographical locations are changing since many businesses are online and are not limited to geographical limits.

Employers are not required by labor law to give severance packages, but if you belong to a labor union, your labor union might have negotiated the terms of your severance package, and those terms might even appear in your union contract.

Given the complexity of employment law, you would be well advised to retain an employment business lawyer to assist you in negotiating your separation agreement and severance benefits.

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