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

Minnesota law does not require employers to pay severance. We found no Minnesota statute that sets a severance amount or obliges a private employer to offer one, so severance in Minnesota is owed only when a contract, company plan or written policy promises it.

Where Minnesota law does speak to severance, it is about what happens after you receive it. Minn. Stat. 268.085, subd. 3b, makes you ineligible for unemployment benefits for the weeks your severance represents, even when you had to sign a release to get it. For how other states handle severance and the full federal rules, see our severance pay laws by state guide.

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

Jurisdiction scope: This article covers Minnesota law on severance pay: the unemployment rule in Minn. Stat. 268.085, subd. 3b, the early warning statute (Minn. Stat. 116L.976), the wage and limitation statutes that matter when promised severance goes unpaid (Minn. Stat. 181.13 and 541.07), and the settlement rule in Minn. Stat. 181.141. Federal rules appear only in short notes; the full federal layer is on our severance pay laws guide. For final-pay deadlines, see Minnesota final paycheck laws; for benefit amounts, see Minnesota unemployment benefits.

Is severance pay required in Minnesota?

No Minnesota statute we read requires it. We read the sections of Minnesota Statutes that deal with pay on discharge and resignation (181.13 and 181.14), pay frequency (181.101), settlements (181.141), the early warning law (116L.976), unemployment payments (268.085) and the wage limitation period (541.07). None creates a right to severance.

The Minnesota Department of Labor and Industry's two employee FAQ pages do not mention severance, and its wage-claim page covers only final-pay timing. A web search of the Legislature's 2025-2026 bills found no severance mandate. One limit on this finding: we could not run a keyword search across all of Minnesota Statutes, so this rests on the sections named above rather than a full-code search. The U.S. Department of Labor says federal law does not require severance either; it is "a matter of agreement between an employer and an employee."

Layoffs: Minnesota's early warning law does not require notice

Minnesota does not have its own law requiring advance notice of a plant closing or mass layoff. Minn. Stat. 116L.976, subd. 1, says the commissioner of employment and economic development "shall encourage" businesses considering a plant closing, substantial layoff or relocation to give notice "as early as possible" to the state, their employees, any union and local government.

The statute's one firm duty is a reporting duty. Under subdivision 2, an employer that gives notice under the federal WARN Act, or the voluntary notice the state encourages, must report to the commissioner the names, addresses and occupations of the employees who will be or have been terminated. The Department of Employment and Economic Development (DEED) says the law "encourages, but does not mandate" early notice.

For this law, a plant closing is a shutdown of a single site, or of facilities or operating units within it, that causes an employment loss for 50 or more employees in any 30-day period, not counting employees who work less than 20 hours a week. The statute creates no back pay.

Federal WARN is the rule with teeth. It requires 60 days' written notice from employers with 100 or more employees not counting part-time employees, or 100 or more employees who together work at least 4,000 hours a week not counting overtime, before a covered plant closing or mass layoff, and an employer that skips it owes back pay and benefits for up to 60 days (29 U.S.C. 2101-2102, 2104). Our severance pay laws guide explains who is covered.

Severance and Minnesota unemployment benefits

Severance delays Minnesota unemployment benefits, week by week. Minn. Stat. 268.085, subd. 3b, says:

"An applicant is not eligible to receive unemployment benefits for any week the applicant is receiving, has received, or will receive separation pay, severance pay, bonus pay, or any other payments paid by an employer because of, upon, or after separation from employment."

The rule applies when the payment counts as wages under Minnesota's unemployment law or is subject to Social Security and Medicare (FICA) tax. How it works under subdivision 3b:

• When the clock starts. The payment is applied from the later of your separation date or the date you first learn the payment is coming.
• Timing and releases do not matter. "The date the payment is actually made or received, or that an applicant must agree to a release of claims, does not affect the application of this paragraph."
• How many weeks. For a lump sum or for payments spread over time, the total is divided by your last level of regular weekly pay, which includes commissions, bonuses and overtime that were part of your ongoing regular pay (268.085, subd. 3(c), applied by subd. 3b).
• Full or partial weeks. A payment for a week that equals or exceeds your weekly benefit amount makes that week ineligible; a smaller payment reduces your benefit for that week.

