Executive Severance Agreements: Protect Your Career Before You Sign
When an executive leaves a company, a severance agreement can provide valuable financial benefits and other compensation. However, accepting those benefits may also require you to agree to restrictions that affect your career after employment ends.
An Executive Severance Agreement may include a non-compete, non-solicitation provision, confidentiality obligations, a release of legal claims, non-disparagement language, or other restrictive covenants. These provisions can have a lasting impact on where you work, whom you can contact, and how you pursue your next opportunity.
At Caldwell, Bridgers, & Benjamin, we help Georgia executives evaluate severance agreements, understand their legal obligations, and identify provisions that could limit their professional options. If you have been offered a severance package, having an experienced attorney review the agreement before you sign can help you make an informed decision.
If you need a great attorney I would recommend Charles Bridgers. Very knowledgeable about
employment law & contracts. If you are not sure for any reason if you’re getting a fair deal
with your employment contract or your exit contract.
Contact Charles he Will definitely make sure it’s employee and employer friendly.
What Is an Executive Severance Agreement?
An executive severance agreement is a contract that establishes the terms of an executive’s departure from a company. In exchange for severance compensation or other benefits, the executive may agree to certain obligations that continue after employment ends.
A severance package may include:
- Severance pay
- Continued salary or benefits
- Bonuses or other compensation
- Health insurance benefits
- Equity or stock-related provisions
- Payment of accrued compensation
- A release of legal claims
- Confidentiality obligations
- Non-compete restrictions
- Non-solicitation provisions
- Employee non-recruitment restrictions
- Non-disparagement provisions
- Trade secret protections
The financial terms are only one part of the agreement. Executives should also understand what they are agreeing to give up in exchange for receiving those benefits.
Why Executives Should Review Severance Agreements Carefully
Executives frequently have specialized knowledge, industry experience, customer relationships, and professional connections developed over many years. Restrictive covenants can potentially affect how an executive uses those skills and relationships after leaving a company, even if you brought that knowledge and expertise to your employer in the first place.
For example, a non-compete may affect your ability to accept a position with a competitor. A non-solicitation provision may restrict communications with customers or employees. Confidentiality provisions may continue to apply even after your employment ends.
The practical value of a severance package therefore depends on more than the dollar amount offered.
A $200,000 severance package may appear attractive, for example, but its value could look very different if the agreement significantly restricts your ability to obtain your next position for years to come.
Before accepting an executive severance agreement, consider both what you receive and what you agree to in return.
What Should Executives Look for in a Severance Agreement?
Executives should review the entire agreement rather than focusing solely on severance compensation.
1. Non-Compete Provisions
A Georgia non-compete may restrict your ability to work for a competitor or operate a competing business after your employment ends.
Pay close attention to:
- How long the restriction lasts
- What geographic area it covers
- Which businesses or positions are restricted
- Whether the restriction applies to specific types of work or specific competitors or potential competitors
- Whether the provision contains exceptions
- Whether the restriction is tied to other provisions in the agreement
The scope of a non-compete can have a significant effect on your next career move.
2. Non-Solicitation Provisions
A non-solicitation clause may limit your ability to contact or conduct business with certain customers, clients, referral sources, vendors, or employees.
Executives with extensive customer relationships or management responsibilities should pay particular attention to these provisions.
The definition of a prohibited solicitation can be especially important. A restriction that appears narrow may have broader practical consequences depending on how it is written and applied.
3. Confidentiality and Trade Secret Obligations
Executives commonly have access to confidential business information, proprietary data, customer information, strategic plans, financial information, and trade secrets.
A severance agreement may establish continuing obligations regarding this information.
Executives should understand:
- What information is considered confidential
- How long confidentiality obligations continue and whether the agreement specifically allows for expiration
- What information is excluded
- What disclosures are legally permitted
- How the agreement addresses trade secrets
- Whether the agreement affects information you legitimately possess
Confidentiality provisions should be reviewed carefully, particularly when an executive plans to remain in the same industry.
4. Non-Disparagement Clauses
A non-disparagement provision may restrict statements about your former employer, its employees, executives, products, or business practices.
Review the provision carefully to determine what communications it covers and whether it contains appropriate exceptions.
Executives should also consider whether the agreement imposes similar obligations on the employer or its representatives.
5. Release of Legal Claims
Most executive severance agreements require the employee to release certain claims against the employer.
A release may affect your ability to pursue legal claims arising from your employment or termination. The specific language matters.
Before signing, make sure you understand:
- Which claims are being released
- Whether known and unknown claims are covered
- Whether there are claims that cannot legally be waived
- Whether the release applies to affiliated companies or individuals
- Whether the agreement provides any exceptions
Signing a release can have significant legal consequences, so it should not be treated as routine paperwork.
Negotiating an Executive Severance Agreement
An executive severance agreement is not always a take-it-or-leave-it proposition. Depending on the circumstances, executives may have an opportunity to negotiate the terms of their separation before signing.
Severance negotiations may involve much more than the amount of compensation offered. An executive should consider the complete agreement and determine whether the proposed terms could affect future employment, professional relationships, or business opportunities.
Potential areas for negotiation may include:
- Severance compensation
- Bonus payments
- Equity, stock options, or other compensation
- Continued health insurance and benefits
- Timing and structure of severance payments
- The scope and duration of a non-compete
- Non-solicitation provisions
- Employee non-recruitment restrictions
- Confidentiality provisions
- Non-disparagement language
- The scope of the release of legal claims
- References and communications about the executive’s departure
An executive will have greater leverage during negotiations before the agreement is signed. Once the agreement has been executed, negotiating changes may become significantly more difficult.
