Severance Pay Laws by State (2026): Is Severance Required?

Federal law does not require employers to pay severance. The U.S. Department of Labor says there is no requirement in the Fair Labor Standards Act for severance pay, and that severance is a matter of agreement between an employer and an employee. A handful of states change that answer in narrow situations, usually a plant closing or mass layoff.

Everywhere else, severance is owed only when your employer promised it in a contract, handbook, policy, company plan or separation agreement. A promised payment can be enforceable, sometimes as wages under a state wage law. And when severance comes with a release, federal and state law limit what that release can take from you. The comparison table below links to a detailed page for every state and the District of Columbia.

Information last verified October 7-8, 2026. This article has not been reviewed by a licensed lawyer.

Jurisdiction scope: This guide covers the federal rules that apply to severance in every state (the Fair Labor Standards Act, ERISA, the federal WARN Act, the Older Workers Benefit Protection Act, the Speak Out Act, the National Labor Relations Act as applied in McLaren Macomb, federal tax rules and COBRA) and summarizes each state's severance, layoff-notice and unemployment rules with links to the state pages. It does not cover final paycheck deadlines; see final paycheck laws by state. For benefit amounts and how to file, see unemployment benefits by state.

Is severance pay required by law?

No federal statute requires a private employer to pay severance. The Department of Labor states it directly: "There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay." It describes severance as "a matter of agreement between an employer and an employee (or the employee's representative)."

For when an employer can end employment at all, and the exceptions that make a firing unlawful, see at-will employment by state.

So the real questions are narrower. Does your state require a payment for this kind of layoff? Did your employer promise severance, and can you enforce that promise? Does a federal or state notice law entitle you to back pay? And if you are offered severance in exchange for a release, what can that release lawfully require?

States that require a severance or layoff payment

Only a few states put a payment obligation on private employers, and each one applies to a specific event, not to every firing.

• Maine (state page). Under 26 M.R.S. 625-B, an employer that closes, relocates or conducts a mass layoff at a covered establishment (a facility that employs, or at any time in the previous 12 months employed, 100 or more people) owes eligible employees one week's pay for each year of employment, plus partial pay for a partial year. Eligible employees have worked there continuously for at least 3 years. The payment is due within one regular pay period after the last full day of work, in addition to final wages. Since P.L. 2023, c. 52 took effect on October 25, 2023, the rule is no longer limited to industrial or commercial establishments.
• New Jersey (state page). Under N.J.S.A. 34:21-2, part of the Millville Dallas Airmotive Plant Job Loss Notification Act as amended (the state says the changes took effect April 10, 2023), an employee terminated in a mass layoff, termination of operations or transfer of operations that ends 50 or more jobs within 30 days at a covered establishment gets severance of one week of pay for each full year of employment. An employee who got less than the required notice gets four more weeks. The severance is owed whether or not notice was given, and no waiver of it is effective unless the Commissioner of Labor or a court approves it.
• Hawaii. The Dislocated Workers Act does not require severance, but HRS 394B-10 requires a dislocated worker allowance of up to four weeks after a covered closing, partial closing or relocation out of Hawaii (not a divestiture). The allowance is the difference between your average weekly wage before the closing and your unemployment benefit, and it does not affect your unemployment eligibility or benefit amount. It is not automatic: you claim it with the employer under HAR 12-506-8.
• Vermont. The only statutory severance pay in Vermont's labor title is a penalty. An employer that violates the notice rules of the Notice of Potential Layoffs Act (45 days to two state officials, 30 days to affected employees) owes each employee who lost employment one day of severance pay for each day after the first day in the 45-day notice period, up to ten days, plus up to one month of continued existing medical or dental coverage, if any, needed to cover a delay in eligibility for other coverage caused by the violation (21 V.S.A. 415(a)).
• Massachusetts. There is no general severance law. M.G.L. c. 149, s. 183 requires a lump sum of twice weekly compensation per completed year of service for certain employees terminated within 24 months after a change of control of a covered employer, but a federal appeals court held s. 183 preempted by ERISA in 1993 (Simas v. Quaker Fabric Corp., 6 F.3d 849 (1st Cir. 1993)), so it may not be enforceable. Section 184 applies the same formula after a contested meeting at a covered publicly registered corporation and is untested in court. Separately, c. 149, s. 190(k) requires a live-in domestic worker fired without cause to get written notice plus at least 30 days of lodging, or severance equal to average earnings for 2 weeks.

Why Maine's mandate survives ERISA when Massachusetts's did not: the U.S. Supreme Court held in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987), that Maine's one-time lump-sum severance requirement is not preempted by ERISA or the National Labor Relations Act.

A few states also give their own government employees a statutory severance right. The District of Columbia caps a D.C. government employee's severance over a career at 26 weeks of pay (D.C. Code 1-624.09). Virginia's Workforce Transition Act gives eligible full-time state employees a transitional severance benefit of 4 to 36 weeks of salary depending on service (Va. Code 2.2-3203). Oklahoma requires executive-branch agencies to provide severance benefits in a reduction in force (74 O.S. 840-2.27D). Florida caps severance in a government employment contract at 20 weeks of compensation (Fla. Stat. 215.425(4)), and Montana's statute says only that the state "may provide" severance in a reduction in force (MCA 2-18-622).

