Major Companies Trying Out New Pay to Quit Policies
Zappos introduced an innovative human resources policy known as Pay to Quit that is now being adopted by other employers. Amazon explained the policy behind a Pay to Quit policy in a letter to their shareholders “[t]he goal is to encourage folks to take a moment and think about what they really want. In the long run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.” Although this sounds like a great objective for a company, how does a Pay to Quit policy impact your business when the leaving employee has had valuable access to trade secrets and confidential information? What should a business consider before implementing a Pay to Quit policy?
Watch out for State and Federal Laws
There are several important considerations to effectively implementing a Pay to Quit policy. First, the offering would need to comply with state and federal law, particularly the requirements of Title VII. Thus, be sure to structure offers to quit in accordance with discrimination laws to limit exposure to litigation.
Additionally, to effectively implement the policy, employees that elected to accept the offer to quit would need to receive their final payment of wages and any other accrued benefits in accordance with the Louisiana wage laws. La. R.S. 23:621 et seq. The employer also may need to prepare information regarding how the Pay to Quit policy will impact any company benefit plans.
Protecting Confidential Information
Finally, prior to implementing the Pay to Quit policy, the employer would want to ensure that confidential information and trade secrets would be protected if an employee accepted the payment to quit. This can be accomplished through an employment agreement when the employee is hired. At the outset of the employment relationship, the employer would need to have the necessary confidentiality, non-compete, and non-solicitation agreements executed. These agreements would protect valuable information that the employee accessed during employment. Properly planning for the termination or departure of an employee can prevent the loss of valuable proprietary information. In connection with the agreements, there would also need to be a process for collecting any of the employer’s property at termination, which would again prevent the inadvertent disclosure of confidential information.
Employees interested in quitting for a small sum of money may not be valuable company investments; therefore, Pay to Quit policies may be important to an employer in maintaining motivated and efficient employees. Taking the time to evaluate the Pay to Quit policy in connection with other employment laws and the company’s agreements will ensure that the employer’s assets are more likely to be protected if and when an employee leaves the company due.
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.