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

Vermont law does not require employers to pay severance when a job ends. The one exception is a penalty: under the Notice of Potential Layoffs Act, an employer that closes a business or conducts a mass layoff without giving the state 45 days' notice owes each affected employee up to ten days of severance pay (21 V.S.A. 415(a)).

Outside that situation, severance is owed only if your employer promised it in a contract, policy or agreement. For how other states handle severance and the federal rules in depth, 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 Vermont's Notice of Potential Layoffs Act (21 V.S.A. 411-418), Vermont wage law as it bears on promised severance (21 V.S.A. 341, 342, 342a and 345), the unemployment rule for severance (21 V.S.A. 1344) and Vermont limits on separation-agreement terms, with short notes on the federal rules that apply in Vermont. It does not cover when your last regular paycheck is due; see Vermont final paycheck laws. It does not cover benefit amounts or how to file for unemployment; see Vermont unemployment benefits.

Is severance pay required in Vermont?

No. Vermont has no general severance law. To check, we searched the full text of Title 21 of the Vermont Statutes, the state's labor title, for "severance," "dismissal," "plant closing," "mass layoff" and "separation pay." The only severance provisions were the layoff-notice penalty in 21 V.S.A. 415 and the unemployment rule in 21 V.S.A. 1344. That search covered Title 21, not every title of Vermont law.

Federal law does not fill the gap. The U.S. Department of Labor says, "There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay," and treats severance as a matter of agreement between employer and employee.

So for most Vermont workers, severance depends on what the employer offered or promised. For when an employer may end a job at all, see our Vermont at-will employment page.

Vermont's layoff-notice law and its severance penalty

Vermont's Notice of Potential Layoffs Act took effect January 15, 2015 (2013 No. 125 (Adj. Sess.)). It requires advance notice of large closings and layoffs, and it is the only Vermont law that puts a severance figure on an employer.

Which employers and events are covered

The Act applies to an employer with:

• 50 or more full-time employees;
• 50 or more part-time employees who work at least 1,040 hours a year; or
• a combination of 50 or more full-time and part-time employees.

It is triggered by two kinds of events (21 V.S.A. ch. 5, subch. 3A):

• Business closing. The permanent shutdown of a facility, the permanent end of operations at one or more Vermont worksites that results in the layoff of 50 or more employees over a 90-day period, or a work stoppage affecting 50 or more employees that is not scheduled to resume within 90 days.
• Mass layoff. A permanent employment loss for at least 50 employees at one or more Vermont worksites in any 90-day period. Smaller losses within 90 days are added together unless they stem from separate and distinct causes.

An employee does not count as suffering an employment loss if the employer offered a transfer to a worksite within 35 miles, if the employee left earlier by voluntary separation or retirement, or if the employee was separated for unsatisfactory performance or misconduct (21 V.S.A. 411(6)).

Notice deadlines

The notice must give the approximate number and job titles of affected employees, the anticipated date and the affected worksites (21 V.S.A. 413(c)). When a business is sold, both the seller and the buyer must still comply (21 V.S.A. 413(d)). The Vermont Department of Labor summarizes the rule this way: employers closing or conducting mass layoffs of 50 or more employees over a 90-day period must notify the Secretary and the Commissioner "45 days prior to the effective closing or layoff date."

Note the two different periods. The 45-day notice goes to the two state officials; employees themselves are owed 30 days' notice under 413(b).

What the employer owes for short notice

An employer that violates the Act's notice requirement is liable to each employee who lost employment for:

"one day of severance pay for each day after the first day in the 45-day notice period required in subsection 413(b) of this subchapter, up to a maximum of ten days' severance pay" (21 V.S.A. 415(a))

The employer must also continue existing medical or dental coverage, for no more than one month after the employment loss, if that is needed to cover a delay in eligibility for other coverage. The amount owed is reduced by voluntary and unconditional payments to the employee, by payments to third parties or trustees for benefits for the same period, and by any liability paid under the federal WARN Act. If the employer proves it acted in good faith, the Commissioner may reduce the amount (21 V.S.A. 415).

