Severance

[Guest aaronk]

Employment contract provides for (i) 3 years of severance pay upon termination for any reason (to be paid monthly beginning with the month following separation) and (ii) a 3-year noncompete provision. However, the employer has the option upon termination to waive the 3-year noncompete, in which case no severance is owed.

As I see it, the severance arrangement does not qualify for any 409A exemption. However, it does seem to comply with 409A in that it is payable upon separation and according to a fixed schedule. I also don't see any issue with the employer's right to cancel the severance by waiving the noncompete provision, however I'm not sure I've considered every angle.

Does anyone have any thoughts or differing views?

Thank you.

Aaron