Illinois Severance Pay Laws (2026): Is Severance Required?

No. Illinois has no law that requires an employer to pay severance. The one layoff payment Illinois law imposes is back pay under the Illinois Worker Adjustment and Retraining Notification Act (820 ILCS 65): a covered employer that orders a mass layoff, relocation or employment loss without 60 days of written notice owes each affected employee back pay and benefits for the violation period, capped at 60 days or half the days the employee worked there, whichever is smaller (820 ILCS 65/10, 65/35).

When an employer has promised severance, Illinois's Wage Payment and Collection Act can reach it. The Act's definition of "final compensation" includes "any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties" (820 ILCS 115/2). For how other states handle severance, see our severance pay laws by state guide.

Information last verified on October 6, 2026. This article has not been reviewed by a licensed lawyer.

Jurisdiction scope: This article covers Illinois law on severance pay: the Illinois WARN Act (820 ILCS 65), promised severance under the Wage Payment and Collection Act (820 ILCS 115), and confidentiality limits on termination agreements in the Workplace Transparency Act (820 ILCS 96), with short notes on the federal rules that apply in Illinois; the full federal rules are on our severance pay laws guide. It does not cover when your last regular paycheck is due; see Illinois final paycheck laws. It does not cover benefit amounts; see Illinois unemployment benefits.

Is severance pay required in Illinois?

No Illinois statute requires an employer to pay severance. We read the Illinois WARN Act (820 ILCS 65, sections 1 through 40) and sections 2 and 5 of the Wage Payment and Collection Act on the General Assembly's official site. The WARN Act requires notice, and back pay when notice is missing; the wage act covers pay owed under a contract or agreement. Neither creates a free-standing right to severance. The Government Severance Pay Act, which covers only public employers, says it creates no entitlement to severance without a contract, and caps contractual severance from a unit of government at 20 weeks of compensation, with none for an employee fired for misconduct (5 ILCS 415/10).

A pending bill points the same way: HB3820 would add a severance requirement to the Illinois WARN Act, which means no such requirement exists today (see the pending legislation section below). We did not run a keyword search across every chapter of the Illinois Compiled Statutes, so this is a finding for the laws named here rather than an exhaustive one. Federal law does not fill the gap: the U.S. Department of Labor says the Fair Labor Standards Act contains no severance requirement.

That leaves four places severance money can come from in Illinois: a contract or offer letter, a company severance plan or policy, a separation agreement offered at the exit, or Illinois WARN back pay when a covered employer skipped the notice. Whether you could be let go at all is a separate question, covered on our Illinois at-will employment page.

The Illinois WARN Act: 60 days' notice or back pay

The Illinois WARN Act is stricter than the federal WARN Act in who it covers, though both require 60 days of notice. Its core rule: "An employer may not order a mass layoff, relocation, or employment loss unless, 60 days before the order takes effect, the employer gives written notice" (820 ILCS 65/10(a)).

A part-time employee, for the Illinois count, is one who averages fewer than 20 hours a week or has worked fewer than 6 of the prior 12 months (820 ILCS 65/5(e)). Job losses within a 90-day period can be added together to reach the thresholds (820 ILCS 65/25).

Notice goes to affected employees or their representatives, to the Illinois Department of Commerce and Economic Opportunity (DCEO), and to the chief elected official of each municipality and county involved (820 ILCS 65/10(a)). The 2-year rule for power plant and coal mine owners comes from P.A. 102-662, effective September 15, 2021.

When less notice is allowed

For a plant closing only, the Act excuses notice when the Illinois Department of Labor determines that the employer was actively seeking capital or business that would have avoided the closing, or that the need for notice was not reasonably foreseeable (820 ILCS 65/15(a)). Unlike the federal WARN Act's exception for unforeseeable business circumstances, the Illinois exception does not cover a mass layoff. Notice is also not required for the closing of a temporary facility or a layoff at the completion of a particular project, when the employees were hired knowing the job would last only that long, or for a strike or a lockout not intended to evade the Act (820 ILCS 65/15(c)). An employer relying on an exception must still give as much notice as is practicable, with a brief statement of the reason (820 ILCS 65/15(d)). Notice is also not required when a closing or layoff results from a physical calamity, terrorism or war (820 ILCS 65/10(c)).

