non compete

Does My Severance Agreement Supersede My Non-Compete

Short answer - it might.  But if it does, that means that your employer was probably pretty sloppy.  Most severance agreements contain an “Entire Agreement” clause that reads something like:

This Agreement contains the entire agreement between the Company and you regarding your termination and supersedes and renders null and void any and all prior or contemporaneous oral or written understandings, statements, representations or promises.                 

If you have a non-compete agreement which predates your severance agreement, and the above-language is in your severance agreement then the severance agreement supersedes and renders null and void your prior non-compete.  In other words, by signing the severance, you kill the non-compete (along with any other agreements that were signed before your severance).  We’ve seen it happen, but this would definitely be sloppy work by the company.

The reason this would be sloppy is because it is very easy to carve out an exception for non-compete agreement.  All an employer has to do is revise the above “Entire Agreement” clause so that it states

This Agreement contains the entire agreement between the Company and you regarding your termination and supersedes and renders null and void any and all prior or contemporaneous oral or written understandings, statements, representations or promises, with the exception of any agreements concerning confidentiality, trade secrets, or any nonsolicitation, or noncompetition agreements, all of which agreements shall remain in full force and effect, and are hereby confirmed and ratified.        

This one revision makes a big difference.  Now, the severance agreement is still the final binding agreement between the employee and the employer, but it explicitly carves out the non-compete, etc. so that the employee is still bound by it.

If you have a non-compete agreement or severance agreement, you would be wise to consult with an attorney.  Our attorneys counsel employees with these agreements every day and would be happy to help you.  Contact us today for a consultation.


Frequently Asked Questions: New York Non-Compete Agreements

Are there any laws or statutes that govern New York non-compete agreements?

No.  Which is not to say there are no guidelines for how New York non-compete agreements are analyzed.  Courts look at these on a case-by-case basis.

Under what circumstances will a New York Court enforce a non-compete agreement?

Only if the restrictions are reasonable. A non-compete agreement is only reasonable if:

  • The restriction is no greater than necessary to protect the employers legitimate protectable interest;
  • Does not impose an undue hardship upon the employee;
  • Does not cause injury to the public; and
  • Is reasonable in terms of duration and geographic scope.

What is a legitimate protectable interest?

  • Trade secrets and confidential information.
  • An employee's unique, special or extraordinary services going to a direct competitor.

Can courts modify a New York non-compete agreement, or just enforce some of it?

Yes.  This is called the "Blue Pencil Doctrine."  A judge can literally take a pencil (it doesn't have to be blue - frankly, it doesn't even have to be a pencil) and amend a non-compete agreement to make it compliant with New York law.  There is no requirement to do so.  A court can also just hold that the agreement is altogether unenforceable.

Does the employer have to pay the employee to sign the non-compete agreement?

No.  Just being employed is sufficient consideration.

Further questions?

No problem - contact us today.



NY Small Business Employment Law Issues -- Restrictive Covenants

NY Small Business Employment Law Issues -- Restrictive Covenants Do you screen for restrictive covenants when hiring?  Failure to do so might cost you.  Effective screening during the hiring process can save you a lot of trouble in the future.  Frequently, new-hires are subject to restrictive covenants that you do not know about.  This can expose you to claims even if you were not aware that the employee was subject to a restrictive covenant.

These days, most companies look at departing employees’ computer logs when they receive a notice of departure.  By doing this, they can easily discern not only if the employee has breached his or her restrictive covenants, but also if such employee intends to do so.

You need to be proactive and organized in uncovering any restrictions that new-hires are subject to.  Do not just take a candidate’s word.  Inquire about all possible pre-existing non-disclosure agreement, intellectual property agreements, non-competes and non-solicits.  Contact an employment attorney to learn more about what you can do to safeguard your start-up against employment claims.

Is Payment Required to Make a Non-Compete Enforceable in New York?

There are many factors that are used to determine whether a non-compete is enforceable.  Laws regarding the enforceability of non-competes vary by state, but courts generally weigh several factors in making the determination, including (a) whether the non-compete is reasonable in time and geography, (b) whether the employee was terminated without cause, (c) whether the employee had access to the employer’s secrets, (d) whether the non-compete is necessary to protect the employer’s interest and (e) whether the employee may have been coerced  into signing it.  Under general contract law principles, each side must get something of value in order for a contract to be enforceable (this requirement is referred to as “consideration”). In some states, an employee must receive actual payment in order to meet the consideration requirement for a non-compete.  Other states, including New York (and New Jersey), view continued employment to be sufficient consideration to make a non-compete enforceable and actual payment is not required. If you have any questions about your non-compete or non-competition agreement, please contact Granovsky & Sundaresh PLLC.