Good Reason Resignation

Terminations, Separation Agreements & U-5s

Outten & Golden attorneys are knowledgeable in drafting employment contracts, including 409A-compliant good reason resignation provisions. We have experience counseling employees and helping them understand what their employment contract requires and ensuring that they fulfill their obligations under the contract in order to trigger a good reason resignation provision.

Employment contracts sometimes distinguish a resignation “without good reason” from a resignation “with good reason.” For example, when an employer materially reduces either an employee’s base compensation or his or her authority, duties, or responsibilities, an employment contract may permit the employee to resign for “good reason.” “Good reason” may also include a change in control or relocation of an employee a significant distance away from his or her present work location.

In order to comply with 409A, a “good reason” resignation provision must include a notice and cure provision. That provision will require an employee to provide the employer with notice of the existence of good reason and give the employer a period of time to cure the problem before the employee may trigger a good reason resignation.

Good reason resignation is not available for most employees. It is available only if it is explicitly spelled out in an employment contract between the employee and the employer.