What an employer owes for skipping notice

An employer that violates the notice rule owes each affected employee 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 the cost of benefits (820 ILCS 65/35). The violation period is capped at 60 days or half the number of days the employee was employed, whichever is smaller.

That amount is reduced by wages the employer paid for the violation period, voluntary and unconditional payments to the employee, payments to benefit plans, and any liability the employer pays under federal WARN (820 ILCS 65/35). The Director of Labor determines the liabilities (820 ILCS 65/30(f)).

Separately, an employer that fails to notify DCEO and the local government faces a civil penalty of up to $500 for each day of the violation, a penalty it avoids if it pays employees what it owes within 3 weeks (820 ILCS 65/40).

Federal WARN applies at the same time for employers with 100 or more employees, not counting part-time employees, or 100 or more employees, counting part-time employees, who together work at least 4,000 hours a week, not counting overtime, and its 60-day notice period runs concurrently with any notice period another statute requires (29 U.S.C. 2102, 2105). Our severance pay laws guide explains the federal rules in full.

Promised severance under the Illinois Wage Payment and Collection Act

Illinois law gives you no right to severance, but it can help you collect severance an employer promised. The Wage Payment and Collection Act defines final compensation for a separated employee as wages, salaries, earned commissions, earned bonuses, and earned vacation and holidays, "and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties" (820 ILCS 115/2).

The statute does not use the word severance. Its text supports treating severance owed under a contract or agreement as final compensation, but we did not review an Illinois court decision that holds so, and nothing here should be read as saying how a court would decide a particular claim.

If your severance comes from a formal company plan rather than an individual agreement, federal law may govern it instead. ERISA supersedes state laws that relate to covered employee benefit plans (29 U.S.C. 1144(a)), and the U.S. Department of Labor says its Employee Benefits Security Administration may assist an employee who did not receive severance benefits under an employer-sponsored plan.

When must severance be paid in Illinois?

Final compensation must be paid at the time of separation if possible, and "in no case later than the next regularly scheduled payday for such employee" (820 ILCS 115/5). Severance reaches this deadline only through the final compensation definition, and the statute does not say whether a severance agreement can set its own installment schedule.

The same deadline governs your last regular paycheck, accrued vacation and other final pay; our Illinois final paycheck laws page covers those rules in detail. When final compensation is not paid on time, the employee is entitled to damages of 5 percent of the underpayment for each month it remains unpaid (820 ILCS 115/14(a)).

How to claim unpaid severance in Illinois

You have two routes under the wage act, and you must pick one. You can file a wage claim with the Illinois Department of Labor, or you can sue in circuit court without first going through the Department (820 ILCS 115/11). The Act does not allow both a Department claim and a civil action for the same pay (820 ILCS 115/14).

The deadline for the Department route is short: "Complaints shall be filed within one year after the wages, final compensation, or wage supplements were due" (820 ILCS 115/11). In a civil action, a successful employee also recovers attorney's fees (820 ILCS 115/14).

We found nothing in the wage act sections we read that says whether a private severance agreement can release a wage claim. That question is open in the sources we reviewed.

Severance and Illinois unemployment benefits

Severance generally does not stop Illinois unemployment benefits. Under the Illinois Department of Employment Security rule, pay for past services, or for pension or seniority rights lost at separation, is severance pay: it is not treated as wages for the period after you leave and does not make you ineligible, whether it is paid in a lump sum or in installments (56 Ill. Adm. Code 2920.45).

Pay in lieu of notice is different. If an employment agreement or a uniformly applied company policy required a set notice period and the employer paid your regular wages for that period instead, the payment counts as wages for the notice period, and you are ineligible for any week in which it exceeds your weekly benefit amount (56 Ill. Adm. Code 2920.40). Payments tied to a WARN Act violation are excluded from that rule. IDES looks at the nature and purpose of a payment, not what the employer calls it.

