New Mexico Severance — 5.9% Top Rate, HB 165 Healthcare Non-Compete Ban, 2026

New Mexico WARN: what applies#

New Mexico has no state-level mini-WARN notice statute. The operative layoff-notice regime for New Mexico private employers is federal WARN (29 U.S.C. §§ 2101–2109): employers with 100 or more full-time employees must give 60 days advance written notice for a mass layoff (50+ affected at a single site of employment constituting at least 33% of the active workforce, or 500+ regardless of percentage) or a plant closing. Notice must go to affected employees (or their representatives), the New Mexico Department of Workforce Solutions Rapid Response unit, and the chief elected official of the local government. Federal WARN penalties: back pay and benefits for each day notice was not given (up to 60 days), plus a $500/day civil penalty payable to the local government. New Mexico adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

How severance is taxed in New Mexico#

New Mexico operates a graduated individual income tax under NMSA § 7-2-7, with rates ranging from 1.5% to 5.9% across multiple brackets. The TOP marginal rate is 5.9% on New Mexico taxable income above approximately $210,000 single / $315,000 MFJ (per 2024 Tax Foundation reference; verify against the live 2026 NM TRD bracket table for any inflation-indexing or subsequent reform). New Mexico does not publish a separate flat supplemental withholding rate; the NM Wage Withholding Tax Tables (FYI-104) direct employers to apply the graduated tables to all wages including supplemental wages, producing an effective ~5.9% rate for top-bracket severance-recipient earners. New Mexico has no state-level local income tax on wages. On top of NM 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% to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ). New Mexico has no state disability insurance.

Calculate your situation#

Inputs default to New Mexico; adjust to your specifics.

FAQ#

Does New Mexico require severance pay?

No New Mexico statute requires private employers to pay severance. New Mexico has no state mini-WARN that would mandate pay-in-lieu of notice. The only layoff-notice regime that carries teeth in New Mexico is federal WARN (29 U.S.C. §§ 2101–2109), which requires 60 days advance notice (or back pay for missed days) at employers of 100+ for covered mass layoffs and plant closings — but WARN mandates notice, not severance. Severance is therefore employer-discretionary in New Mexico unless your employment agreement, written severance plan, or company handbook makes it mandatory. New Mexico is an at-will employment state. Note: New Mexico does require accrued PAID SICK LEAVE payouts under the Healthy Workplaces Act (NMSA § 50-17-1 et seq., effective July 1, 2022) — verify your specific accrued balance and any handbook payout rule.

How is severance taxed in New Mexico?

New Mexico operates a graduated individual income tax under NMSA § 7-2-7 with rates ranging from 1.5% to 5.9% across multiple brackets. The TOP marginal rate is 5.9% on New Mexico taxable income above approximately $210,000 single / $315,000 MFJ. Severance-recipient earners commonly fall in the top 5.9% bracket. New Mexico does NOT publish a separate flat supplemental withholding rate; the NM Wage Withholding Tax Tables (FYI-104) direct employers to apply the graduated tables to all wages including supplemental wages, producing an effective ~5.9% rate for top-bracket earners. New Mexico has no state-level local income tax on wages. On top of NM 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% to the wage base, Medicare 1.45% plus 0.9% additional Medicare on wages above $200,000 single / $250,000 MFJ). Year-end New Mexico liability is reconciled on Form PIT-1.

Does New Mexico have a mini-WARN statute?

No. New Mexico has no state-level mini-WARN that imposes employer notice obligations independent of federal WARN. The operative regime is federal WARN (29 U.S.C. §§ 2101–2109): 60 days advance notice at employers of 100+ for mass layoffs affecting 50+ at a single site that constitute at least 33% of the active workforce (or 500+ regardless of percentage). Notice goes to affected employees, the New Mexico Department of Workforce Solutions Rapid Response unit, and the chief elected local official. Federal WARN penalties: back pay and benefits for each day notice was not given (up to 60 days), plus a $500/day civil penalty payable to the local government. New Mexico adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

Does OWBPA apply in New Mexico?