That is why it is important to have an executive severance agreement reviewed before signing. An attorney can identify provisions that may create problems, explain what you may be giving up, and determine whether certain terms should be negotiated. Many executives opt to prenegotiate a severance agreement as part of their initial employment agreement.
For executives whose next position may involve a competitor, former customers, or the same industry, restrictive covenants deserve particular attention during severance negotiations.
Do not focus only on how much severance you are being offered. Understand the obligations you are accepting in exchange for it.
Can a Severance Agreement Limit Your Next Job?
It can, depending on the language of the agreement and applicable law.
A restrictive covenant may affect where you can work, whom you can contact, or what business activities you can pursue after leaving your employer.
This can be particularly important for executives who intend to:
- Join a competitor
- Start a competing business
- Work with former customers
- Recruit former colleagues
- Remain in the same geographic market
- Continue working in the same industry
Georgia law governs many restrictive covenant issues involving employers and employees. The enforceability of a particular restriction, however, depends on the language of the agreement, the circumstances surrounding the employment relationship, and other applicable law.
Executives should not assume that every restrictive covenant is enforceable. At the same time, they should not assume that a provision is harmless simply because they believe it may ultimately be unenforceable.
An employer may attempt to enforce a restrictive covenant and could seek court intervention. Defending against such action can be costly and disruptive.
For that reason, it is generally better to understand the potential consequences before signing the agreement or accepting a new position.
What If You Already Signed the Severance Agreement?
If you have already signed an executive severance agreement, that does not necessarily mean every question has been resolved.
You may still have continuing obligations under the agreement, including confidentiality, non-solicitation, non-disparagement, or other restrictive covenant provisions.
Before accepting a new position or taking action that could potentially violate the agreement, consider having an attorney review the applicable provisions.
This is especially important if your new opportunity involves a competitor, former customers, former employees, or similar business activities.
An attorney can evaluate the agreement and help you understand the potential risks and available options.
Do Not Wait Until Your Career Is Already Restricted
One of the biggest mistakes an executive can make is waiting until after signing to ask whether a severance agreement creates problems.
Before you sign, an attorney may be able to identify problematic language and negotiate changes. Once the agreement is executed, your options may be more limited.
This is particularly important if you already know what your next career move may be.
If you expect to remain in the same industry, join a competitor, serve similar customers, or build a competing business, review your executive severance agreement before making that move.
The best time to address restrictive covenants is before they restrict your career.
How Caldwell, Bridgers, & Benjamin Can Help
At Caldwell, Bridgers, & Benjamin, we help Georgia executives understand their rights and obligations when negotiating or reviewing severance agreements.
Our attorneys can evaluate the complete agreement, including:
- Severance compensation
- Executive employment provisions
- Non-compete agreements
- Non-solicitation provisions
- Confidentiality and trade secret obligations
- Non-disparagement clauses
- Releases of legal claims
- Employee non-recruitment restrictions
- Other restrictive covenants
We can help identify provisions that may affect your professional mobility and explain the potential implications of accepting the agreement.
If appropriate, we can also assist with severance negotiations and help executives seek changes to provisions that may unnecessarily restrict their future opportunities.
For executives who have already signed an agreement, we can review the applicable restrictions and help address concerns involving a new job, competitor, customer relationships, or other post-employment activities.
Our goal is straightforward: help you understand your rights, protect your interests, and make informed decisions about your next career move.
Executive Severance Agreements and Your Future
A severance package can provide important financial protection during a career transition. But the agreement may also impose obligations that continue long after your employment ends.
Before accepting an executive severance agreement, look beyond the compensation package.
Understand the non-compete. Review the non-solicitation provisions. Examine the confidentiality requirements. Understand the release. Determine whether the agreement could affect your next position or business opportunity.
You do not have to accept the first version of a severance agreement without understanding its consequences.
Get experienced legal guidance before you sign.
Frequently Asked Questions About Executive Severance Agreements
Yes. Executive severance agreements can contain complex compensation terms, releases, restrictive covenants, and continuing obligations. An attorney can help explain the agreement, identify potential concerns, and determine whether negotiation may be appropriate.
Potentially. Depending on the circumstances, an employer may agree to narrow, modify, or remove certain restrictive covenants as part of severance negotiations. The amount of leverage available will depend on the individual circumstances.
In many situations, executives can negotiate severance compensation and other terms. Potential negotiation points may include severance pay, bonuses, benefits, equity, the timing of payments, and restrictive covenants.
You may continue to have obligations under the agreement. Review any non-compete, non-solicitation, confidentiality, non-disparagement, or other restrictive covenant provisions before accepting a new position.
It may, depending on the language of the agreement and applicable law. Because the consequences can be significant, executives should have the restriction reviewed before signing the agreement or accepting a position with a competitor.
You may still have continuing obligations under the agreement. An attorney can review the language and help you understand how it may affect your proposed career move or business activities.
Protect Your Career Before You Sign
Your executive severance agreement may affect much more than your immediate financial future. It may influence where you can work, whom you can contact, what information you can use, and how freely you can pursue your next opportunity.
Do not sign first and ask questions later.
Caldwell, Bridgers, & Benjamin helps Georgia executives evaluate Executive Severance Agreements, understand restrictive covenants, negotiate important terms, and protect their professional options.
Contact Caldwell, Bridgers, & Benjamin today to discuss your severance agreement before you sign. Protect your career. Protect your options. Protect your future.