Did you sign a non-compete clause that prevents you from further employment?
The purpose of severance has been described by the Courts as a means to help tide over dismissed employees until a time they can find reasonable, comparable re-employment. Accordingly, one of the factors that may have a direct impact on any calculation of severance amounts is what (if any) restrictive covenants apply to the employee post-dismissal.
Take this common example: a dismissed employee is restricted for a period of one (1) year post-termination from working in a similar role for a competing employer. This employee’s job prospects will be necessarily impacted by the non-competition clause as their most likely avenues to find reasonable, comparable re-employment are blocked for the foreseeable future.
In such cases, the Courts typically increase the amount of severance that a dismissed employee is owed to help compensate for the extra time that will be needed to find new work. The exact amount of extra severance will dependant on a variety of different factors, such as:
whether the former employer has indicated that the restrictive covenants will be waived;
the degree of interference the restrictive covenants will have on the dismissed employee’s job prospects; and
the length of time the restrictive covenants will be in effect post-dismissal.
If there is a restrictive covenant that will apply to you, it is best to speak with an employment lawyer to better understand how such contractual provisions may impact any related severance entitlements.