Maine Severance — 1-Week/Year Statutory Mandate, 5% Tax, 2026

Maine WARN: what applies#

Maine operates a hybrid regime that is structurally unique among U.S. states: federal WARN (29 U.S.C. §§ 2101–2109) supplies the 60-day notice rule for employers of 100 or more full-time workers, but Maine adds a separate statutory severance pay mandate under 26 M.R.S. § 625-B (Severance pay due to closing, substantial shutdown or relocation of a covered establishment). A "covered establishment" is any facility that has employed 100 or more persons at any time in the preceding 12-month period. When the employer closes, substantially shuts down, or relocates such an establishment, every eligible employee is entitled to severance pay at the rate of one week of pay for each year of employment, plus partial pay for any partial year, measured from the last full month of employment. Severance must be paid within one regular pay period after the employee's last full day of work — in addition to any final wages owed. An employer that violates § 625-B is liable to affected employees for the unpaid severance in any Maine state or federal court, and a single employee may sue on behalf of others similarly situated. Maine has no separate state-law notice period beyond federal WARN: the Maine Department of Labor / Work Source Maine WARN page directs covered employers to federal WARN for the 60-day notice obligation, and § 625-B operates independently as a separate, parallel severance-pay duty.

How severance is taxed in Maine#

Maine Revenue Services 2026 Withholding Tables publish a flat 5% supplemental wage withholding rate that an employer may use when severance, bonuses, or commissions are paid SEPARATELY from regular wages. If the severance is combined with regular wages on a single payment, the employer must instead use the regular graduated tables (the 2026 brackets are 5.80% up to $27,400 single / $54,850 MFJ, 6.75% on the next bracket, and 7.15% on income above $64,850 single / $129,750 MFJ), which typically produces a higher effective rate for severance-recipient earners. On top of Maine state withholding, severance is subject to the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 in a calendar year) and FICA (Social Security 6.2% up to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ). Year-end Maine liability is reconciled on Form 1040ME.

Calculate your situation#

Inputs default to Maine; adjust to your specifics.

FAQ#

Does Maine require severance pay?

Yes — Maine is one of only two states (with New Jersey) that statutorily mandates severance pay. Under 26 M.R.S. § 625-B (Severance Pay Due to Closing, Substantial Shutdown or Relocation of a Covered Establishment), any employer who closes, substantially shuts down, or relocates a "covered establishment" — defined as any facility that has employed 100 or more persons at any time in the preceding 12-month period — is liable to every eligible employee for severance pay at the rate of one week of pay for each year of employment, plus partial pay for any partial year, measured from the employee's last full month of work at that establishment. The severance is in addition to any final wages owed and must be paid within one regular pay period after the employee's last full day of work. An employer that fails to pay is liable in any Maine state or federal court, and a single employee can sue on behalf of others similarly situated. Unlike NJ-WARN (which is triggered by a covered "mass layoff" of 50+ employees in any 30-day period and combines notice with severance), Maine's mandate is keyed specifically to closings, substantial shutdowns, or relocations at the 100-employee establishment threshold — not to a percentage-based mass-layoff trigger. Comparable contractual severance from your offer letter or plan is in addition to (not in substitution for) the § 625-B minimum unless your contract explicitly says so.

How is severance taxed in Maine?

Maine Revenue Services publishes a flat 5% supplemental wage withholding rate in the 2026 Withholding Tables that an employer MAY use when severance is paid separately from regular wages — exercising the same option federal IRS Publication 15 gives at 22%. If your employer combines severance with a regular paycheck, Maine requires use of the regular graduated tables instead, with 2026 brackets at 5.80% (up to $27,400 single / $54,850 married filing jointly), 6.75% (up to $64,850 single / $129,750 MFJ), and 7.15% on income above those thresholds. Many severance-recipient earners fall in the 6.75% or 7.15% bracket, so combined payments typically produce a higher effective rate than separate payment + 5% flat. On top of Maine withholding, severance is subject to the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 in a calendar year) and FICA (Social Security 6.2% up to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single or $250,000 MFJ). Year-end Maine liability is reconciled on Form 1040ME — withholding is just a prepayment; what you owe depends on your full annual taxable income, deductions, and credits.

How does Maine's § 625-B severance mandate interact with federal WARN?