Severance pay laws by state: 50-state and DC comparison

The table summarizes what each state page found. "None found" means the state's researcher searched the labor and unemployment statutes and found no requirement; each state page says how far that search went. "Unsettled" means no statute or appellate decision answered the question. Select a state for its statutes, agencies, deadlines and sources.

The federal WARN Act: layoff notice and back pay

The Worker Adjustment and Retraining Notification Act is the closest thing to a federal layoff payment, and it is a notice law. It does not require severance. It requires advance written notice, and an employer that skips the notice owes back pay and benefits for the days it missed.

Which employers it covers. Under 29 U.S.C. 2101(a)(1), a covered employer is a business enterprise that employs either (A) 100 or more employees, not counting part-time employees, or (B) 100 or more employees, counting part-time workers, who together work at least 4,000 hours a week, not counting overtime. A part-time employee is one who averages fewer than 20 hours a week or has worked fewer than 6 of the 12 months before the date notice is required (29 U.S.C. 2101(a)(8)).

Which layoffs trigger it. Two events require notice:

• A plant closing: a permanent or temporary shutdown of a single site of employment, or of one or more facilities or operating units within it, that causes an employment loss for 50 or more employees, not counting part-time employees, during any 30-day period (29 U.S.C. 2101(a)(2)).
• A mass layoff: a reduction in force that is not a plant closing and causes an employment loss at a single site during any 30-day period for at least 33 percent of the employees and at least 50 employees, or for at least 500 employees, not counting part-time employees in either test (29 U.S.C. 2101(a)(3)).

An "employment loss" is a termination other than a discharge for cause, voluntary departure or retirement; a layoff of more than 6 months; or a cut in hours of more than 50 percent in each month of any 6-month period (29 U.S.C. 2101(a)(6)). Smaller losses at one site within any 90-day period are added together and treated as a plant closing or mass layoff unless the employer shows they had separate and distinct causes (29 U.S.C. 2102(d)).

What notice is required. The employer may not order the closing or layoff until 60 days after it serves written notice on each representative of the affected employees (or on each affected employee if there is none), on the state's dislocated worker unit and on the chief elected official of the local government (29 U.S.C. 2102(a)). The Department of Labor's rules say the notice must include, among other items, the expected date of the first separation, the schedule of separations, and the job titles and names of the affected workers (20 CFR 639.7).

Exceptions. Three exceptions allow less notice: a faltering company seeking capital (for a plant closing only), business circumstances that were not reasonably foreseeable when notice would have been due, and a natural disaster, for which the 60-day notice is not required. An employer relying on one must still give as much notice as is practicable, with a brief statement of the reason for reducing the notice period (29 U.S.C. 2102(b)). WARN does not apply to the closing of a temporary facility or the end of a project when workers were hired knowing the job would last only that long, or to strikes and lockouts that are not intended to evade the law (29 U.S.C. 2103).

What an employer owes for skipping notice. Each affected employee can recover back pay for each day of the violation, at the higher of the employee's average regular rate over the last 3 years or final regular rate, plus benefits under an ERISA plan, including medical expenses that plan would have covered. Liability runs for the period of the violation, up to 60 days, "but in no event for more than one-half the number of days the employee was employed by the employer" (29 U.S.C. 2104(a)(1)). It is reduced by wages the employer paid for the period, by voluntary and unconditional payments the employer made, and by certain payments to third parties on the employee's behalf (29 U.S.C. 2104(a)(2)).

An employer that fails to notify the local government faces a civil penalty of up to $500 a day, which it avoids by paying each affected employee the full amount it owes that employee within 3 weeks after ordering the closing or layoff (29 U.S.C. 2104(a)(3)). A court may reduce liability for an employer that proves it acted in good faith with reasonable grounds to believe it was complying, and may award attorney's fees to the prevailing party.

Who enforces it. Employees, their representative or the local government enforce WARN by suing in federal district court. The statute's remedies are exclusive, and a federal court cannot stop the closing or layoff itself (29 U.S.C. 2104(a)(5), (b)). The Department of Labor's Employment and Training Administration says the federal court "solely enforces the Act." The Department does not bring WARN cases.

WARN rights add to any other contract or statutory rights, and the 60-day federal period runs at the same time as any notice period a contract or another statute requires (29 U.S.C. 2105). That matters in states with their own notice laws, below.

Watch out: WARN back pay is liability for a notice violation, not severance. A severance agreement offered during a layoff is a separate matter. The statute reduces WARN liability by, among other things, the employer's voluntary and unconditional payments (29 U.S.C. 2104(a)(2)). If you are covered by WARN and did not get 60 days' notice, read any release carefully before signing it.

State WARN laws (mini-WARN acts)

Several states have their own closing and layoff notice laws. They often reach smaller employers or smaller layoffs than federal WARN, require longer notice, or both. Where a state law requires more, the employer generally must meet both laws, with notice periods running at the same time.

