Direct answer
Non-compete settlements create wage weeks: stand-down pay, garden leave, and fee awards move income, and SGA counts the earned weeks. The settlement paper fixes the claim lines (see the settlement guide ). The clause trends are in the 2026 outlook , enforcement in the enforcement guide , and public trails in the records guide .
Updated November 9, 2026 · Reviewed against US FTC — competition policy
Non-compete settlements create wage weeks: stand-down pay, garden leave, and fee awards move income, and SGA counts the earned weeks. The settlement paper fixes the claim lines (see the settlement guide).
The Settlement Lines
- Stand-down & garden leave: paid windows read as wages for SGA and unemployment; label the weeks in the weekly reports (see the certifications guide and the SGA guide).
- Fee awards: loser-pays and statutory fees add income lines; the fee rules are in the fee guide and venue in the fee-shifting guide.
- Wage lines: settlement money follows W-2/1099 reporting by state; the lines are in the state tax guide and the comp set in the settlement guide.
The clause trends are in the 2026 outlook, enforcement in the enforcement guide, and public trails in the records guide.
Put the rule into action
Write the letter with the free Non-Compete Disclosure Letter generator. The state pages carry the local payout and notice windows, and the application tracker keeps the follow-up date in writing.
Map the settlement weeks before you sign
A covenant settlement creates weeks as well as money, and each week gets read by at least one agency. Map both before signing:
- Structure: lump sum, salary continuation, stand-down schedule, or garden leave. Same dollars, different week labels.
- Allocation: which payments are wages, which are damages, and which are fees.
- Dates: the restriction start and end, the payment dates, and the new start date.
- Reporting: what the employer files for each period, and what you certify each week.
Ask the state workforce agency how the structure is treated in your state, and ask Social Security how paid non-working weeks are read, before you agree to the schedule. Run the cash in the severance calculator, and read the severance offset entry, because allocation across weeks can bar benefit weeks while the restriction runs.
Three structures, three different outcomes
- Lump sum paid before filing: one wage line, and in allocation states the whole amount can be divided across weeks, ending the benefit season quickly.
- Salary continuation or stand-down: weekly pay that many states count as wages for the covered weeks, pausing benefits while the restriction runs.
- Garden leave: you stay employed and paid, which usually answers the availability question differently and reports as wages.
Order matters. Where filing before signing is allowed, a file opened first can change how the same money is treated later. Ask the agency in writing, and get the settlement schedule in a table: date, amount, and classification. Then keep the weekly certification wording identical to your first statement, and generate it with the claim statement generator so nothing drifts.
The reporting file for restricted weeks
Four documents, one folder, updated weekly:
- Pay statements or the settlement schedule, matched to each week.
- The written consent, showing what you may and may not do.
- The weekly note: pay source, hours worked, restriction reason, availability, in the same wording every week.
- The correspondence: agency questions and answers, dated, including any notice about severance treatment.
If disability benefits are involved, keep the same file for that claim; earnings and work activity are read from your records, not your recollection. Log the restriction dates and certification days in the application tracker so a busy search week does not create a gap. A settlement that is documented week by week produces consistent filings; a settlement remembered later produces contradictions, and contradictions produce repayments.
| Structure | How the weeks read | Confirm before signing |
|---|
| Lump sum | One wage line; allocation states spread it across weeks | Whether filing first changes the treatment |
|---|
| Stand-down salary continuation | Weekly wages that can bar benefit weeks | The schedule table with dates and classification |
|---|
| Garden leave | Employed and paid; reported as wages | Separation date, coverage end date, and availability answer |
|---|
For the current text behind these numbers, start with the New York Severance Offset rule page and the New Jersey Severance Offset rule page, along with the Severance Pay definition and the hiring references non competes guide hub. Those sources state the rule in full; this page only points at them.
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Frequently Asked Questions
- Does a non-compete settlement count as wages?
- Wage-type settlement money is usually reported as wages with withholding, and damages or fee amounts may be treated differently. Ask for the allocation by line in writing before signing so you know what each week will look like on the record.
- Should I file for unemployment before signing a settlement?
- In some states the order changes the result, because severance paid before filing can be allocated across weeks and bar benefits. Ask your state workforce agency in writing how each structure is treated, and get the payment schedule dated.
- How do I report paid restricted weeks to an agency?
- State the pay source, zero hours worked, the restriction reason, and what work you could still accept, using identical wording every week. Attach the pay statement or schedule line that matches the week; consistent filings are what prevent overpayment notices.
- Do settlement payments affect disability eligibility?
- They can, because determinations read reported earnings and work activity rather than your description of the period. Ask the agency how paid non-working weeks will be treated before you agree to a stand-down schedule, and keep the pay records with the dates.
Sources (official record — verify before filing)
US FTC — competition policy