Human Resource Blog

Is employee entitled to Severance

Payment during non compete period
Question: We made employment offer to an employee of a competitor not knowing the a non compete had been signed. After the offer the current employer found out and sent us letter of notice. The employee was called in and immediately terminated by the current employer without severace or compensation of any kind or any offer of future compensation. The employee was also told that employee could not work for a competitor for a period of twelve month. Agreement reads as follows: Payments During Non-Competition Period. XYZ Company will continue to pay Employee’s full base salary excludiing bonuses and all benefits except medical, dental and prescription insurance coverage, during the period Employee is required not to work for a competitor, as confirmed by Employee’s providing XYZ Company with a bona fide employment offer to Employee from a competitor. XYZ Company will not pay Employee’s salary or provide any benefits for any portion of the 12 month period that Enployee is employed or works elsewhere than with a competitor. If XYZ Company provides Employee with severance or comparable postemployment payments for all or any part of the 12 month period specified in this agreement, the for the period of time that Employee is receiving those payments, payments under this agreement shall be deemed to be included within them, and shall not be paid in addition to them. Given the above statement, isn’t the terminated employee entitled to severance if offer letter is presented to the XYZ Company? Please advise

A non-compete agreement is a contract. Only an attorney who has carefully studied the contract can offer a legal opinion on it. (And, we do not offer legal advice, anyway.)

It appears to us that the employee may be entitled to compensation, but there are just too many unknown factors here. We have not read the contract, and apparently you have not either. There may be additional clauses that the employee is in violation of, that would limit compensation. To be honest, this is really between the employee and his or her previous employer — it is not really any of your business. (And frankly, it would have been more honest for the employee to tell you there was a non-compete contract in place before you made the job offer.)

Our suggestion would be that the employee consult an attorney about this issue. If you really, really want to hire this person (perhaps he or she is the hottest news anchor for your TV station) then you may fund legal representation for the potential employee. But only a fool would try to make a determination on a contract that they have not even read.