Unemployment Insurance Minnesota (UI Minnesota) puts it this way for "severance pay, wages in lieu of notice, retention pay, or any other payments made because of separation from employment": you are not eligible "for the number of weeks of your regular pay the severance payment represents." The same page says the maximum amount of benefits available to you is not reduced; the payments are delayed. Benefit amounts and filing are on Minnesota unemployment benefits.

Unpaid promised severance in Minnesota

Is severance "wages" under Minnesota's final-pay law?

We found no Minnesota statute or appellate decision holding that it is. Minn. Stat. 181.13 makes "the wages or commissions actually earned and unpaid at the time of the discharge" immediately due on the employee's demand. An employer that does not pay within 24 hours after a written demand is in default and owes a penalty of the employee's average daily earnings for each day, up to 15 days.

That penalty is written for wages actually earned. Nothing we read applies it to severance, so this page does not say unpaid severance carries the 181.13 penalty. Severance timing is set by your agreement or plan. The final-pay rules themselves are on Minnesota final paycheck laws.

A contract claim, with a short deadline risk

A promised severance that goes unpaid is generally enforced as a contract claim in court. If the promise is part of an ongoing company severance plan, it can be an employee benefit plan under ERISA, the federal benefits law, which supersedes state laws that relate to covered plans (29 U.S.C. 1002(1), 1144(a)).

The deadline can be shorter than the six years Minnesota usually allows for contract claims (Minn. Stat. 541.05, subd. 1(1)). Minn. Stat. 541.07(5) allows two years to sue for "the recovery of wages," or three years if the employer fails to submit payroll records when the Department of Labor and Industry asks or the nonpayment is willful. That section defines wages as "all remuneration for services or employment, including commissions and bonuses."

In Kulinski v. Medtronic Bio-Medicus, Inc., 577 N.W.2d 499 (Minn. 1998), the federal district court and the Eighth Circuit had applied 541.07(5) to an employee's breach-of-contract claim for severance benefits under change-of-control agreements. Answering a certified question, the Minnesota Supreme Court held that Minnesota's savings statute saved that claim "from the statute of limitations governing wage claims." The Supreme Court did not itself decide whether 541.07(5) applies to severance contracts, so treat the two-year period as a real risk rather than a settled rule.

Where to go

The Labor Standards Division of the Minnesota Department of Labor and Industry handles wage claims. Its wage-claim page covers final-pay timing and does not mention severance, so for an unpaid severance promise the route is usually the agreement's own dispute terms, a legal aid office or a lawyer licensed in Minnesota.

What a Minnesota severance agreement can and cannot do

Harassment and abuse settlements

Minn. Stat. 181.141, enacted in 2023, says that when an employer and employee settle a sexual harassment or abuse claim, the money "cannot be provided as wages or severance pay to the employee regardless of whether the settlement includes a nondisclosure agreement." The statute controls how the payment is labeled; it does not by its own terms ban nondisclosure agreements. The label matters because money called severance delays unemployment benefits under 268.085, subd. 3b.

Unemployment rights cannot be released

A severance release cannot give up your right to Minnesota unemployment benefits. Under Minn. Stat. 268.192, subd. 1, any agreement to waive, release or commute rights to unemployment benefits is void, and an employer that requires or accepts such a waiver, or obstructs a claim, commits a misdemeanor. The severance itself still delays benefits under 268.085, subd. 3b.

Review periods, confidentiality and wage claims

Minnesota gives a rescission period for one kind of release. Under Minn. Stat. 363A.31, subd. 2, a release of claims under the Minnesota Human Rights Act may be rescinded within 15 calendar days after you sign it, and you must be told of that right in writing. The rescission must be in writing and delivered by hand, electronically if the employer consents, or by mail within the 15-day period; a mailed rescission must be postmarked within that period, properly addressed and sent by certified mail, return receipt requested.

The rule does not apply to a release given to settle a claim already filed with an agency or court, which is final when signed. We did not find a Minnesota statute banning confidentiality or non-disparagement terms in a separation agreement, and we did not find a Minnesota statute or case on whether a release in a severance agreement can waive unpaid-wage claims.