State laws with a back-pay or severance remedy:

• California (Cal/WARN, Lab. Code 1400-1408): covers a covered establishment that employs, or in the preceding 12 months employed, 75 or more persons; a mass layoff is 50 or more employees in a 30-day period; relocation of 100 or more miles and termination of operations are also covered. It requires 60 days' written notice (Lab. Code 1401), and skipped notice owes back pay and benefits for up to 60 days or half the days employed, whichever is smaller (Lab. Code 1402).
• Delaware (19 Del. C. ch. 19, effective January 7, 2019): employers with 100 or more employees not counting part-time workers, or 100 or more working 2,000 hours a week in total; 60 days' notice before a plant closing, mass layoff or relocation of 50 or more miles; back pay and benefits up to 60 days, or half the days employed if fewer, plus a civil penalty of $1,000 a day or $100 a day per worker, whichever is greater.
• Hawaii (HRS ch. 394B): a business that employed 50 or more persons at any time in the preceding 12 months; 60 days' written notice to each employee and the labor director before a closing, partial closing, divestiture or relocation out of state; back pay and benefits up to 60 days; a civil penalty of up to $500 a day unless employees are paid within three weeks after the closing (HRS 394B-9).
• Illinois (Illinois WARN Act, 820 ILCS 65): employers with 75 or more employees not counting part-time workers, or 75 or more who together work 4,000 or more hours a week; 60 days' notice; a plant closing is 50 or more employees at one site in 30 days; a mass layoff is at least 25 employees who make up at least 33 percent of the workforce, or at least 250; back pay and benefits when notice is skipped, plus a civil penalty.
• New Hampshire (RSA 275-F): employers with 100 or more New Hampshire employees not counting part-time workers, or 100 or more working at least 3,000 hours a week; 60 days' notice before a plant closing (50 or more employees in 30 days) or mass layoff (250 employees at a site, or 25 if they are at least 33 percent of full-time employees); back pay and benefits up to 60 days, or half the days employed if fewer, plus costs and attorney's fees (RSA 275-F:8).
• New Jersey (N.J.S.A. 34:21-1 et seq.): employers with 100 or more employees must give at least 90 days' notice, or the federal period if longer; statutory severance is owed as described above (the severance subsection does not repeat the 100-employee figure; the state page covers that question). The Department of Labor says it has "neither enforcement authority, nor rulemaking authority" under the Act, so employees enforce it by suing in Superior Court.
• New York (Labor Law Art. 25-A): employers with 50 or more employees not counting part-time workers, or 50 or more working 2,000 hours a week in total (Labor Law 860-a); a plant closing causing employment loss for 25 or more employees in 30 days, a mass layoff of at least 33 percent and at least 25 employees or at least 250, and a relocation of 50 miles or more; at least 90 days' notice (Labor Law 860-b); back pay and benefits for a violation (Labor Law 860-g), and those WARN payments do not reduce unemployment benefits.
• Vermont (21 V.S.A. 411-415, effective January 15, 2015): employers with 50 or more full-time employees, 50 or more part-time employees working at least 1,040 hours a year, or a combination of 50 or more; a business closing (including the permanent shutdown of a facility) or a mass layoff of at least 50 employees at one or more Vermont worksites in any 90-day period; 45 days' notice to two state officials and 30 days' notice to the town, affected employees and their bargaining agent (21 V.S.A. 413(b)); the severance-pay penalty described above.
• Washington (chapter 49.45 RCW, in effect July 27, 2025): employers with 50 or more employees in Washington not counting part-time workers; a business closing (50 or more at a single site) or mass layoff (50 or more in a 30-day period) requires 60 days' notice to the Employment Security Department and each affected employee or union; back pay and benefits for each day of the violation, up to 60 days.
• Wisconsin (Wis. Stat. 109.07): business enterprises employing 50 or more persons in Wisconsin; 60 days' notice before a business closing affecting 25 or more employees or a mass layoff of at least 25 percent of the workforce or 25 employees, whichever is greater, or at least 500 employees; an employer that skips or shortens notice owes pay and lost benefits for the days notice was late.

State laws with a penalty but no back pay to workers:

• Iowa (Iowa Code ch. 84C): employers with 25 or more employees not counting part-time workers; 30 days' notice before a business closing or mass layoff affecting 25 or more employees at one site, which may be reduced by the days for which severance or wages in lieu of notice are paid (Iowa Code 84C.4(7)); the only remedy is a civil penalty of up to $100 a day paid to the state (Iowa Code 84C.5).
• Maryland (Economic Stabilization Act, Lab. & Empl. 11-301 to 11-306): employers with at least 50 employees; 60 days' notice before a reduction in operations; an order to comply and a civil penalty of up to $10,000 a day, with no back pay for missed notice.
• Nebraska (LB921, approved April 14, 2026 and in effect since July 18, 2026): employers with 100 or more employees not counting part-time workers; 90 days' notice before a business closing or mass layoff affecting 100 or more employees at one site; the only remedy is a civil penalty of up to $100 a day, enforced by the Nebraska Department of Labor. Layoffs ordered before July 18, 2026 are not covered.
• Maine (26 M.R.S. 625-B): 90 days' written notice to the Director of the Bureau of Labor Standards before a closing or relocation, and to employees and municipal officers before a closing unless the Director waives it; for a mass layoff, notice to the Director as early as practicable and no later than 7 days after it; a fine of $500 a day, with exceptions such as a physical calamity or unforeseen circumstances; no back-pay remedy for short notice. Maine's severance mandate applies whether or not notice was given.

