While most employers are not obligated to provide severance to properly terminated at-will employees, no improper discrimination, contract obligations or retaliation involved, they often offer some form of severance conditioned on the terminated employee signing a severance or separation agreement that includes a waiver of claims against the employer and a promise of non-competition and other protections of the employer’s business. Recently enacted state laws and National Labor Relations Board (NLRB) rulings, no longer limited to collective bargaining situations (unions), may make those employer protection and release provisions not only unenforceable but could expose an employer to liability.

No Non-Competition Requirements.

A recent Illinois law not only bars non-competition provisions in employment and separation agreements, but provides employees can sue for damages and attorney’s fees, while empowering the Attorney General to impose fines. Other states have similar restrictions and the NLRB ruled non-competition, non-disclosure, and non-disparagement provisions waiving employee rights are not only unenforceable but an unfair labor practice.

No Waiver or Release of Rights.

The NLRB ruled that severance or separation agreements that require departing employees to waive their statutory and common law rights arising from their employment or its termination are an unfair labor practice, rendering them unenforceable and subjecting employers to fines and sanctions. We await clarification of what rights cannot be waived.

Action Needed.

Review and reconsider your use and the content of severance and separation agreements, as well as protection of your business and its confidential and proprietary information from unfair competition.

This Brief is designed to provide our friends and clients with information regarding the various subject matters covered, it is not designed to take place of legal, accounting, or other professional advice.  If expert assistance is required, the services of a competent professional should be sought. This memorandum may constitute advertising under the rules regulating Illinois attorneys.

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