Maryland Severance — ESA Mini-WARN, County Piggyback Tax, 2026

Maryland WARN: what applies#

Maryland has a state mini-WARN — the Economic Stabilization Act, Md. Code Lab. & Empl. §§ 11-301 to 11-306 — converted from a voluntary-guidelines regime to a MANDATORY notice statute with civil penalties by SB 780 (Chapter 407 of 2020 Maryland Laws, signed by Governor Hogan May 8, 2020, effective October 1, 2020). Maryland's regulations implementing the Act took effect October 13, 2025. Under § 11-301, 'employer' means any person, corporation, or other entity that employs at least 50 employees and operates an industrial, commercial, or business enterprise in Maryland. 'Reduction in operations' (§ 11-301(D)) includes (1) the relocation of part of an employer's operation, or (2) the shutdown of a workplace or a portion of operations that reduces the number of employees by at least 25 percent OR 15 employees, whichever is greater, over any 3-month period. Section 11-305(A) requires written notice AT LEAST 60 DAYS BEFORE initiating a reduction in operations to: all affected employees; bargaining representatives; part-time/short-tenure employees at the workplace; the Division's Dislocated Worker Unit; AND all elected officials in the jurisdiction. Section 11-306 authorizes a civil penalty of up to $10,000 per day of violation — markedly higher than federal WARN's $500/day.

How severance is taxed in Maryland#

Maryland income tax has TWO distinctive features that dominate severance-package math. (1) The top STATE marginal rate is 5.75% (Md. Code Tax-Gen. § 10-105) on Maryland taxable income above $250,000 single / $300,000 MFJ — a graduated structure from 2% to 5.75% across eight brackets. (2) Each county and Baltimore City levies a 'piggyback' LOCAL income tax administered by the Maryland Comptroller on the same return as the state tax, with 2026 rates from roughly 2.25% (low-tax counties) to 3.20% (Howard, Montgomery, PG, and several others at the top). Unlike Ohio's WORKPLACE municipal tax, Maryland's piggyback is a RESIDENT tax tied to where you LIVE on the last day of the tax year. The COMBINED effective state-plus-local rate for severance-recipient earners therefore typically lands in the 7.95%–8.95% range. Maryland's employer withholding guide does not publish a separate flat supplemental rate; employers apply the graduated method against the combined state-plus-local rate for the employee's resident county, or apply the percentage method against the same combined rate. Plus the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 for the year) and FICA.

Calculate your situation#

Inputs default to Maryland; adjust to your specifics.

FAQ#

Does Maryland require severance pay?

No Maryland statute generally requires private employers to pay severance. Maryland's Economic Stabilization Act (Md. Code Lab. & Empl. §§ 11-301 to 11-306) is a NOTICE statute — it mandates 60 days advance written notice for covered reductions in operations and authorizes civil penalties up to $10,000/day for non-compliance, but it does not require additional severance payments beyond the federal-WARN-style back-pay damages for inadequate notice. Maryland has no Maine-style or New Jersey-style statutory severance mandate. Severance itself is employer-discretionary in Maryland unless your employment agreement, handbook, or collective bargaining agreement makes it mandatory.

How is severance taxed in Maryland?

Maryland severance is taxed at the COMBINED state-plus-local rate for your county of residence. Maryland's STATE tax is graduated from 2% to 5.75% across eight brackets (Md. Code Tax-Gen. § 10-105) — with the 5.75% top marginal applying to Maryland taxable income above $250,000 single / $300,000 MFJ. ON TOP of state tax, each county and Baltimore City levies a 'piggyback' LOCAL income tax administered by the Maryland Comptroller on the same return, with 2026 rates from roughly 2.25% (low-tax counties) to 3.20% (Howard, Montgomery, PG, and others at the top). Maryland's piggyback is a RESIDENT tax — owed to the county where you LIVED on the last day of the tax year, NOT where you worked (this differs from Ohio's WORKPLACE municipal tax). The COMBINED effective state-plus-local rate for severance-recipient earners therefore typically lands in the 7.95%–8.95% range. Maryland's employer withholding guide does not publish a separate flat supplemental rate; employers apply the graduated method or percentage method against the combined state-plus-local rate for the employee's resident county. Plus the federal 22% supplemental rate (37% on cumulative amounts above $1,000,000 for the year) and FICA (Social Security 6.2% to the wage base, Medicare 1.45% on all wages, plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ). State and local tax are reconciled on your Maryland Form 502.

Does Maryland have a mini-WARN statute?

