Exit Agreements

At the end of an employment relationship, exit agreements may be used to set out the legal terms between the employer and employee related to the termination of their relationship. In this article, we will explain the importance and key components of exit agreements in Ontario. In addition, we will explain the customized solutions Roberts & Obradovic offers to companies and employees with respect to their specific exit agreement legal needs and concerns. 

Difference between Severance Packages and Exit Agreements

In the context of an employment relationship in Ontario, severance packages and exit agreements are related but distinct concepts that deal with the termination of employment.  

Severance packages in Ontario are governed by the Employment Standard Act, 2000 (ESA). A severance package primarily sets out the financial compensation provided to an employee upon termination; that is, the statutory or contractual payment employers are required to provide to eligible employees. 

An exit agreement, also known as a termination agreement, is a legally binding contract that outlines the terms and conditions related to the termination of the employment relationship. While they may include severance provisions, exit agreements typically address various other aspects of the employment separation.  The terms of an exit agreement are negotiable and are highly customizable to the specific needs of the parties.

The Power of Exit Agreements: Mitigating Risks & Ensuring Fairness

Exit agreements establish the terms and conditions under which the employer  and the employee terminate their employment relationship. Exit agreements are negotiated and entered into voluntarily by both parties and can be initiated by either party (although it is typically the employer who starts the process).  If drafted properly, exit agreements can help minimize the potential for future legal disputes and help ensure that the end of the employment relationship is on relatively good terms. 

At the same time, they are negotiation tools that allow each party to safeguard their respective interests. 

Once they are signed, exit agreements become legally binding. This is why it is of paramount importance that you fully understand the agreement, including how it relates to your legal rights, before signing. 

Structure of Exit Agreements

Exit agreements typically include the following clauses: non-disclosure clauses, non-compete clauses, and return of property clauses.   

Confidentiality Safeguards: Non-Disclosure Clauses  

Non-disclosure or confidentiality agreements, seek to prevent employees from disclosing employer’s confidential business information, trade secrets, and other non-public, proprietary information that the employee had access to during the course of their relationship. . While common law imposes a duty of confidentiality on all employees, specific non-disclosure clauses or agreements allow employers to more precisely define employee’s obligations and increase the likelihood that the confidentiality obligations are enforceable in court. 

The purpose of non-disclosure agreements is to. A well drafted non-disclosure clause clearly defines what constitutes confidential information, sets out specific employee obligations in protecting confidential information and preventing unauthorized uses or disclosures, and defines employee obligations after the employment relationship ends.  

Preserving Market Integrity: Non-Compete Clauses Reclaiming Assets 

Non-competetition or non-compete clauses seek to restrict or prevent former employees from engaging in similar business activities for certain periods of time, within a specified geographic area, following  their departure. These clauses aim to protect employer’s interests, often by setting restrictions that prevent former employees or partners from competing directly with the company. However, any non-compete clause that aims to prevent the employee from making a living or which goes beyond what is reasonably necessary to protect the employer’s legitimate interest will generally be unenforceable. In Ontario, non-compete clauses are altogether prohibited in employment agreements subject to some limited exceptions, including with respect to executive positions or in limited circumstances of sale or lease of the business. This is why it is imperative to consult an employment law expert when drafting such restrictive clauses.  . 

Return of Property Clauses Empowering Your Business with Tailored Exit Agreements 

Exit agreements may contain a ‘return of company property’ clause which requires the exiting employee to return the goods, assets, or equipment provided to them in the course of their employment This may include company supplied laptops, cellphones, security passcodes, company cars, etc. Often, this clause will also deal with return of company and customer records.  

Why Choose Roberts & Obradovic for Your Exit Agreements?

When companies and employees decide to enter into an exit agreement, the experience and expertise of an exit agreement lawyer is crucial.  

Roberts & Obradovic has a team of experienced legal professionals who can provide companies or employees with the knowledge, legal advice and representation to enable them to negotiate the agreement that best protects their interests.  
These are our areas of work:  

  • Information about exit agreements, provincial and federal laws and other related issues.  
  • Drafting of exit agreements that are tailored to your specific circumstances.  
  • Expert advice on negotiating the terms of exit agreements. 
  • Review of the terms of the exit agreements. 
  • Designing a tailored exit solution. 
  • Enforcement of exit agreements, including commencing legal action. 

Navigating Exit Agreements? Whether you’re an employer seeking guidance on personnel transitions and employment-related issues, or an employee seeking legal advice on reviewing and negotiating the terms of their employment contract, our legal team specializes in employment issues, including Exit Agreements, and is ready to offer the professional support you require. Contact us at (647) 724-5179 or complete our contact form to schedule a free consultation with our experienced lawyers.