Severance Agreements and Your Next Job: Restrictions to Watch Before You Sign

Losing your job is stressful enough. You’re worried about bills, your next paycheck, and how long it will take to land another role. But right in the middle of that stress, HR hands you a thick severance agreement full of legalese.

Most people flip straight to the money section. How much am I getting? When will it be paid? But tucked a few pages down are restrictions that could quietly shape your future. Clauses that affect where you can work next, whether you can take clients with you, what you can say publicly, and even whether your severance continues if you accept another role.

This page breaks down the most common restrictions in severance agreements — what they mean, why they matter, and how to protect yourself before signing.

Does Severance Affect Where You Can Work?

One of the first fears people have is: “Will this severance stop me from taking a new job?”

The answer: sometimes yes, sometimes no. It depends on how your severance is structured and what’s written in your agreement.

Lump sum severance: You get all the money upfront. Once it’s in your account, starting a new job won’t affect it.
Salary continuation severance: You keep receiving paychecks for a set period (say, 12 weeks). But many agreements include language saying those payments stop once you’re re-employed. Some even require you to notify your former employer when you accept a new role.

👉 Real-world example: I worked with someone promised 10 weeks of severance as salary continuation. On week 5, she accepted a new job. Her severance stopped immediately. That one clause cost her five weeks of income.

Money Matters: Look for any lines tying severance to “re-employment” or “new employment.” If it’s there, it directly impacts how soon you can accept your next role.

When Severance Payments Stop

How and when your severance ends depends heavily on the payment structure and the fine print.

Lump sum: Paid all at once. Employer obligation is complete, and you typically keep it regardless of new employment.
Salary continuation: Paychecks continue, but conditions may apply. Employers often insert:
- “Payments cease upon re-employment.”
- “Employee must notify employer of new employment.”
- “Severance is subject to repayment if terms are breached.”

These “repayment terms” are known as clawbacks. If you break the rules — or simply accept new employment sooner than expected — the company can demand repayment of part or all of your severance.

👉 Action Step: If your severance is structured as salary continuation, ask HR directly: “What happens if I get a new job before this period ends?” Get the answer in writing.

Notification & Severance Cutoff

Before COVID, severance was often seen as a thank-you for your service. Today, it’s more often treated as a bridge until you’re re-employed.

That’s why many agreements now require:

You to notify your former employer when you get a new job.
Severance (and COBRA coverage) to end the moment you start that new role.

👉 Negotiation idea: If you know you’ll land quickly, push for a lump sum upfront instead of continuation. That way, you don’t lose money just because you found work sooner.

Clawbacks with Double Harm

One risk employees don’t see coming is the clawback clause. This allows the employer to demand repayment if you breach the agreement — even accidentally.

I’ve seen someone apply for a job at a company they didn’t realize was considered a competitor. They didn’t get hired, but it still triggered the clause. Because they had already spent part of their severance on rent, they were left scrambling to pay it back.

👉 Money Matters: A clawback can hit twice — you lose the new opportunity and owe back the severance you already spent.

Non-Compete Clauses in Severance Agreements

A non-compete clause restricts where you can work after leaving your employer, usually preventing you from joining a competitor or starting a competing business for a set time.

Do they still apply if you’re laid off? In many states, yes — unless local law prohibits or limits them.

States that restrict non-competes: California, Oklahoma, North Dakota.
States that allow but limit them: Many require “reasonable” limits on time (6–12 months) and geography (e.g., 50 miles).

👉 Real-world example: An engineer in Illinois signed a severance that included a 12-month non-compete covering the entire United States. He assumed it wasn’t enforceable. Six months later, a competitor rescinded his offer after their legal team flagged it.

Money Matters: Just because you’re laid off doesn’t mean the non-compete disappears. Check your state’s rules, and never assume “unenforceable” = “safe.”

Non-Compete Scope & Balance

Most non-competes in severance aren’t actually new — they often show up in your original offer letter and then get re-attached to your severance agreement. That means even if you didn’t notice it years ago, it still applies today.

Here’s what to check:

Length: Most non-competes run 6 months to 2 years. Anything longer is rarely reasonable.
Scope: Some restrict only direct competitors. Others are so broad they ban working with clients, vendors, or even entire industries.
Geography: Some limit you to 25 miles from your office or some specific distance from all offices. Others apply statewide or nationwide, which can feel impossible.

👉 Balance tip: Compare the length of your non-compete to your severance coverage. If your non-compete lasts six months but your severance only pays for two, that’s a disconnect. You can negotiate — either shorten the restriction or extend the severance to match.

👉 Negotiation idea: Instead of vague “no competitors” language, ask for an explicit list of companies or roles you’re barred from. That gives clarity now and freedom later as industries evolve.

