Job Termination and Severance Agreements: Three Tips Based on Recent Legislation
Starting a new job is typically a hopeful time. Both management and the employee look forward to a “fresh start” for whatever came before. However, the end of the employment relationship is typically less agreeable and more difficult.
In Virginia and many jurisdictions, most employment relationships are terminable “at will,” meaning they can be ended at any time and for any reason not prohibited by existing law (e.g., discrimination) or public policy. Select relationships are terminable “for cause”—meaning employers and employees must adhere to the provisions of a contract in advancing the end of the relationship.
A severance agreement can potentially provide clarity for when a relationship ends. These agreements provide additional payment (and sometimes other benefits) to employees in exchange for a release of claims (and potential other commitments) to an employer. On March 4, 2026, the Virginia legislature provided additional parameters surrounding severance agreements when passing Senate Bill 170 (the “Legislation”). The Legislation is currently pending approval by Governor Spanberger; however, if signed into law, it would prohibit the use of non-competes in all contexts for terminations without cause in the absence of severance payment (or other monetary benefits). The Legislation also provides a private cause of action for employees alleging violations.
Non-competition agreements are already illegal in Virginia, Maryland, and the District of Columbia, for low-wage workers (Virginia: around $70,000) and generally disfavored by the courts. Nonetheless, the Legislation (which would apply to non-competes entered into after July 1, 2026) could have a significant impact on existing approaches to severance agreements (and restrictive covenants overall).
I recommend the following tips based on the Legislation and other emergent issues:
Seek to proactively plan for any terminations. Virginia’s pending Legislation would require employers to commit to providing severance “upfront” in order to have an enforceable non-compete.
If non-competes are important to your business, then I recommend that you reexamine your current agreements in order to ensure that they provide severance commitments (as well as meet other statutory requirements). If non-competes are not particularly important, then I recommend that you attempt to “plan out” situations when your organization might opt to offer severance (and for how much). Having this information available in advance as a framework (and, in the context of the Legislation, will be required).
Look at the context surrounding the separation. Employers should review why the termination is occurring and how it is documented. Certain terminations (i.e., criminal acts that occur on the job) are “clear cut” and may not warrant additional consideration for potential severance. Most separations, however, are more nuanced. A risk of a lawsuit (or the terms of a contract, if available) could potentially lean towards offering severance. For both employers and employees, past and future relations in the industry may also play a factor. Simply put, there is “no size fits all” for terminations—and severance agreements must similarly adapt to the context of the situation.
Determine your priorities in ending the relationship. Employers and employees should seek to prioritize their goals and then use them as guideposts for potential next steps. Employers that prioritize finality may be best served to offer a severance agreement (and may be required to do so in the context of a non-compete per the Legislation). On the other hand, employers might prioritize defending their organization (depending on the context of the termination) and might opt against a severance. Employees similarly must weigh whether they can (and would like to) pursue their goals (if not met via a severance agreement) via litigation and the cost/expense associated with such an approach.
Theodora Stringham focuses her practice on bringing solutions-oriented representation and zealous advocacy to complex issues impacting individuals, organizations, and businesses. Ms. Stringham seeks to understand clients’ concerns and provide thorough and strategic options aimed at achieving their goals. She has been recognized for her work in the Real Estate, Labor and Employment, and Commercial Litigation practice areas, providing counseling and litigation support for a wide variety of concerns.