Separately, the Commissioner may assess an administrative penalty of $500 for each day of deficient notice. The Commissioner may waive that penalty if the employer shows good cause, pays the section 415 amounts to all affected employees within 30 days from the date it enacts the closing or layoff, and pays any unpaid wages owed (21 V.S.A. 417). Every employer conducting a covered layoff must pay laid-off workers all wages and compensation owed as Title 21 requires (21 V.S.A. 413(f)).

Exceptions to the 45-day notice

The Act's exceptions (21 V.S.A. 414(a)) cover:

• a strike or lockout;
• an employer that was actively seeking capital that would have avoided the closing and believed in good faith that giving notice would have prevented it;
• business circumstances that were not reasonably foreseeable;
• a disaster beyond the employer's control; and
• the end of seasonal employment, or the completion of a project for which employees were hired for a limited time.

Even then, the employer must give as much notice as is practicable and tell the Commissioner why it could not meet the deadline; an employer that fails to do that is liable for the same severance amount (21 V.S.A. 414(b); 415(a)).

Nursing homes covered by certain licensing and federal Medicare and Medicaid closure rules are also excluded (21 V.S.A. 413(g)).

How the penalty is enforced

The Commissioner of Labor issues an order after an administrative hearing, and that order can be appealed to the Superior Court within 30 days (21 V.S.A. 415(d)). Neither the Commissioner nor a court may stop a closing or mass layoff from going forward (21 V.S.A. 416(d)), and the Act's remedies do not change any other contractual or statutory rights employees have (21 V.S.A. 418). The sections we read describe this administrative route; we did not establish whether an employee can also sue an employer directly under section 415.

How the Vermont law fits with federal WARN

The federal WARN Act applies on top of the Vermont statute. It requires 60 days' written notice from employers with 100 or more employees, not counting part-time workers (or 100 or more employees, counting part-time workers, who together work at least 4,000 hours a week, not counting overtime), before a covered plant closing or mass layoff (29 U.S.C. 2101-2102). Vermont reduces its own ten-day amount by any liability the employer pays under federal WARN (21 V.S.A. 415). Our severance pay laws guide explains the federal thresholds and back-pay rules.

Severance your employer promised

If your job ended in an ordinary layoff or firing, Vermont law gives you no severance of its own, and your right to it depends on what your employer promised.

Is promised severance "wages" in Vermont?

The answer is not settled. Vermont defines wages as "all remuneration payable for services rendered by an employee, including salary, commissions, and incentive pay" (21 V.S.A. 341(5)). Severance is not on that list, and we found no Vermont statute or court decision that classifies promised severance as wages, or that says it is not.

A separate provision covers benefits. Under 21 V.S.A. 345(b), "any employer who, pursuant to an oral or written employment agreement, is required to provide benefits to an employee shall be liable to the employee for actual damages caused by the failure to pay for the benefits." A knowing and willful failure that continues for 30 days can also bring a civil penalty of up to $5,000. We found no decision applying that section to severance.

If your severance comes from a formal company plan, federal law may control the claim instead. ERISA supersedes state laws that relate to covered employee benefit plans (29 U.S.C. 1144(a)).

Filing a claim with the Vermont Department of Labor

The Department's Wage and Hour Program handles unpaid-wage complaints. A complaint must be filed "not later than two years after the date the wages were due" (21 V.S.A. 342a(a)), and the Department's online claim form says, "You cannot file a claim for wages more than two years after the date they are due." The Commissioner investigates and may order collection. A party may appeal to the Department's administrative law judge within 30 days and then to the Employment Security Board.

The Department's sources do not say whether it accepts a claim for promised severance as an unpaid-wage complaint. Ask the Wage and Hour Program before relying on that route.

When promised severance must be paid

Vermont sets deadlines for final wages: an employee who is discharged "shall be paid within 72 hours of discharge," and an employee who quits is paid on the last regular payday (21 V.S.A. 342(b)). The statute does not mention severance, and we found no Vermont law setting a deadline for it. For final-paycheck rules, see Vermont final paycheck laws.