The federal government leaves this to each state: the U.S. Department of Labor says each state sets its own unemployment eligibility guidelines. Ask the Illinois Department of Employment Security how it will treat your payments when you file, and see Illinois unemployment benefits for benefit amounts and the claims process.

What an Illinois severance agreement can and cannot require

Illinois's main limit on severance agreements is the Workplace Transparency Act, which restricts confidentiality terms about alleged unlawful employment practices. Under 820 ILCS 96/1-30, as amended by P.A. 104-320 effective January 1, 2026, a settlement or termination agreement may include that kind of confidentiality only if all of these conditions are met:

• Confidentiality is the employee's documented preference and is mutually beneficial to both parties.
• The employer notifies the employee in writing of the right to have an attorney review the agreement before signing.
• The employee receives separate, bargained-for consideration for the confidentiality.
• The agreement does not waive claims that accrue after it is signed.
• The employee gets "a period of 21 calendar days to consider the agreement before execution," and may sign sooner voluntarily.
• The employee has 7 calendar days after signing to revoke, unless that right is knowingly waived.

An employer may not unilaterally include a clause that bars truthful statements about unlawful employment practices, and a confidentiality term that does not meet these conditions is void and severable (820 ILCS 96/1-30). The Act still permits a release of claims that arose before the agreement was signed (820 ILCS 96/1-30(d)).

A related section governs conditions of employment rather than exit agreements. Under 820 ILCS 96/1-25, a unilateral condition of employment or continued employment that bars truthful statements about alleged unlawful employment practices, or waives or diminishes claims about them, is void; a mutual condition is allowed only with written, knowing, bargained-for consideration.

An employee who successfully challenges an agreement under the Act can recover remedies under 820 ILCS 96/1-35. Two amendments effective January 1, 2026, P.A. 104-23 and P.A. 104-320, add compensatory or consequential damages beyond fees and costs, and the General Assembly's site currently posts more than one version of that section, so check its current text before relying on a specific remedy.

A release in a severance agreement cannot take away your right to unemployment benefits. Under 820 ILCS 405/1300(A), except as the section otherwise provides, "any agreement by an individual to waive, release or commute his rights under this Act shall be void," and 820 ILCS 405/1600 bars an employer from requiring or accepting "any waiver of any right under this Act by an individual in his employ."

Non-compete and non-solicit terms

A non-compete or non-solicit in a severance agreement is void under the Illinois Freedom to Work Act unless the employer advises you in writing to consult a lawyer and gives you at least 14 calendar days to review it (820 ILCS 90/20). A non-compete is also void if your actual or expected annualized earnings are $75,000 or less, and a non-solicit if they are $45,000 or less, floors that rise to $80,000 and $47,500 on January 1, 2027 (820 ILCS 90/10).

Federal limits that also apply

These federal rules sit on top of the Illinois Act; our severance pay laws guide explains each in full:

• Workers 40 and older. A release of federal age-discrimination claims must give you at least 21 days to consider it (45 days in a group layoff) and 7 days to revoke it after signing, among other requirements (29 U.S.C. 626(f)).
• Labor-law rights. The National Labor Relations Board's McLaren Macomb decision, 372 NLRB No. 58 (2023), bars severance agreements that require employees to broadly give up their rights under the National Labor Relations Act. In memo GC 26-04 (August 26, 2026) the NLRB's General Counsel said she is arguing to overrule it in Valley Radiology, P.A. (10-CA-324512), a case still open, so the decision remains Board law until the Board acts.

Reading an Illinois severance offer

Check first whether the agreement keeps any alleged unlawful employment practice confidential; if it does, the Workplace Transparency Act conditions above apply, including the written notice that you may have an attorney review it. Keep a copy of the offer letter, plan or agreement that promises the money, because a wage act claim depends on compensation owed under a contract or agreement. If you were part of a layoff, compare the timing to the 60-day Illinois WARN notice rule before you sign. Our severance pay laws guide has general guidance on reading and negotiating an offer.

Pending Illinois legislation (not law)

HB3820 (104th General Assembly) would add a new section 11 to the Illinois WARN Act requiring severance of one week of pay for each full year of employment for a terminated employee, plus 4 additional weeks if the employer gives short WARN notice, with provisions for collectively bargained agreements. Rep. Gregg Johnson introduced it on February 18, 2025. Its last action, on March 21, 2025, re-referred it to the Rules Committee under Rule 19(a). It has not passed either chamber and is not law.

