North Dakota Severance — § 9-08-06 Voids Non-Competes, Top 2.5% Tax, 2026

North Dakota WARN: what applies#

North Dakota has no state-level mini-WARN notice statute. The operative layoff-notice regime for North Dakota private employers is federal WARN (29 U.S.C. §§ 2101–2109): employers with 100 or more full-time employees must give 60 days advance written notice for a mass layoff (50+ affected at a single site of employment constituting at least 33% of the active workforce, or 500+ regardless of percentage) or a plant closing. Notice must go to affected employees (or their representatives), Job Service North Dakota Rapid Response unit, and the chief elected official of the local government. Federal WARN penalties: back pay and benefits for each day notice was not given (up to 60 days), plus a $500/day civil penalty payable to the local government. North Dakota adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

How severance is taxed in North Dakota#

North Dakota operates a graduated individual income tax under N.D.C.C. § 57-38-30.3 with a three-bracket structure: 0% on income below approximately $48,475 single / $80,975 MFJ; 1.95% on middle-bracket income; and 2.50% on income above approximately $244,825 single / $298,075 MFJ (2025 thresholds; 2026 thresholds inflation-indexed and should be verified against the Office of State Tax Commissioner 2026 booklet). The 2.50% top marginal rate ties Arizona for the LOWEST top rate among states with an income tax. The rate structure reflects HB 1158 of the 2023 North Dakota Legislative Assembly and subsequent legislation, which dramatically simplified and reduced North Dakota's tax. The 0% zero-bracket up to ~$48K single / ~$81K MFJ is also notable — many North Dakota workers pay zero state income tax. Because North Dakota uses a graduated structure with a very low top bracket, supplemental wages (severance, bonuses, commissions) are withheld using the regular graduated tables and the effective top rate is 2.50% for top-bracket earners. North Dakota does not impose any state-level local income tax on wages. On top of North Dakota state withholding, severance is subject to the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 in a calendar year) and FICA (Social Security 6.2% to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ).

Calculate your situation#

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FAQ#

Does North Dakota require severance pay?

No North Dakota statute requires private employers to pay severance. North Dakota has no state mini-WARN that would mandate pay-in-lieu of notice. The only layoff-notice regime that carries teeth in North Dakota is federal WARN (29 U.S.C. §§ 2101–2109), which requires 60 days advance notice (or back pay for missed days) at employers of 100+ for covered mass layoffs and plant closings — but WARN mandates notice, not severance. Severance is therefore employer-discretionary in North Dakota unless your employment agreement, written severance plan, or company handbook makes it mandatory. North Dakota is an at-will employment state.

How is severance taxed in North Dakota?

North Dakota operates a graduated individual income tax under N.D.C.C. § 57-38-30.3 with a three-bracket structure: 0% on income below approximately $48,475 single / $80,975 MFJ; 1.95% on middle-bracket income; and 2.50% on income above approximately $244,825 single / $298,075 MFJ. The 2.50% top marginal rate ties Arizona for the LOWEST top rate among states with an income tax. Because North Dakota uses a graduated structure, supplemental wages (severance, bonuses, commissions) are withheld using the regular graduated tables, producing an effective ~2.50% rate for top-bracket severance-recipient earners. North Dakota does not impose any state-level local income tax on wages. On top of North Dakota state withholding, severance is subject to the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 in a calendar year) and FICA (Social Security 6.2% to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ). For a $100,000 severance to a top-bracket North Dakota recipient, state withholding is approximately $2,500 — far below most other states. Year-end North Dakota liability is reconciled on Form ND-1.

Does North Dakota have a mini-WARN statute?

No. North Dakota has no state-level mini-WARN that imposes employer notice obligations independent of federal WARN. The operative regime is federal WARN (29 U.S.C. §§ 2101–2109): 60 days advance notice at employers of 100+ for mass layoffs affecting 50+ at a single site that constitute at least 33% of the active workforce (or 500+ regardless of percentage). Notice goes to affected employees, Job Service North Dakota Rapid Response unit, and the chief elected local official. Federal WARN penalties: back pay and benefits for each day notice was not given (up to 60 days), plus a $500/day civil penalty payable to the local government. North Dakota adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

Does OWBPA apply in North Dakota?