Severance and Vermont unemployment benefits

Severance delays Vermont unemployment benefits. Under 21 V.S.A. 1344(a)(5), you are disqualified for any week in which you are receiving or have received remuneration that includes severance pay. The statute says how the payments are assigned to weeks:

"Severance pay, back pay awards, and back pay settlements. These payments, awards, and settlements shall be allocated to the week(s) and in the manner as specified in the order or agreement, or, in the absence of such specificity, to the week(s) and in the manner that, in the judgment of the Commissioner, would be reasonable." (21 V.S.A. 1344(a)(5)(C))

The Vermont Department of Labor's Unemployment Insurance Claimant Handbook (February 2026) puts it plainly: "You cannot receive severance pay and unemployment benefits at the same time." It adds that a lump sum is allocated weekly "until exhausted in accordance with your typical weekly work schedule with that employer," and that if you have a severance agreement and apply for benefits, "that agreement MUST be provided to the Department."

So the way your agreement allocates the payment matters. For benefit amounts and how to file, see Vermont unemployment benefits.

What a Vermont severance agreement can and cannot include

Vermont has no general statute regulating severance agreements, but several provisions limit specific terms.

• Settling a sexual harassment claim. An agreement that settles a sexual harassment claim may not bar the employee from working for the employer or its affiliates. It must expressly state that it does not prohibit filing complaints with the Attorney General, a State's Attorney, the Human Rights Commission, the EEOC or another agency, testifying in or assisting with investigations, complying with discovery or testifying, or exercising labor-relations rights, and that it does not waive claims arising after it is signed. A provision that violates these rules is void as to the claimant (21 V.S.A. 495h(h)). That rule can reach a separation agreement that resolves a harassment claim.

• No-rehire clauses in a discrimination settlement. An agreement that settles a claim of employment discrimination under 21 V.S.A. 495(a) may not bar you from working for the employer or its parent, subsidiaries or affiliates, and a provision that does is void as to you (21 V.S.A. 495(i)).

• Conditions of employment. An employer may not require, as a condition of employment, an agreement that restricts opposing, disclosing, reporting or taking part in an investigation of sexual harassment, or that waives rights on a harassment claim (21 V.S.A. 495h(g)).

• Safety of minors and vulnerable adults. A confidential separation agreement may not stop disclosure to prospective employers and licensing bodies of facts that would lead a reasonable person to conclude the employee engaged in conduct jeopardizing the safety of a minor or vulnerable adult. Any provision in an agreement entered into on or after June 3, 2010 "that attempts to do so is void and unenforceable" (21 V.S.A. 306).

• Pay secrecy. An employer may not require, as a condition of employment, that you keep your wages secret, and may not require you to sign a waiver or other document that purports to take away your right to disclose your own wages or to ask about or discuss others' (21 V.S.A. 495(a)(7)(B)).

• Unemployment benefits. A release in a severance agreement cannot take away your right to unemployment benefits. Under 21 V.S.A. 1366, "No agreement by an employee to waive his or her right to benefit or any other right under this chapter shall be valid."

We found no Vermont statute giving you a set number of days to review a separation agreement or to revoke it after signing, and no Vermont rule on whether a private agreement can release a claim for unpaid wages.

Non-compete terms in a severance agreement

Vermont has no statute that bans non-compete agreements for most workers, so their enforceability is decided by Vermont courts case by case. The Vermont Supreme Court's general rule is that a restrictive covenant in employment will be enforced unless it is "contrary to public policy, unnecessary for protection of the employer, or unnecessarily restrictive of the rights of the employee" (Summits 7, Inc. v. Kelly (Vt. 2005)). Health care providers are the exception: for agreements entered into on or after July 1, 2026, a provision in an employment, partnership or other professional agreement that restricts a health care provider from practicing in any area for any period after the relationship ends is void (21 V.S.A. 495q, added by 2026 Act No. 177, Sec. 8e).