Notice rules that give workers no pay remedy:

• Ohio (R.C. 4113.31) applies when an employer with 100 or more employees who together work at least 4,000 hours a week lays off 50 or more employees at a single site in any 30-day period. It requires 60 days' notice, including notice to the state's Department of Job and Family Services and local officials, and adds Ohio content requirements, but creates no separate Ohio payment; affected employees may seek the federal remedies in 29 U.S.C. 2104.
• Tennessee (T.C.A. 50-1-601 to 50-1-604) covers employers with 50 to 99 full-time employees, a band below federal WARN. The text the state publishes requires the employer to notify the state when it notifies employees, but sets no number of days of advance notice to employees and no back pay or penalty.
• Georgia, North Dakota and Wyoming require employers to report large separations to the state unemployment agency, which gives workers no advance notice and no pay. Minnesota only "shall encourage" early notice and requires employers that give notice to report affected workers to the state (Minn. Stat. 116L.976). In Massachusetts, advance notice is "a voluntary declaration" (M.G.L. c. 151A, s. 71A), though workers in a certified plant closing can get reemployment assistance benefits (s. 71F).
• Connecticut repealed its old plant-closing health insurance continuation rule (Public Act 24-147, approved June 6, 2024), which never required a severance payment.

When promised severance is enforceable

If your employer promised severance and then refused to pay, the first question is where the promise lives. A written employment contract, an offer letter, a handbook policy, a formal company severance plan and a signed separation agreement can each create an enforceable obligation, but they are enforced through different routes.

Severance as "wages" under state wage laws

When a state's wage-payment law treats promised severance as wages, the worker can usually file a wage claim with the state labor agency or sue under the wage statute, which often carries extra damages and attorney's fees. Where it is not wages, the usual route is a breach-of-contract claim in court. The states fall into four groups.

Severance named in the wage statute. These statutes include severance or separation pay, usually when it is promised by agreement or established policy:

• Kentucky: KRS 337.010(1)(c)1 lists "severance or dismissal pay" in the definition of wages; no Kentucky decision applying it to a contested promise was found.
• Iowa: Iowa Code 91A.2(7)(b) includes severance payments "due an employee under an agreement with the employer or under a policy of the employer."
• New Hampshire: RSA 275:43, V treats severance pay as wages "when such benefits are a matter of employment practice or policy, or both."
• North Carolina: G.S. 95-25.2(16) includes "severance pay" and other amounts promised when the employer has a policy or practice of making such payments.
• Oklahoma: 40 O.S. 165.1(7) lists "severance or dismissal pay" in the definition of wages.
• Pennsylvania: the Wage Payment and Collection Law includes "separation" pay among the wage supplements that count as wages (43 P.S. 260.2a), with liquidated damages and mandatory attorney's fees for unpaid amounts.
• Texas: Tex. Lab. Code 61.001(7)(B) covers severance pay "owed to an employee under a written agreement with the employer or under a written policy of the employer." An oral promise does not qualify, TWC's rule excludes payments made in exchange for a release of claims or because of a lack of notice of separation (40 Tex. Admin. Code 821.25(b)), and a Payday Law claim must be filed within 180 days after the wages became due.
• Wisconsin: Wis. Stat. 109.01(3) lists "severance pay or dismissal pay" in wages, though chapter 109 excludes officers, managers, executives and certain others.
• Delaware and New York treat separation pay as a benefit or wage supplement under their wage laws (19 Del. C. 1109; N.Y. Labor Law 198-c(2) and 190(1)). New York's section 198-c does not apply to executive, administrative or professional employees earning over $1,300 a week (Labor Law 198-c(3)); the New York page covers their options.

Severance treated as wages by a court. In Maryland, Stevenson v. Branch Banking & Trust Corp. (Md. Ct. Spec. App. 2004) held that severance that is deferred compensation for work performed can be wages, while severance paid for a non-compete promise is not. In Washington, Dice v. City of Montesano (Wash. Ct. App. 2006) held that a contractual lump sum of three months' salary on termination without cause was wages. In West Virginia, Miller v. St. Joseph Recovery Center, LLC (W. Va. 2022) held that a written contractual severance package was a fringe benefit that "constitutes unpaid wages" under the state's wage act. Each decision involved a written agreement and did not decide every kind of severance arrangement.

Severance excluded from wages. Colorado's wage act says "wages" does not include severance pay, and the Court of Appeals applied that to contractual severance in Sommers v. MarketPlace Realty, 2025 COA 97; an unpaid promise there is a contract matter. In Nebraska, Eikmeier v. City of Omaha, 280 Neb. 173 (2010), held that severance that becomes due on termination and was not earned through continued employment is not wages under the Wage Payment and Collection Act. In Massachusetts, the Supreme Judicial Court's 2025 decision in Nunez v. Syncsort described an earlier Appeals Court ruling as holding severance is not wages, so the question there is unsettled but leans no.

Unsettled. In most other states, the wage statute does not mention severance and no appellate decision has decided the question, so the state pages call it unsettled. In those states, a written promise is still enforceable as a contract, and the page for your state gives its contract and wage-claim deadlines. Alaska takes a different route: its labor department can take assignment of claims "for vacation pay or severance pay" (AS 23.05.220(a)), and its wage claim form takes claims of more than $50 and less than $20,000.