Yes. OWBPA is federal (29 U.S.C. § 626(f)) and applies in all states. If you are age 40 or older and your New Mexico 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. The New Mexico Human Rights Act (NMSA § 28-1-1 et seq.) separately prohibits age discrimination (40+) by employers with 4 or more employees — a lower threshold than the federal ADEA's 20-employee minimum, so smaller New Mexico employers are still covered by state law. A release of state-law age claims under the NMHRA does not require OWBPA-compliant 21/45/7 procedures, but the federal ADEA release portion still does.

Can I collect New Mexico unemployment while receiving severance?

It depends on how the severance is structured. New Mexico's unemployment disqualification rules are at NMSA § 51-1-7 (Disqualification for benefits) and related sections of the New Mexico Unemployment Compensation Law. In practice, the NM DWS Unemployment Insurance Bureau treats severance pay based on allocation: severance designated as 'wages in lieu of notice' or salary continuation tied to a specific notice period typically offsets UI benefits week-by-week during the allocated weeks; a lump-sum severance not designated to specific weeks is more likely to be allocated to the separation date. Practical takeaways: (a) file your New Mexico UI claim with NM DWS on or shortly after your last day worked at jobs.state.nm.us 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) New Mexico's UI maximum weekly benefit amount is in the $562 range for 2026 — verify the live figure at dws.state.nm.us before relying on net-of-benefits figures.

Are non-competes enforceable in New Mexico after a layoff?

Depends on whether you are a HEALTHCARE PRACTITIONER. New Mexico's HEALTHCARE-PRACTITIONER non-compete ban is the headline distinction: NMSA §§ 24-1l-1 to 24-1l-4 (the Health Care Practitioner Restrictive Covenant Act, enacted by HB 165 of 2020) makes non-compete agreements UNENFORCEABLE against physicians, certified registered nurse anesthetists (CRNAs), certified nurse practitioners (CNPs), certified nurse-midwives (CNMs), dentists, and psychologists to the extent they restrict the right to practice in New Mexico. For HEALTHCARE-PRACTITIONER employees: your non-compete is likely UNENFORCEABLE — the non-compete release clause in your severance offer may be releasing nothing of real value. For NON-HEALTHCARE WORKERS: New Mexico non-compete law is common-law reasonableness — a covenant must (1) protect a legitimate business interest, (2) be reasonable in DURATION, (3) reasonable in GEOGRAPHIC scope, (4) reasonable in the SCOPE of restricted activities, and (5) be supported by adequate consideration. Leading case: Bowen v. Carlsbad Insurance & Real Estate, Inc., 104 N.M. 514, 724 P.2d 223 (1986). New Mexico courts have judicial blue-pencil authority. Confidentiality and non-solicitation provisions remain enforceable across both categories to the extent reasonable. Practical takeaway: confirm your worker classification before assigning value to a non-compete release.

How does the New Mexico Healthy Workplaces Act affect severance?

The New Mexico Healthy Workplaces Act (NMSA § 50-17-1 et seq., effective July 1, 2022) requires most private employers (regardless of size) to provide PAID SICK LEAVE accrued at 1 hour per 30 hours worked, capped at 64 hours per year. Under HWA, accrued paid sick leave carries over from year to year (subject to the cap), and unused accrued sick leave is generally NOT required to be paid out upon separation — but check your employer's handbook policy: many employers do pay out accrued sick leave as a matter of internal policy even though HWA does not require it. New Mexico does not have a separate statutory PFL or short-term disability program (unlike CA, NJ, NY, RI, WA, MA, CO, OR, CT, MD, DE, HI), so severance recipients in New Mexico do not have a parallel state-level paid-leave income source during a transition. The Healthy Workplaces Act is most relevant for severance recipients in two ways: (a) confirm whether any of your separation-period vacation/PTO/sick balance is paid out, and (b) NM HWA paid-leave entitlements end on the separation date — your severance is not also subject to HWA accrual.