Minnesota Severance — Statewide Non-Compete Ban, 6.25% Supp Tax, 2026

Minnesota WARN: what applies#

Minnesota has no enforceable state mini-WARN. Minn. Stat. § 116L.976 is an "early warning system" that directs the Minnesota Department of Employment and Economic Development (DEED) commissioner to ENCOURAGE — not require — advance notice of plant closings, substantial layoffs, or relocations to the commissioner, affected employees, any employee organization, and the local government unit. The statute defines a "plant closing" as a 30-day shutdown causing employment loss for 50 or more employees at a single site (excluding workers averaging fewer than 20 hours/week), but imposes no employer-to-employee advance-notice obligation and specifies no penalty for failing to give notice. The only mandatory employer duty under § 116L.976 is a post-event reporting obligation: if an employer provides notice under federal WARN or under the Minnesota statute, it must report the names, addresses, and occupations of terminated employees to the commissioner. Accordingly, the operative layoff-notice regime for private employers in Minnesota is federal WARN (29 U.S.C. §§ 2101–2109): employers with 100+ full-time employees must give 60 days advance written notice for a mass layoff (50+ affected at a single site constituting at least 33% of the active workforce, or 500+ regardless of percentage) or a plant closing, with back-pay liability for the days notice was not given.

How severance is taxed in Minnesota#

Minnesota has a graduated personal income tax with four brackets for 2026 — 5.35%, 6.80%, 7.85%, and 9.85% — but for supplemental wages the Minnesota Department of Revenue publishes a single flat withholding rate of 6.25% under the 2026 Minnesota Withholding Tax Instructions and Tables. Employers apply the 6.25% rate to severance, bonuses, and other supplemental payments made separately from regular wages, regardless of W-4MN allowances. On top of Minnesota 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 above the threshold). Year-end Minnesota liability is reconciled on Form M1 — if your total taxable income falls in the 7.85% or 9.85% bracket, your reconciled state tax will exceed the 6.25% that was withheld.

Calculate your situation#

Inputs default to Minnesota; adjust to your specifics.

FAQ#

Does Minnesota require severance pay?

No Minnesota statute requires private employers to pay severance. Minnesota also has no enforceable mini-WARN that would mandate pay-in-lieu of notice — Minn. Stat. § 116L.976 only encourages advance notice of layoffs and imposes no penalty for non-compliance. The only layoff-notice regime that carries teeth in Minnesota is federal WARN (29 U.S.C. §§ 2101–2109), which requires 60 days notice (or back pay for missed days) at employers of 100+ for covered mass layoffs and plant closings. Severance beyond federal WARN back pay is entirely employer-discretionary unless your employment contract or company plan requires it.

How is severance taxed in Minnesota?

Minnesota withholds severance at a flat 6.25% supplemental rate under the 2026 Minnesota Withholding Tax Instructions and Tables — this rate applies to supplemental wages (bonuses, severance, etc.) paid separately from regular wages, regardless of W-4MN allowances. Note that Minnesota's underlying income tax is graduated (5.35%, 6.80%, 7.85%, 9.85% for 2026), so if your total taxable income lands in the 7.85% or 9.85% bracket, the 6.25% withheld at payment will under-withhold and you will owe the difference on your Form M1. On top of MN withholding, you owe federal supplemental withholding of 22% (37% on cumulative amounts above $1,000,000 in the 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 married filing jointly).

Does Minnesota have a mini-WARN?

Not in the enforceable sense that California, New York, New Jersey, or Illinois do. Minn. Stat. § 116L.976 is titled an "early warning system" and directs DEED to encourage employers planning a plant closing, substantial layoff, or relocation to give advance notice to the commissioner, affected employees, any employee representative, and the local government — but the statute uses encouragement language, not a mandate, and contains no penalty for failure to give notice. The one mandatory employer duty is a post-event reporting obligation: an employer that does provide notice (under federal WARN or under § 116L.976) must report the names, addresses, and occupations of terminated employees to DEED. The operative advance-notice regime for private MN employers is federal WARN: 60 days notice at employers of 100+ for covered mass layoffs (50+ affected at a single site constituting 33%+ of the workforce, or 500+ regardless of percentage) and plant closings.

Can I collect Minnesota unemployment while receiving severance?

Generally no — at least not during the weeks severance is allocated to. Under Minn. Stat. § 268.085 subd. 3b, an applicant is NOT eligible for 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" if those payments are wages under § 268.035 subd. 29 or subject to FICA. The total payment is divided by your last regular weekly pay to determine the number of weeks disqualified. If the per-week severance amount is at or above your weekly benefit, you get no benefit that week; if it is less, your benefit is reduced by the severance amount. Disqualification runs from the later of separation or the date you first learned the employer would pay — the date the check actually arrives or the date you sign a release does not change the timing. This is the opposite of California (which protects severance recipients) and stricter than New Jersey or Massachusetts. File your MN unemployment claim through MN UI Online and disclose the severance amount, structure, and date you learned of it.

Are non-competes enforceable in Minnesota after a layoff?

No, if the non-compete was signed on or after July 1, 2023. Minn. Stat. § 181.988 (enacted as Laws 2023 ch. 53 art. 6 § 4, signed by Governor Walz May 24, 2023) made Minnesota the fourth state to broadly ban non-competes. The statute states that "any covenant not to compete contained in a contract or agreement is void and unenforceable" — and it applies to all employees and independent contractors regardless of income, including C-suite executives. Only two narrow exceptions are preserved: (1) covenants between buyer and seller in connection with the sale of a business, and (2) covenants among partners/members/shareholders in anticipation of business dissolution. The ban does NOT void non-solicitation agreements, non-disclosure agreements, or trade-secret protections, which remain enforceable. The statute is NOT retroactive — non-competes signed BEFORE July 1, 2023 remain governed by Minnesota common-law reasonableness review. Employees may seek injunctive relief to void violating provisions and may recover reasonable attorney fees. Practical implication for severance: if your employer offers severance specifically as consideration for a "non-compete release" on a post-July-1-2023 agreement, the underlying non-compete is already void by statute — you can negotiate that purported consideration away because the release has no real value to give up.

Does OWBPA apply in Minnesota, and does Minnesota add its own protection?

Yes on both. OWBPA is federal and applies in every state: if you are age 40 or older and the employer asks you to sign a waiver of age-discrimination claims, you must get 21 days to consider (45 days for group exits) and 7 days after signing to revoke. Minnesota also has its own age-discrimination protection under the Minnesota Human Rights Act (Minn. Stat. § 363A), which covers employers with 1+ employees — a much lower threshold than federal ADEA (20+). Separately, Minn. Stat. § 181.932 (the Minnesota Whistleblower Act) prohibits retaliation against employees who report violations of law and may give you additional leverage if your termination followed a protected report. A waiver of state-law claims under the MHRA does not need to meet OWBPA's 21/7-day timing — but the federal ADEA waiver portion still does for employees 40+, and most employers use the OWBPA timeline as the default.