Severance from a formal company plan (ERISA)

Some severance is paid under a formal plan, not a one-off promise. The Employee Retirement Income Security Act defines a "welfare plan" to include plans that provide benefits in the event of unemployment (29 U.S.C. 1002(1)). A Department of Labor regulation says a severance arrangement is not treated as a pension plan just because it pays on termination, if the payments are not contingent on retiring, total no more than twice the employee's annual compensation for the prior year, and are generally completed within 24 months after termination (29 CFR 2510.3-2(b)). Such an arrangement can still be an ERISA welfare plan.

That classification matters because ERISA supersedes state laws "insofar as they may now or hereafter relate to any employee benefit plan" it covers (29 U.S.C. 1144(a)). If your severance comes from an ERISA plan, the plan document and federal law, not your state wage act, may control your claim. The Department of Labor says its Employee Benefits Security Administration may be able to help an employee who did not receive severance benefits under an employer-sponsored plan.

Two limits on what this guide can tell you. We could not open the Department's own guidance on which severance arrangements count as ERISA plans, and we have not covered ERISA's claims and appeal procedures here, so ask for the plan document and its claims procedure in writing if you think a plan applies. On the other side, a one-time statutory payment like Maine's is not an ERISA plan, as Fort Halifax held.

Severance and unemployment benefits

Federal law leaves this question to the states. The Department of Labor's unemployment insurance fact sheet says eligibility, benefit amounts and the length of time benefits are available "are determined by the State law," and each state sets its own eligibility guidelines. No federal statute sets a severance offset.

The state rules vary more than almost anything else on this topic:

• No reduction. California's EDD says severance pay is not wages for unemployment insurance and does not reduce benefits, though it treats wage continuation pay as wages. New Mexico's rule says severance is "not considered wages" and "will not be deducted" (11.3.300.317(D) NMAC). Washington's rule says severance assigned to a period before the date of separation is "not deductible from benefits" (WAC 192-190-045). Illinois generally does not count severance as wages for the period after separation (56 Ill. Adm. Code 2920.45).
• Reduction only above a threshold. In Pennsylvania, severance reduces benefits only to the extent it exceeds 40 percent of the state average annual wage, which the Department of Labor and Industry puts at $28,153.63 for benefit years that begin in 2026 (43 P.S. 804(d)). In Wisconsin, more than $500 in combined termination and similar pay in a week bars benefits for that week (Wis. Stat. 108.05(3)(dm)).
• No benefits for the weeks severance covers. Minnesota makes you ineligible for any week you receive, have received or will receive severance, and says a required release does not change that (Minn. Stat. 268.085, subd. 3b). Rhode Island allocates severance or dismissal pay weekly from the last day of work for up to 26 weeks and pays no benefits for those weeks (R.I. Gen. Laws 28-44-59). Texas disqualifies you for the period covered by severance pay or wages in lieu of notice, with exclusions (Tex. Lab. Code 207.049).
• Agency decides case by case. Several states, including Hawaii, Montana, North Dakota, South Carolina and Mississippi, have no rule naming severance. Hawaii, Montana and South Carolina tell claimants to report it; we found no Mississippi agency guidance on severance and could not open North Dakota's, so report any severance when you file and let the agency decide.

How the payment is labeled can matter too. Several states treat pay in lieu of notice differently from severance for past service. Report any severance or separation payment when you file, and check your state's page for its rule. For filing steps and benefit amounts, see unemployment benefits by state.

A severance agreement cannot take away your right to unemployment benefits in most states. Most state unemployment laws void any agreement to waive benefit rights, and each state page names its own statute.

What a severance agreement can and cannot make you give up

When severance comes with a release, you get the payment and give up the right to sue your employer over the claims the release covers. A release is generally enforceable, but federal and state law set conditions on some releases and void certain terms outright.

Workers 40 and older: the Older Workers Benefit Protection Act

A release of claims under the Age Discrimination in Employment Act is valid only if it is "knowing and voluntary." Under 29 U.S.C. 626(f)(1), that requires at least the following:

• The agreement is written in a manner calculated to be understood, and specifically refers to rights or claims under the ADEA.
• You do not waive rights or claims that arise after you sign.
• You receive consideration "in addition to anything of value to which the individual already is entitled," such as wages you already earned.
• You are advised in writing to consult a lawyer before signing.
• You are given at least 21 days to consider the agreement, or at least 45 days if the release is requested in connection with an exit incentive or other termination program offered to a group or class of employees.
• You have at least 7 days after signing to revoke, and the agreement does not become effective or enforceable until that period ends.

In a group program, the employer must also disclose in writing the class, unit or group covered, the eligibility factors, the time limits, and "the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected" (29 U.S.C. 626(f)(1)(H)). That list lets you see whether older workers were selected more often.

The employer has the burden of proving the waiver was knowing and voluntary, and "no waiver may be used to justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding" conducted by the EEOC (29 U.S.C. 626(f)(3)-(4)). The EEOC's guidance on severance waivers adds that the 21-day period runs from the employer's final offer and that material changes restart it, and that "the seven-day revocation period cannot be changed or waived by either party for any reason."

If you later challenge an ADEA waiver, the EEOC says you do not have to return the severance first, though your employer's recovery "may not exceed the amount it paid for the waiver or the amount of your award if it is less." Courts differ on whether you must return the money to challenge a waiver of other, non-ADEA claims.