Yes. OWBPA is federal (29 U.S.C. § 626(f)) and applies in all states. If you are age 40 or older and your North Dakota employer asks you to sign a waiver of age-discrimination claims under the ADEA in your severance agreement, the waiver is enforceable only if you receive at least 21 days to consider the agreement (45 days for group exits — a 'reduction in force' or 'exit incentive program'), and 7 days after signing to revoke. Group exits additionally require disclosure of the ages and job titles of all selected and non-selected employees in the decisional unit. The North Dakota Human Rights Act (N.D.C.C. § 14-02.4) separately prohibits age discrimination (40+) by employers — verify the current employee-count threshold via the North Dakota Department of Labor and Human Rights. A release of state-law age claims under NDHRA does not require OWBPA-compliant 21/45/7 procedures, but the federal ADEA release portion still does.

Can I collect North Dakota unemployment while receiving severance?

It depends on how the severance is structured. North Dakota's unemployment disqualification rules are at N.D.C.C. § 52-06-02 (Disqualification for benefits). In practice, Job Service North Dakota treats severance pay based on allocation: severance designated as 'wages in lieu of notice' or salary continuation tied to a specific notice period typically offsets UI benefits week-by-week during the allocated weeks; a lump-sum severance not designated to specific weeks is more likely to be allocated to the separation date. Practical takeaways: (a) file your North Dakota UI claim with Job Service ND on or shortly after your last day worked at jobsnd.com to establish your benefit year; (b) fully disclose the severance amount, structure, and any employer designation when you apply and on weekly certifications — failure to report severance is fraud; (c) North Dakota's UI maximum weekly benefit amount is in the $748 range for 2026 — one of the highest in the country; verify the live figure at jobsnd.com.

Are non-competes enforceable in North Dakota after a layoff?

NO for most ordinary employment non-competes — this is the HEADLINE North Dakota fact. N.D.C.C. § 9-08-06 (titled 'In restraint of business void — Exceptions') statutorily VOIDS contracts that restrain a person from exercising a lawful profession, trade, or business, except in three narrow circumstances: (a) the sale of the goodwill of a business, (b) the dissolution of a partnership, and (c) the dissolution of a limited liability company. The statute does NOT preserve ordinary employment non-competes. § 9-08-06 was the historical model for California's nearly-identical Cal. Bus. & Prof. Code § 16600 — both were enacted from § 1673 of the 1872 Field Code, making North Dakota and California two of the oldest 'non-compete void' jurisdictions. North Dakota is one of only a handful of states (California, North Dakota, Oklahoma, and Minnesota as of MN HF 100 of 2023) where most employer post-employment non-competes are categorically void by statute rather than evaluated under a reasonableness test. Confidentiality and non-solicitation provisions are separately enforceable to the extent reasonable, and trade-secret protections under N.D.C.C. § 47-25.1 (the North Dakota Uniform Trade Secrets Act) remain fully enforceable. PRACTICAL IMPLICATION: a non-compete release clause in a North Dakota severance offer is typically releasing a covenant that is already statutorily void — assigning low marginal value to the release on its own. The broader release of claims (age, FMLA, NLRA, ADA, Title VII, state human-rights, and other federal/state claims) retains real value, but the specific non-compete release component does not. Have an attorney confirm before assigning value.

Why does N.D.C.C. § 9-08-06 matter so much for severance?

When an employer asks an employee to sign a severance agreement, the package typically includes a release of various claims (wage-and-hour, discrimination, retaliation, breach-of-contract, federal/state human-rights), AND often a 'non-compete' or 'non-solicitation' clause restricting the employee's post-separation activities. The non-compete provision is often presented as a significant employer concession — 'we are giving you X weeks of severance in exchange for, among other things, your agreement not to compete for 12 months.' In most states (Florida, Texas, Massachusetts, Tennessee, etc.) a reasonable post-separation non-compete IS enforceable, so a release of an existing non-compete obligation actually has economic value. In North Dakota, by contrast, N.D.C.C. § 9-08-06 makes most ordinary employment non-competes statutorily VOID from the start — so the 'concession' of releasing the non-compete is releasing a covenant that was never enforceable in the first place. The employer cannot trade nothing for severance, but the practical implication is that the non-compete component of the severance trade has near-zero economic value. Negotiation framing: in North Dakota, you should not credit an employer's 'non-compete release' as a meaningful concession — your existing covenant is likely unenforceable. Push harder on the cash component, COBRA subsidization, equity acceleration, references, and outplacement. Confidentiality and non-solicitation provisions remain enforceable to the extent reasonable, so those have real value if released; the broad non-compete typically does not.