Non-Solicitation Restrictions

Non-solicitation clauses stop you from taking relationships with you. They often prevent:

Recruiting coworkers to join your new company
Taking clients or vendors with you
Leveraging insider contacts to compete

Why does this matter even if you weren’t in sales? Because these clauses can be broad. I’ve seen them applied to project managers, engineers, even HR staff who never thought of themselves as “salespeople.”

👉 Action Step: Look for the words “solicit,” “clients,” or “employees” in your agreement. If you see it, clarify how long it lasts and who it applies to.

Non-Solicitation Details

Non-solicitation clauses don’t just apply to clients. They often extend to:

Coworkers (you can’t recruit your old team to join your new business)
Vendors and suppliers (you can’t convince them to leave your former employer)
Partners (anyone your employer worked with)

👉 Personal relationships are usually fine — but if a relationship started because of your role, the company can claim ownership of it.

Nondisclosure (NDA) Clauses

NDAs are one of the most common restrictions. They usually cover:

Confidential information (client lists, pricing, internal strategies)
Trade secrets
Intellectual property created during your employment

Some NDAs are so broad they feel like they “own your brain” — preventing you from using even general knowledge you gained at work.

👉 Real-world example: A designer left her agency with a severance agreement that banned her from “using any creative materials or processes developed during her tenure.” The clause was so vague she worried about using her own design portfolio.

Money Matters: If the NDA feels overly broad, ask for narrower wording. Courts may side with reasonableness, but it’s better to fix it before signing.

Intellectual Property & NDA Realities

Paste under: “Nondisclosure (NDA) Clauses”

When you signed on with your employer, you likely assigned away all rights to anything you created — code, processes, even patents with your name on them. That means you can’t take those ideas with you to a competitor or a new business, even if you remember them.

👉 Important: Don’t download files, templates, or processes as you leave. That’s considered theft of intellectual property and can trigger both NDA and severance clawbacks.

Rehireability and References

Severance agreements sometimes set the tone for how your exit will be described.

Neutral reference: Employer agrees only to confirm your dates of employment and role.
Not eligible for rehire: Agreement may say you’re not eligible to return to the company.

This matters because future employers often ask, “Is this person eligible for rehire?” That single box checked “no” can shape how your departure is perceived.

👉 Action Step: If you see a rehireability clause, ask for “neutral reference” language. It protects your future job prospects without burning bridges.

Rehireability & Mutual Respect

Most severance agreements state you’re not eligible for rehire. Sometimes this extends beyond the original company to affiliates, subsidiaries, or family companies. Always check how far it goes.

Also look for non-disparagement clauses. Many agreements require you not to badmouth the company. Negotiate for this to be mutual — they shouldn’t badmouth you either.

👉 Best-case: ask for “neutral reference only” language, which guarantees they’ll confirm only your title and dates of employment if asked by future employers.

Negotiating Employment Restrictions

The restrictions in your severance aren’t always set in stone. Many can be narrowed, shortened, or even removed.

What You Can Negotiate

Scope: Limit non-competes to a specific geography or competitor list.
Duration: Shorten a 12-month restriction to 3–6 months.
Carve-outs: Exclude certain clients or industries from non-solicits.
Clarity: Add “neutral reference” language instead of “not eligible for rehire.”

How to Approach It

Frame it as reasonableness: Employers are often open to clarifying vague or overly broad clauses.
Tie it to fairness: If you’re giving up rights, ask for added value (extended severance, COBRA coverage).
Get legal advice: An employment attorney can tell you what’s standard in your state and industry.

👉 Money Matters: Negotiation isn’t about being difficult — it’s about balance. Severance is an exchange. If the company is asking you to limit your future, make sure you’re compensated for it.

Career Services as a Perk

Most people don’t realize you can negotiate career support into your severance. Larger companies sometimes offer outplacement services, recruiters, or resume coaching. Even smaller employers can agree to cover the cost of career coaching or placement help.

👉 If you know you’ll need extra support landing your next role, ask:

Will you cover resume writing or career coaching?
Will you pay for recruiter support?
Can I get access to outplacement services?

It’s less common, but it’s absolutely negotiable — especially if they’re emphasizing a “smooth transition.”

Final Thoughts

Your severance agreement isn’t just about the check you walk away with today. It’s also about your freedom tomorrow.

Non-competes, non-solicits, NDAs, clawbacks — all of these can quietly shape your next move. Some are reasonable, some are negotiable, and some are simply traps for the unwary.

Before you sign, slow down. Read for restrictions, ask for clarity, and don’t be afraid to push for better terms. Because severance isn’t just about money — it’s about protecting your career, your reputation, and your next role.