Confidentiality and non-disparagement: the NLRB's McLaren Macomb decision

In McLaren Macomb, 372 NLRB No. 58, decided February 21, 2023, the National Labor Relations Board held that employers violate Section 8(a)(1) of the National Labor Relations Act by offering severance agreements that require employees to broadly waive their Section 7 rights, including through broad confidentiality and non-disparagement terms. The Board's announcement put it this way: employers "cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act."

Current status (as of October 7, 2026). The decision is still Board law, but it is under challenge:

• On February 14, 2025, Acting General Counsel Cowen's memo GC 25-05 rescinded GC 23-05, the earlier General Counsel guidance on severance agreements. That rescinded the enforcement guidance, not the Board's decision.
• On August 26, 2026, General Counsel Crystal Carey's memo GC 26-04 said she is "arguing to overrule McLaren Macomb" in an answering brief in Valley Radiology, P.A. (case 10-CA-324512).
• In Valley Radiology, exceptions to the judge's decision were filed March 31, 2026, answering briefs May 5-6, 2026 and reply briefs May 19, 2026. The case was open with no Board decision when we checked.

So McLaren Macomb remains the Board's law until the Board itself overrules it. The General Counsel's position affects which cases the agency's prosecutors pursue, not what the Board has held. If the Board overrules the decision, this section will change.

The Speak Out Act: sexual assault and harassment

The Speak Out Act (Pub. L. 117-224, December 7, 2022) provides that, for sexual assault and sexual harassment disputes, "no nondisclosure clause or nondisparagement clause agreed to before the dispute arises shall be judicially enforceable in instances in which conduct is alleged to have violated Federal, Tribal, or State law" (42 U.S.C. 19403). It does not stop employers from protecting trade secrets or proprietary information, and it leaves in place state laws that are at least as protective.

State limits on releases and confidentiality terms

Many states add their own rules. Examples from the state pages:

• California: a separation agreement may not stop disclosure of information about unlawful acts in the workplace, and the employer must tell the employee of the right to consult a lawyer and give at least five business days to do so (Cal. Gov. Code 12964.5).
• Illinois: under the Workplace Transparency Act (820 ILCS 96/1-30), a promise of confidentiality about alleged unlawful employment practices in a settlement or termination agreement is allowed only if confidentiality is the employee's documented preference, with 21 days to consider and 7 days to revoke unless knowingly and voluntarily waived, among other conditions. Amendments effective January 1, 2026 added a requirement of consideration for confidentiality separate from the payment for the release.
• New York: a confidentiality term in a settlement of discrimination, harassment or retaliation claims must be the employee's preference, with up to 21 days to consider and 7 days to revoke (General Obligations Law 5-336).
• Minnesota: a release of Minnesota Human Rights Act claims can be rescinded in writing within 15 calendar days (Minn. Stat. 363A.31, subd. 2).
• Oregon: an employer may not require a nondisclosure or non-disparagement provision covering workplace discrimination, including sexual assault, as a condition of separation benefits; a settlement may include one only at the employee's request, with at least seven days to revoke (ORS 659A.370).
• Washington voids nondisclosure and non-disparagement terms covering conduct the employee reasonably believed was illegal discrimination, harassment, retaliation, a wage and hour violation or sexual assault (RCW 49.44.211). New Jersey makes clauses that hide the details of discrimination, retaliation or harassment claims unenforceable against the employee (N.J.S.A. 10:5-12.8). Maine limits nondisclosure terms in severance agreements (26 M.R.S. 599-C), and Louisiana made pre-dispute nondisclosure clauses on hostile work environment or sexual harassment unenforceable from August 1, 2024 (Act 781 of 2024).
• Wage claims. In Massachusetts, a release waives Wage Act claims only if it is plainly worded and specifically refers to Wage Act rights (Crocker v. Townsend Oil Co., 464 Mass. 1 (2012)). New Hampshire voids a release required as a condition of paying wages the employer concedes are due (RSA 275:45, II), and West Virginia's wage act cannot be set aside by private agreement (W. Va. Code 21-5-10).
• Workers' compensation. In Missouri, a severance release cannot waive a workers' compensation claim (RSMo 287.390), and Ohio treats an agreement to waive workers' compensation rights as invalid except in narrow cases (R.C. 4123.80).
• Vermont: a separation agreement cannot stop the disclosure of conduct that endangers a minor or vulnerable adult (21 V.S.A. 306).

Non-compete terms in a severance agreement

A severance agreement sometimes adds or renews a non-compete. A few states tie the two together. In Virginia, for covenants entered, amended or renewed on or after July 1, 2026, a non-compete is unenforceable if the employer discharges the employee without severance benefits or other monetary payment, unless the discharge was for cause; the law does not make severance mandatory (Va. Code 40.1-28.7:8(C)). In Washington, until June 30, 2027, a non-compete is void for a laid-off employee unless the employer pays base salary for the enforcement period, minus later earnings (RCW 49.62.020(1)(c)); from June 30, 2027, ESHB 1155 (ch. 149, Laws of 2026) voids all non-competes. Utah allows a reasonable non-compete freely agreed to in good faith in a severance agreement at or after termination (Utah Code 34-51-202). In Illinois, a non-compete or non-solicit is void unless the employer advises the employee in writing to consult a lawyer and gives at least 14 calendar days to review it (820 ILCS 90/20). In Nevada, if you lost your job in a reduction in force, reorganization or similar restructuring, a non-compete is enforceable only while the employer pays your salary, benefits or equivalent compensation, including severance (NRS 613.195(5)). In Massachusetts, the noncompetition statute does not cover a non-compete made in connection with a separation if you are expressly given seven business days to rescind (M.G.L. c. 149, s. 24L(a)). Elsewhere, whether the clause can be enforced depends on the state's non-compete law.