Yes. Maryland's mini-WARN is the Economic Stabilization Act, Md. Code Lab. & Empl. §§ 11-301 to 11-306. The Act was originally a VOLUNTARY guidelines regime, but SB 780 (Chapter 407 of 2020 Maryland Laws, signed by Governor Hogan May 8, 2020, effective October 1, 2020) CONVERTED IT TO A MANDATORY notice statute with civil penalties — the headline change is in § 11-304(b)(1), where 'voluntary' was struck out and 'MANDATORY' inserted. Maryland's regulations implementing the Act took effect October 13, 2025. Under § 11-301, the Act applies to employers with at least 50 employees (excluding individuals working less than 20 hours/week on average, or employed less than 6 months in the preceding 12 months). 'Reduction in operations' includes relocation OR a shutdown that reduces employees by at least 25% OR 15 employees, whichever is greater, over any 3-month period. Section 11-305(A) requires 60 days advance written notice to (1) affected employees, (2) bargaining representatives, (3) part-time/short-tenure employees at the workplace, (4) the Division's Dislocated Worker Unit, and (5) all elected officials in the jurisdiction. Section 11-306 authorizes a civil penalty of up to $10,000 per day of violation, with the Secretary of Labor considering gravity, employer size, good faith, and violation history — markedly higher than federal WARN's $500/day. Maryland also remains subject to federal WARN (29 U.S.C. §§ 2101–2109) for employers of 100+.

Does OWBPA apply in Maryland?

Yes. OWBPA is federal (29 U.S.C. § 626(f)) and applies in all states. If you are age 40 or older and your Maryland employer asks you to sign a waiver of age-discrimination claims under the ADEA in your severance agreement, the waiver is enforceable only if you receive at least 21 days to consider the agreement (45 days for group exits — a 'reduction in force' or 'exit incentive program'), and 7 days after signing to revoke. Group exits additionally require disclosure of the ages and job titles of all selected and non-selected employees in the decisional unit. Maryland's Fair Employment Practices Act (Md. Code State Gov't § 20-606) separately prohibits age discrimination by employers with 15 or more employees — same threshold as federal Title VII (lower than federal ADEA's 20). A release of state-law age claims under § 20-606 does not require OWBPA-compliant 21/45/7 procedures, but the federal ADEA release portion still does — the safer practice is to insist on the OWBPA timeline regardless.

Can I collect Maryland unemployment while receiving severance?

It depends on how the severance is structured. The Maryland Division of Unemployment Insurance generally treats severance based on allocation: severance paid as a lump sum that is NOT designated for a specific notice period typically does not delay UI benefits, while severance designated as 'wages in lieu of notice' or paid as salary continuation tied to a specific period is treated as wages and delays benefits during that period. Vacation, sick, and holiday pay paid at separation may also affect UI eligibility under DUI rules. Practical takeaways: (a) file your Maryland UI claim with the DUI on or shortly after your last day worked at labor.maryland.gov/unemployment-insurance to establish your benefit year; (b) fully disclose the severance amount, structure, and any employer designation when you apply and on weekly certifications — failure to report severance is fraud; (c) confirm the current Maryland UI maximum weekly benefit amount and any dependent allowances with the DUI before relying on net-of-benefits figures.

Are non-competes enforceable in Maryland after a layoff?

It depends on your wages. Maryland's Noncompete and Conflict of Interest Clauses Act, codified at Md. Code Lab. & Empl. § 3-716, makes non-competes UNENFORCEABLE against employees earning at or below specified wage thresholds — the threshold has been raised by multiple amendments (originally 1.5x state minimum wage in 2019, expanded by SB 328 in 2023 to 150% of the state minimum wage, and further amended in 2024 to cover healthcare workers up to a higher salary threshold; the current 2026 threshold is roughly $46,800/year — verify the live statute). For workers ABOVE the threshold, Maryland non-compete law applies the standard common-law reasonableness test: covenants must be reasonable in time, geography, and scope, ancillary to a legitimate business interest (trade secrets, confidential information, customer relationships, goodwill), and must not impose undue hardship on the employee or harm the public. Maryland's Court of Appeals (now the Supreme Court of Maryland) has historically been willing to MODIFY (blue-pencil) overbroad covenants under cases like Holloway v. Faw, Casson & Co., 319 Md. 324, 572 A.2d 510 (1990), rather than strike them entirely. Practical takeaway: in Maryland, the non-compete release clause in your severance offer is worth ASKING ABOUT — for low- and middle-wage workers, the underlying covenant may already be void by statute; for higher earners, a covenant reasonable in time and scope can be enforced, so negotiate duration/geography/scope reduction in exchange for signing.

How does Maryland's FAMLI program interact with my severance?

Maryland is building a state Family and Medical Leave Insurance program — FAMLI — codified at Md. Code Lab. & Empl. § 8.3-101 et seq., administered by the Maryland Department of Labor. The program has been DELAYED multiple times by the Maryland General Assembly through subsequent legislation. Verify the live contribution start date, benefit start date, and contribution rate at paidleave.maryland.gov before relying on specific figures — as of mid-2026 the timeline is still in flux. Once active, FAMLI is expected to provide up to 12 weeks of partial wage replacement for qualifying family- and medical-leave events, funded by joint employee-and-employer payroll contributions split per the most recent legislation. FAMLI contributions do NOT apply to severance paid after the employee's last day of work. Separately, Maryland's Healthy Working Families Act (effective February 11, 2018, codified at Md. Code Lab. & Empl. § 3-1301 et seq.) requires employers with 15+ employees to provide paid sick and safe leave, accruing at one hour per 30 hours worked — but that is sick/safe leave, distinct from FAMLI.