Non-compete terms in a severance agreement

Under Minn. Stat. 181.988, a covenant not to compete in an agreement signed on or after July 1, 2023, including a severance agreement, is void and unenforceable, apart from narrow sale-of-business and business-dissolution exceptions. The ban does not cover nondisclosure or customer nonsolicitation clauses.

Federal limits

If you are 40 or older, a release of federal age-discrimination claims must give you at least 21 days to consider it (45 in a group layoff) and 7 days to revoke it after signing (29 U.S.C. 626(f)). Our severance pay laws guide covers this and the other federal rules on releases.

Before signing, check three Minnesota-specific points: the number of weeks your payment represents, because that sets your unemployment delay; the 15-day right to rescind a release of Minnesota Human Rights Act claims under 363A.31; and any deadline in the agreement for raising a dispute, given the two-year risk under 541.07(5).

Pending bill: AI layoff notice (not law)

Two 2026 bills would add a new Minn. Stat. 181.9937 on "technological displacement." As engrossed in the Senate, SF 4576 would require employers with 50 or more full-time-equivalent employees in Minnesota to give 90 days' written notice before displacing 10 or more employees, or 10 percent of the unit's workforce if that is fewer, and to keep affected employees employed or on equivalent wages for a 90-day transitional period, with back pay of up to 90 days and a civil penalty of up to $10,000 per willful violation.

Neither bill is law. SF 4576 was introduced on March 18, 2026, and on April 7, 2026 the Labor committee recommended it pass as amended and re-referred it to State and Local Government; the revisor shows no later action. HF 4369 was introduced on March 16, 2026 and referred to committee, with no later action shown. We found no enacted 2024-2026 Minnesota law on severance or layoff notice.

Related

• Severance pay laws by state
• Minnesota unemployment benefits
• Minnesota final paycheck laws

Disclaimer: This article provides general legal information about Minnesota severance pay law (Minn. Stat. 268.085, 116L.976, 181.13, 181.141 and 541.07) and the federal laws that apply in Minnesota. It is not legal advice. The information was verified on October 8, 2026. For advice about your situation, contact Unemployment Insurance Minnesota about benefits, the Minnesota Department of Labor and Industry about final pay, a legal aid office, or a lawyer licensed in Minnesota.

Last updated: October 8, 2026.

Frequently Asked Questions

Is severance pay required by law in Minnesota?

No Minnesota statute we found requires it. Severance is owed only when a contract, company plan or policy promises it; federal law does not require it either.

Can I collect unemployment while receiving severance in Minnesota?

Not for the weeks the severance represents. Minn. Stat. 268.085, subd. 3b, makes you ineligible for those weeks, counted by dividing the payment by your last regular weekly pay; UI Minnesota says your maximum benefit amount is not reduced.

Does signing a release change how severance affects my Minnesota unemployment?

No. Minn. Stat. 268.085, subd. 3b(b), says a requirement to agree to a release of claims, and the date the payment is actually made, do not affect the rule.

Does Minnesota have a state WARN Act?

Not one that requires notice. Minn. Stat. 116L.976 encourages early notice of plant closings and layoffs and requires employers that give notice to report affected workers to DEED; the 60-day notice requirement comes from federal WARN, which generally covers employers with 100 or more full-time employees.

How long do I have to sue for unpaid severance in Minnesota?

It can be as short as two years. Minn. Stat. 541.07(5) sets two years (three if willful) for wage claims, and federal courts applied it to a severance contract claim in the Kulinski litigation; a lawyer licensed in Minnesota can say which period fits your claim.

Can a Minnesota harassment settlement be paid as severance?

No. Minn. Stat. 181.141 says a settlement of a sexual harassment or abuse claim cannot be provided as wages or severance pay, whether or not it includes a nondisclosure agreement.

Can I take back a Minnesota severance release after signing it?

For Minnesota Human Rights Act claims, yes, within 15 calendar days. Minn. Stat. 363A.31, subd. 2, lets you rescind that release in writing, delivered by hand, electronically with the employer's consent, or by certified mail postmarked within the 15 days; it does not apply to a release settling a claim already filed with an agency or court.