Federal taxes on severance pay

Severance is taxed as wages. IRS Publication 15 says: "Severance payments are wages subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax." It lists severance pay among supplemental wages, and a Treasury regulation defines supplemental wages as "all wages paid by an employer that are not regular wages" (26 CFR 31.3402(g)-1).

For supplemental wages, an employer may use an optional flat federal withholding rate of 22 percent, and must withhold at 37 percent on supplemental wages above $1 million paid to an employee in the calendar year. The 2026 edition of Publication 15 says those rates continue because P.L. 119-21 permanently extended the individual tax rates. Your employer computes the withholding.

One detail for negotiations: if you accept outplacement services in exchange for a reduced severance payment, the IRS treats the amount of the reduction as wages for employment tax purposes (IRS Publication 15-A). This guide does not cover state income tax treatment.

Health insurance after a layoff: COBRA

Losing a job usually means losing employer health coverage. Federal COBRA lets you continue group health coverage if your employer's plan is covered. It does not apply to a group health plan for a year if all employers maintaining the plan normally employed fewer than 20 employees on a typical business day in the preceding calendar year (29 U.S.C. 1161(b)). For a termination or reduction in hours, the maximum required continuation period is 18 months from the qualifying event (29 U.S.C. 1162(2)(A)).

The Department of Labor says you usually pay the full premium amount, "unless your employer agrees to cover some or all of it as part of your separation." That makes a COBRA premium subsidy one item you can ask about in a severance negotiation. You generally have at least 60 days to elect COBRA, ending no earlier than 60 days after the later of the date your coverage ends or the date of your election notice (29 U.S.C. 1165(a)(1)). Your employer generally must notify the plan administrator within 30 days of your termination (29 U.S.C. 1166(a)(2)). A termination for gross misconduct is not a COBRA qualifying event (29 U.S.C. 1163(2)). Check the notice your plan sends you and act within the deadline it gives.

How to read and negotiate a severance offer

A severance offer is usually a contract you are free to accept, decline or try to change. Nothing below assures a better offer; an employer can refuse to negotiate and, outside the state mandates above, can withdraw an offer. These are the points worth checking before you sign.

1. Separate what you are owed from what you are offered. Your final wages are owed whether or not you sign anything, and some states set deadlines for paying them; see final paycheck laws by state. If you are in Maine or New Jersey and the layoff is covered, statutory severance is owed too. If federal or state WARN applies and you did not get the required notice, back pay may be owed. A release that asks you to give up something you are already entitled to deserves a closer look, and for workers 40 and older federal law requires the payment for an ADEA waiver to be in addition to anything already owed (29 U.S.C. 626(f)(1)(D)).

2. Read exactly what you are releasing. Look for which claims are released (all claims, or only some), whether the release covers claims you do not yet know about, and whether it releases only your employer or also related companies and individuals. Look for anything that seems to stop you from filing an agency charge; under 29 U.S.C. 626(f)(4) a waiver cannot be used to interfere with an EEOC charge.

3. Check the deadlines. If you are 40 or older and the agreement releases age claims, you should have at least 21 days to consider it, or 45 days in a group layoff, and 7 days to revoke after signing. If you were laid off as part of a group, check that the age and job-title disclosures are attached. Some states add their own time periods for certain terms, such as California's five business days to consult a lawyer.

4. Understand how and when you will be paid. Is it a lump sum or salary continuation? What conditions apply, such as returning property or complying with a non-compete? How the payment is structured can change how your state treats it for unemployment, so compare the terms with your state's rule.

5. Look at the other terms. Confidentiality, non-disparagement, non-compete, non-solicitation, cooperation and clawback clauses can matter as much as the amount. The McLaren Macomb rule and state laws above limit some of these terms.

6. Consider what else you can ask for. Depending on your situation, terms you can ask about include the amount, the payment timing, a COBRA premium subsidy, outplacement services, an agreed reference or neutral reference policy, how the departure is described, release from a non-compete, and treatment of unvested benefits. Ask in writing and get any change in the final written agreement.

7. Keep records. Keep the offer letter, the agreement, any plan document or handbook policy that mentions severance, your pay records and any layoff notice. If your employer later fails to pay, those documents show what was promised.

8. Get advice for your situation. The agreement itself may advise you to consult a lawyer, and for ADEA releases federal law requires that advice in writing. A legal aid office, a lawyer licensed in your state or the state labor agency named on your state's page can help with a specific offer.

Recent changes and pending bills

Recently enacted:

• Nebraska enacted a state WARN Act (LB921), approved by the Governor April 14, 2026, in effect since July 18, 2026: 90 days' notice from employers with 100 or more employees, enforced by civil penalty.
• Virginia SB 170 (2026 Acts ch. 883), effective July 1, 2026, makes a non-compete in a covered agreement unenforceable after a discharge without severance or other monetary payment, unless for cause.
• Washington ESHB 1155 (ch. 149, Laws of 2026) voids all non-competes from June 30, 2027. Washington's state WARN law took effect July 27, 2025.
• Illinois amended the Workplace Transparency Act effective January 1, 2026, adding conditions on confidentiality terms in termination agreements.

