Get the Severance Package You Deserve
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In April of 2015, CEO Anthony Zell of ABC Technologies offered Paul Riley the position of vice president of finance. He presented Riley with a compensation package that had all the typical perks for a C-level executive: a base salary of $200,000, an annual bonus equal to four percent of the firm’s shared bonus pool, stock options, and other benefits, including a severance package. The offer letter included a copy of the firm’s executive severance plan. Riley accepted the offer and began working for the company in June of 2015. In November of 2018, ABC Technologies entered into a merger agreement with Merger Partners. However, before the deal was approved by the board of directors, Zell was contacted by Allister McGhee, the vice president of human resources at Merger Partners, who recommended that he amend the executive severance plan to include a clause requiring certain senior officers, including the vice president of finance, to sign a release prior to receiving severance that would protect the company from impending litigation. Zell presented the recommendation to the board of directors at ABC Technologies. Unaware that the vice president of human resources at Merger Partners had recommended that the release clause be added to the severance policy, the board of directors adopted the release amendment. Following the merger in March of 2019, Paul Riley was terminated and advised by Merger Partners’ human resources department that he would have to execute a release to be entitled to severance. Riley refused to sign the release. The benefit appeals committee at Merger Partners determined that Riley would be entitled to receive his benefits only if he agreed to execute the release. Soon thereafter, Riley filed a lawsuit against ABC Technologies. Riley asserted that he was wrongly denied benefits because he refused to sign a release. He claimed that the provision requiring him to execute a release before receiving his severance from the company was invalid because the company violated its procedures for adoption of an amendment to the severance plan: approval or ratification by resolution, delivery of a copy of each amendment to the employer within 30 days after adoption of each amendment. Furthermore, he asserted that the release violated the severance plan’s “no cut-back” provision, designed to protect employees from a unilateral reduction or elimination of severance benefits accrued by any employee who had a qualified termination prior to the effective date of the amended provision. In its summary judgment ruling, the district court agreed with Riley that:
1. The release amendment was a breach of the “no cut-back” provision. Employers have the right to modify a severance agreement for any reason they deem necessary and at any time. Nonetheless, the severance plan cannot be amended in such a way that it eliminates or reduces the employee’s severance payment;
2. The amendment was an act of “bad faith” concerning its conception and administration and therefore void;
3. The amendment was adopted in violation of ABC Technologies procedures.
Subsequently, the court of appeals denied the district court’s findings that ABC Technologies breached the no cut-back provision and operated in bad faith. However, it agreed with Riley’s assertion that the company violated its procedures for modifying the severance plan. The plaintiff received the full severance payment to which he was entitled. If you believe you have unfairly had your severance plan amended in such a way that it eliminates or reduces your severance payment, contact an employee rights advocate to find out what your next step should be toward getting everything you have earned.
In Delaware, a restrictive covenant not to compete after termination of the employment relationship will be enforced only to the extent that it is reasonable to do so. Knowles-Zeswitz Music, Inc. v. Cara, 260 A.2d 171 (Del. Ch. 1969). Such restraints upon competition must be reasonable both in respect of time and area. John Roane, Inc. v. Tweed, 89 A.2d 548 (Del. Supr. 1952).
We have substantial experience advising current, departing, and former employees as to whether the non-compete agreement or the non-solicitation agreement they signed with the current or former employer is reasonable. If you need legal advice about a non-compete agreement or a non-solicitation agreement that you have signed or have been asked to sign, contact us toll free at 888-854-2012 to arrange a strategy meeting today.
What To Do Next:
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302-250-4283 for your No Hassle Executive Employment Advocate Strategy Meeting, and get expert guidance on how to ensure a secure professional future.