Should I sign a non-compete in my severance?

Counteroffer · Answers · severance Source: https://trycounteroffer.com/answers/should-i-sign-non-compete-in-severance

Short answer: No, you should usually not sign a new non-compete in your severance agreement. If your original employment contract didn't include one, the company is asking you to give up future career flexibility for the severance amount they were going to pay anyway. The standard counter is to request removal of the new non-compete entirely. If they insist on some restriction, narrow it to named competitors and 6 months maximum. In California, North Dakota, Oklahoma, and Minnesota, employee non-competes are void by state law regardless of what you sign.

Why companies add non-competes at severance

Many companies don't include non-competes in their initial employment agreements but add them at separation. The reasoning:

The severance payment can serve as consideration for the new restriction
Departing employees are at their most vulnerable; they may sign without scrutiny
A non-compete signed in severance is usually broader than the company could justify mid-employment
Even if unenforceable, the chilling effect protects competitive positioning

This is opportunistic. The company gets significant value (your future career flexibility) in exchange for severance they were going to pay anyway, and they get it precisely when you have the least bargaining power.

Why you should usually refuse

The math typically favors refusal:

You're giving up future earnings potential in exchange for fixed severance. If the non-compete keeps you out of an industry where you could make $300K+ for 12 months, the cost can dwarf the severance.
The non-compete is broader than it needs to be because the company designed it to give themselves maximum flexibility, not to protect a specific interest.
The severance multiple is rarely increased to compensate for the new restriction. You're not getting paid for the non-compete; you're absorbing it at no additional cost.
Enforcement uncertainty cuts against you in practice. Even if the non-compete is unenforceable in your state, you may face cease-and-desist threats, hiring company hesitation, or legal costs to challenge.

The right framing: the company is asking you to sell future flexibility for current payment. That trade is only good if the price is right, and the price is almost never right for non-executives.

When non-competes in severance are unenforceable

In some states, non-competes are void regardless of what you sign:

California: Cal. Bus. & Prof. Code § 16600 voids employee non-competes broadly. Even severance-added non-competes are unenforceable.
North Dakota, Oklahoma, Minnesota (post-July 2023): Similarly void.
States with salary thresholds (Washington, Colorado, Illinois, Oregon, DC): If you don't meet the threshold, the non-compete is unenforceable.
Massachusetts (for non-competes signed October 2018 or later): Strict procedural requirements that severance contexts often don't meet.

If you're in one of these states, the practical risk of signing is lower because the agreement is likely unenforceable anyway. However:

The chilling effect can still hurt you (new employers may hesitate even if the agreement is void)
Enforcement of an unenforceable agreement still costs you legal fees to defend
The principle matters: signing something void is still signing something

Best practice in all states: refuse to sign new non-competes in severance.

How to negotiate removal

Standard counter language:

"I'd like to remove the non-compete section from this agreement. The original employment agreement did not include a non-compete, and adding one now requires consideration above the standard severance. If the company has a specific competitive concern, I'm happy to discuss narrower alternatives like customer non-solicitation or confidentiality restrictions, which already exist in my employment agreement."

This counter works because:

It frames removal as the default expectation, not an unusual ask
It identifies the lack of original non-compete as relevant
It offers narrower alternatives that don't restrict your future employment

Most companies will agree to remove the non-compete when pushed. They added it speculatively; they're not committed to it.

If you must agree to something

If the company insists on some competitive restriction (rare but possible), negotiate to:

Limit to specific named competitors: Not the industry as a whole. List 3-5 specific companies.
Limit duration to 6 months maximum: Less is better.
Limit geographic scope: To regions or accounts you actually serviced.
Limit activity scope: To the specific function you performed, not employment at competitors generally.
Add a buy-out clause: Allow you to release the non-compete by repaying a defined portion of severance.
Add a "good reason" termination of restrictions: If the company materially breaches the severance agreement, the non-compete terminates.

If you have to choose what to leave in, customer non-solicit and confidentiality are typically less harmful than full non-competes. They don't prevent you from working in your industry, just from poaching specific customers or sharing trade secrets.

What to do next

If you want a delivered review of your severance agreement's non-compete language (or recommended counter-language to remove it), we deliver one in 24 hours for $199. See Severance Review.

Get your contract reviewed

If you want a delivered review of your specific document with cited authority and counter language, see https://trycounteroffer.com/severance.

Last updated: Sun May 31 2026 00:00:00 GMT+0000 (Coordinated Universal Time)

Counteroffer is a contract analysis service, not a law firm. This page is informational, not legal advice.