They run in parallel — § 625-B is a separate, independent obligation that is NOT satisfied by federal WARN notice. Federal WARN (29 U.S.C. §§ 2101–2109) requires employers of 100 or more full-time employees to give 60 days advance written notice for a covered plant closing (shutdown of a single site of employment, or one or more facilities or operating units within a single site, resulting in employment loss for 50+ during any 30-day period) or a mass layoff (employment loss for 500+ employees, or 50–499 employees if those laid off constitute at least 33% of the active full-time workforce). Notice goes to affected employees (or their representative), the state dislocated-worker unit, and the chief elected official of the local government. WARN remedies are back pay and benefits for each day notice was missed, up to 60 days, plus a $500/day civil penalty to the local government. 26 M.R.S. § 625-B, by contrast, imposes an affirmative severance-pay duty (one week per year of service, plus partial pay for any partial year) for any closing, substantial shutdown, or relocation of a 100-employee establishment — regardless of whether federal WARN notice was given or skipped. A Maine employer who gives full federal WARN notice still owes § 625-B severance; an employer who fails to give WARN notice owes both WARN back-pay damages AND § 625-B severance. The two regimes are cumulative, not alternative. There is no Maine-specific mini-WARN notice period separate from federal WARN — the Maine Department of Labor / Work Source Maine WARN page directs covered employers to federal WARN for the 60-day notice obligation.

Can I collect Maine unemployment while receiving severance?

Generally severance reduces Maine unemployment benefits during the period it covers, but the exact treatment turns on how the payment is allocated. The Maine Department of Labor Unemployment Claimants FAQ states that "termination or separation pay, bonus pay, and pensions are deducted" from weekly unemployment benefits "under certain conditions" — implementing the statutory rule at 26 M.R.S. § 1193 (the Maine Employment Security Law disqualification provisions). In practice, severance paid as wages in lieu of notice, or severance allocated by the employer to specific weeks following separation, is offset against UI benefits for those weeks; lump-sum severance not allocated to a specific period may or may not be offset depending on the MDOL Bureau of Unemployment Compensation's determination. Vacation pay, by contrast, is statutorily exempt from the offset for payments made on or after July 12, 2010 — Maine eliminated that interaction by legislation. Always disclose severance amounts, structure, and the date you learned of the payment when you file. File your initial claim at ReEmployME (reemployme.maine.gov) on or shortly after your last day of work. Failing to report severance, holiday pay, bonus, or vacation pay can result in a fraud charge under Maine UC rules.

Are non-competes enforceable in Maine after a layoff?

Only above an income floor and only when narrowly drawn. Maine enacted 26 M.R.S. § 599-A (Noncompete Agreements), effective September 19, 2019, which adopts three notable restrictions. (1) Wage floor: an employer may not require or permit an employee whose earnings are at or below 400% of the federal poverty level to enter a non-compete agreement at all — at 2026 federal poverty guidelines this threshold is roughly $62,000–$63,000 annually for a single-person household, with the exact number tied to FPL inflation. Any non-compete signed by a worker below that threshold is void on its face. (2) Notice and review period: an employer must notify an employee or prospective employee that a non-compete will be required BEFORE making an offer, and must provide the actual agreement at least 3 business days before the employee is required to sign — so you cannot lawfully be ambushed with a non-compete on Day 1 at a closing-of-deal meeting. (3) Effective-date restriction: a non-compete cannot take effect until one year after the start of employment OR six months after signing, whichever is later — meaning if you are laid off within the first year, the covenant likely has not yet attached at all. (4) Substantive narrowness: even above the wage threshold, the agreement is enforceable only to the extent it is reasonable and no broader than necessary to protect the employer's trade secrets, confidential information that does not qualify as a trade secret, or goodwill. (5) Enforcement: violations are civil violations subject to a minimum $5,000 fine, enforced by the Maine Department of Labor. Section 599-A also expressly prohibits "restrictive employment agreements" between employers (no-hire / no-poach agreements), with the same $5,000 minimum fine. Practical takeaway for severance: if you signed a non-compete while earning below the FPL-400% threshold, or if the employer skipped the 3-business-day notice, the covenant is likely unenforceable — meaning the "non-compete release" clause in your severance offer is releasing little or nothing, and you can negotiate that consideration down.

Can my employer fold the § 625-B statutory severance into its plan or offer letter severance?

Not unless the plan documents explicitly say so — and even then, an employer's plan cannot waive the § 625-B floor. Section 625-B operates as a statutory minimum: every eligible employee at a covered establishment that closes, substantially shuts down, or relocates is entitled to one week of pay per year of service (plus partial year). If your employment agreement, written severance plan, or negotiated separation offer provides more generous severance than the statutory floor — for example, two weeks per year, or four weeks per year of service, or a flat number of months — you receive the more generous amount, not the statutory minimum. If the plan or offer is silent or less generous than § 625-B, you are entitled to the § 625-B floor. An employer's plan may credit § 625-B severance against contractual severance only if the plan or agreement specifically and unambiguously says so (a "set-off" or "in lieu of" clause). General language like "this package is your complete severance" is generally insufficient to waive the statutory entitlement, because § 625-B creates a non-waivable obligation enforceable by employee lawsuit under the statute's private right of action. Practical tip: when you review a Maine severance offer following a closing, shutdown, or relocation, compute the § 625-B baseline first (weeks of pay = total years and partial years × your weekly rate) and confirm the offer is AT LEAST that amount — if not, the offer violates state law and you have leverage. The OWBPA review window (21 days, or 45 days for group exits) and 7-day revocation period applies on top if you are 40 or older.