HB3635 (104th General Assembly, Rep. Daniel Didech) would amend the Wage Payment and Collection Act so that wages expressly include severance owed under a separation or severance agreement or an employer policy. It was re-referred to the Rules Committee on March 21, 2025 and is not law.

Related

• Severance pay laws by state
• Illinois final paycheck laws
• Illinois unemployment benefits
• Illinois at-will employment laws

Disclaimer: This article provides general legal information about Illinois severance pay law (the Illinois WARN Act, 820 ILCS 65; the Wage Payment and Collection Act, 820 ILCS 115; and the Workplace Transparency Act, 820 ILCS 96) and the federal laws that apply in Illinois. It is not legal advice. The information was verified on October 6, 2026. For advice about your situation, contact the Illinois Department of Labor, a legal aid office or a lawyer licensed in Illinois.

Last updated: October 6, 2026.

Frequently Asked Questions

Is severance pay required by law in Illinois?

No. No Illinois statute requires an employer to pay severance. The Illinois WARN Act requires 60 days of written notice before a covered layoff or closing and back pay only when the employer skips that notice (820 ILCS 65/10, 65/35).

Does the Illinois WARN Act require severance?

No. It requires notice, and an employer that violates it owes back pay and benefits for up to 60 days or half the days you were employed, whichever is smaller (820 ILCS 65/35). HB3820, which would add one week of severance per year, is stalled in the Rules Committee.

Which Illinois employers must give WARN notice?

Employers with 75 or more employees not counting part-time workers, or 75 or more employees who together work at least 4,000 hours a week, not counting overtime (820 ILCS 65/5(c)). Federal WARN generally starts at 100 full-time employees.

How much notice does an Illinois employer have to give before a mass layoff?

At least 60 days of written notice to affected employees or their representative, the Department of Commerce and Economic Opportunity, and local chief elected officials (820 ILCS 65/10(a)). Owners of an investor-owned electric generating plant or a coal mining operation must give 2 years.

Is severance considered wages in Illinois?

Promised severance fits the Wage Payment and Collection Act definition of final compensation, which includes any other compensation owed under an employment contract or agreement (820 ILCS 115/2). The statute does not name severance, and we did not find an Illinois court decision on the point.

When does an Illinois employer have to pay severance?

Final compensation is due at separation if possible and no later than the next regularly scheduled payday (820 ILCS 115/5). The statute does not say whether a severance agreement can set a later installment schedule.

How long do I have to file a claim for unpaid severance in Illinois?

A complaint with the Illinois Department of Labor must be filed within one year after the final compensation was due (820 ILCS 115/11). You can sue in circuit court instead, but you cannot pursue both a Department claim and a civil action (820 ILCS 115/14).

Can I get unemployment in Illinois if I receive severance?

Generally yes. Under the IDES rule, severance for past services does not make you ineligible and is not treated as wages for the period after you leave, whether paid in a lump sum or installments (56 Ill. Adm. Code 2920.45). Pay in lieu of a notice period required by an agreement or uniform company policy is treated as wages for that period, and blocks benefits for any week it exceeds your weekly benefit amount (56 Ill. Adm. Code 2920.40).

How long do I have to sign a severance agreement in Illinois?

No Illinois statute sets a review period for every severance agreement. If the agreement keeps alleged unlawful employment practices confidential, you get 21 calendar days to consider it and 7 to revoke (820 ILCS 96/1-30). A non-compete or non-solicit in it is void unless you get at least 14 calendar days to review it and written advice to consult a lawyer (820 ILCS 90/20), and workers 40 and older get federal review periods under 29 U.S.C. 626(f).

Can an Illinois severance agreement include a confidentiality clause?

Only on conditions. For alleged unlawful employment practices, confidentiality must be your documented preference, the employer must tell you in writing you can have a lawyer review it, and you must get separate consideration for it; a clause that does not comply is void and severable (820 ILCS 96/1-30).