Federal limits that also apply

These federal rules apply in Vermont; our severance pay laws guide explains each:

• 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 (29 U.S.C. 626(f)).
• Sexual harassment and assault. Under the Speak Out Act, a nondisclosure or non-disparagement clause agreed to before such a dispute arises cannot be enforced in court when the conduct is alleged to violate federal, tribal or state law (42 U.S.C. 19403).
• Labor-law rights. The NLRB's McLaren Macomb decision, 372 NLRB No. 58 (2023), bars severance agreements that require employees to broadly give up their National Labor Relations Act rights. The NLRB's General Counsel is arguing to overrule it in Valley Radiology, P.A. (10-CA-324512), an open case, so the decision remains Board law until the Board acts.

Reading a severance offer in Vermont

Start by asking whether your job ended in a closing or a layoff of 50 or more workers. If it did, ask whether the employer gave the required notice, because an employer that missed the 45-day state notice can owe up to ten days of severance pay. If it did not, the offer is the employer's promise, so keep the letter, handbook or plan it comes from, and expect to hand any signed agreement to the Department of Labor if you claim unemployment. Our severance pay laws guide covers reading and negotiating an offer in general.

Recent changes and pending bills

We found no 2025-2026 bill on severance pay or layoff notice. We have not reviewed bills filed for the 2027 session. Check the Legislature's statute pages before relying on the text above.

Related

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

Disclaimer: This article provides general legal information about Vermont severance pay law (the Notice of Potential Layoffs Act, 21 V.S.A. 411-418; the wage statutes in 21 V.S.A. 341, 342, 342a and 345; the unemployment rule in 21 V.S.A. 1344; and 21 V.S.A. 306, 495, 495h and 495q) and the federal laws that apply in Vermont. It is not legal advice. The information was verified on October 8, 2026. For advice about your situation, contact the Vermont Department of Labor, a legal aid office or a lawyer licensed in Vermont.

Last updated: October 8, 2026.

Frequently Asked Questions

Is severance pay required by law in Vermont?

No, not for an ordinary layoff or firing. The only statutory severance in Vermont is up to ten days' pay owed when a covered employer closes a business or conducts a mass layoff without the 45-day state notice (21 V.S.A. 415(a)); otherwise severance is owed only if your employer promised it.

How much severance does Vermont require if my employer skipped the layoff notice?

One day of severance pay for each day after the first day of the 45-day notice period, up to ten days, plus up to one month of continued medical or dental coverage if needed (21 V.S.A. 415(a)). The amount is reduced by voluntary unconditional payments and by liability paid under the federal WARN Act.

How much notice must a Vermont employer give before a mass layoff?

45 days to the Secretary of Commerce and Community Development and the Commissioner of Labor, and 30 days to the affected employees, their bargaining agent and the town's chief elected or administrative officer (21 V.S.A. 413(b)). Federal WARN separately requires 60 days, generally from employers with 100 or more full-time employees (29 U.S.C. 2101(a)(1), 2102(a)).

Does the Vermont layoff law apply to small employers?

No. The Notice of Potential Layoffs Act covers 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 (21 V.S.A. ch. 5, subch. 3A).

Can I collect unemployment while receiving severance in Vermont?

Not for the same weeks. Severance is allocated to weeks under 21 V.S.A. 1344(a)(5)(C), and the Department of Labor's Claimant Handbook says you cannot receive severance and benefits at the same time and that a lump sum is allocated weekly until it is exhausted.

Is severance considered wages in Vermont?

Vermont's statute defines wages as remuneration for services, including salary, commissions and incentive pay, and does not mention severance (21 V.S.A. 341(5)). We found no Vermont statute or court decision deciding the question.

How long do I have to file an unpaid wage claim in Vermont?

A wage complaint to the Department of Labor must be filed no later than two years after the date the wages were due (21 V.S.A. 342a(a)). The Department's sources do not say whether it treats unpaid promised severance as wages.

Does Vermont give me time to review a severance agreement?

We found no Vermont statute setting a review or revocation period. If you are 40 or older, federal law requires at least 21 days to consider a release of age claims (45 days in a group layoff) and 7 days to revoke it after signing (29 U.S.C. 626(f)).