Pending, not law (as of October 7-8, 2026):

• New York: the No Severance Ultimatums Act (S372A/A6480A) passed the Senate on February 11, 2026 and the Assembly on June 1, 2026, with no delivery to the governor, signature or veto shown. A618/S496 and the Wage Payment Integrity Act (S2236A/A2222A) have also passed both houses. The governor can still sign or veto these bills once they are delivered. S2595/A7781A, which would require severance of one week per year in WARN layoffs plus four weeks if notice was late, is in committee.
• Pennsylvania: SB 321, the Mandatory Severance for Mass Layoffs Act (one week per year plus four more weeks for short notice), has been in committee since February 26, 2025. HB 815 would create a Pennsylvania WARN Act and is in committee.
• Illinois: HB3820 would require one week of severance per year plus four weeks for short WARN notice, and HB3635 would add severance expressly to the definition of wages. Both were re-referred to the Rules Committee on March 21, 2025.
• Massachusetts: H.2127 would require 60 days' notice of large layoffs and is pending.
• Missouri: HB 403 (2025) and HB 2285 (2026) would have required layoff notice and severance and stalled in committee.

Related

• Final paycheck laws by state
• Unemployment benefits by state
• At-will employment by state
• Maine severance pay laws
• New Jersey severance pay laws

Disclaimer: This guide is general legal information, not legal advice. It covers federal law (the Fair Labor Standards Act, ERISA, the WARN Act, the Older Workers Benefit Protection Act, the Speak Out Act, the National Labor Relations Act, federal tax rules and COBRA) and summarizes the severance, layoff-notice and unemployment rules of the 50 states and the District of Columbia as verified October 7-8, 2026. Laws and agency positions change. For advice about your own severance offer or layoff, contact your state labor agency, a legal aid office, or a lawyer licensed in your state.

Last updated: October 8, 2026.

Frequently Asked Questions

Is severance pay required by law?

Not under federal law: the Department of Labor says the Fair Labor Standards Act has no severance requirement. A few states require a payment in specific closing or layoff situations, including Maine (26 M.R.S. 625-B) and New Jersey (N.J.S.A. 34:21-2).

Which states require severance pay?

Maine and New Jersey require one week of pay per year of service after a covered closing or mass layoff. Hawaii requires a dislocated worker allowance of up to four weeks after a covered closing (HRS 394B-10), and Vermont imposes severance pay as a penalty for violating its layoff-notice rules, which require 45 days' notice to the state and 30 days' notice to employees (21 V.S.A. 415).

How much severance pay am I owed?

No federal law sets an amount, so outside the state mandates the amount is whatever your employer's policy, plan or agreement says. Where a state does set one, Maine and New Jersey both use one week of pay per year of service.

Is the WARN Act the same as severance?

No. Federal WARN requires 60 days' notice before a covered plant closing or mass layoff, and an employer that skips it owes back pay and benefits for up to 60 days, capped at half the days you were employed (29 U.S.C. 2104(a)).

Can my employer take back a promised severance payment?

A promise in a contract, handbook or policy can be enforceable as a contract, and in states such as Texas, Wisconsin, Pennsylvania and North Carolina the wage-payment statute names severance as wages. Whether a particular promise binds your employer depends on its terms and your state's law.

How long do I have to sign a severance agreement?

If you are 40 or older and the agreement releases age-discrimination claims, federal law requires at least 21 days to consider it (45 days in a group program) and 7 days to revoke after signing (29 U.S.C. 626(f)(1)(F)-(G)). Otherwise the agreement sets its own deadline unless a state law adds one.

Can a severance agreement waive my right to file an EEOC charge?

No. Under 29 U.S.C. 626(f)(4), no waiver may be used to interfere with your right to file a charge with the EEOC or take part in an EEOC investigation or proceeding.

Is severance pay taxed?

Yes. IRS Publication 15 says severance payments are wages subject to Social Security and Medicare taxes, federal income tax withholding and FUTA tax, and lists severance among supplemental wages, which can be withheld at a flat 22% (37% above $1 million in a year).

Does severance pay affect unemployment benefits?

It depends on the state. California's EDD says severance pay generally does not reduce benefits, while Minnesota (Minn. Stat. 268.085, subd. 3b) and Nevada (NRS 612.420) make you ineligible for the weeks it covers; check your state's page.

Can I get COBRA after a layoff?

If your employer's group health plan is covered by federal COBRA, which generally excludes plans whose employers normally had fewer than 20 employees, you can usually continue coverage for up to 18 months after a termination (29 U.S.C. 1161, 1162). You usually pay the full premium unless your employer agrees to cover some of it as part of your separation.

Can a severance agreement include confidentiality and non-disparagement clauses?

Under the NLRB's McLaren Macomb decision (2023), offering severance that requires employees to broadly give up their labor-law rights, including through broad confidentiality and non-disparagement terms, violates the National Labor Relations Act. The NLRB General Counsel is asking the Board to overrule it in a pending case, so check its status.