Utah Severance — Flat 4.5% Tax, § 34-51-201 One-Year Non-Compete Cap, 2026

Utah WARN: what applies#

Utah has no state-level mini-WARN notice statute. The operative layoff-notice regime for Utah 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 Utah Department of Workforce Services 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. Utah adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

How severance is taxed in Utah#

Utah operates a FLAT 4.5% individual income tax effective January 1, 2025 (current as of January 1, 2026) under Utah Code § 59-10-104, as reduced from 4.55% to 4.5% by HB 106 of the 2025 General Session (signed March 2025, retroactive to January 1, 2025). Utah's rate has been on a multi-year reduction glidepath: 4.95% (2017–2021) → 4.85% (2022) → 4.65% (2023, per SB 59 of 2023) → 4.55% (2024) → 4.5% (effective 2025, current). The 4.5% flat rate applies to all Utah taxable income — Utah does not publish a separate flat supplemental withholding rate; the Utah Withholding Tax tables apply the same 4.5% flat rate to all wages including supplemental wages (severance, bonuses, commissions). Utah has no state-level local income tax on wages. On top of Utah 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).

Calculate your situation#

Inputs default to Utah; adjust to your specifics.

FAQ#

Does Utah require severance pay?

No Utah statute requires private employers to pay severance. Utah has no state mini-WARN that would mandate pay-in-lieu of notice. The only layoff-notice regime that carries teeth in Utah 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 Utah unless your employment agreement, written severance plan, or company handbook makes it mandatory. Utah is an at-will employment state.

How is severance taxed in Utah?

Utah operates a FLAT 4.5% individual income tax effective January 1, 2025 (current as of January 1, 2026) under Utah Code § 59-10-104, as reduced from 4.55% to 4.5% by HB 106 of the 2025 General Session. Utah's rate has been on a multi-year reduction glidepath: 4.95% (2017–2021) → 4.85% (2022) → 4.65% (2023, per SB 59 of 2023) → 4.55% (2024) → 4.5% (effective 2025, current). The same 4.5% flat rate applies to all wages including supplemental wages (severance, bonuses, commissions) — Utah does not publish a separate flat supplemental rate. Utah does not impose any state-level local income tax on wages. On top of Utah 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 Utah liability is reconciled on Form TC-40.

Does Utah have a mini-WARN statute?

No. Utah 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 Utah Department of Workforce Services 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. Utah adds no shorter notice, no lower employer-size trigger, and no statutory severance mandate.

Does OWBPA apply in Utah?

Yes. OWBPA is federal (29 U.S.C. § 626(f)) and applies in all states. If you are age 40 or older and your Utah 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 Utah Antidiscrimination Act (Utah Code § 34A-5-101 et seq.) separately prohibits age discrimination (40+) by employers with 15 or more employees — a lower threshold than the federal ADEA's 20-employee minimum, so smaller Utah employers are still covered by state law. A release of state-law age claims under UADA does not require OWBPA-compliant 21/45/7 procedures, but the federal ADEA release portion still does.

Can I collect Utah unemployment while receiving severance?

It depends on how the severance is structured. Utah's unemployment severance treatment lives at Utah Code § 35A-4-405 (Ineligibility for benefits) and related sections of the Utah Employment Security Act. In practice, the Utah Department of Workforce Services 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 Utah UI claim with Utah DWS on or shortly after your last day worked at jobs.utah.gov 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) Utah's UI maximum weekly benefit amount is in the $755 range for 2026 (one of the higher in the country) — verify the live figure at jobs.utah.gov before relying on net-of-benefits figures.

Are non-competes enforceable in Utah after a layoff?

Yes if reasonable and no more than ONE YEAR — this is Utah's headline non-compete distinction. Utah's Post-Employment Restrictions Act (Utah Code § 34-51-201, enacted by HB 251 of 2016, amended by HB 81 of 2018 broadcast-employee carve-out) imposes a STATUTORY ONE-YEAR CAP on post-employment non-compete duration. Under § 34-51-201, a post-employment non-compete is enforceable only if it is no more than ONE YEAR in duration after employment ends. The Act applies to non-compete agreements entered into on or after May 10, 2016. PRACTICAL IMPLICATION: any non-compete with a duration EXCEEDING one year is statutorily unenforceable as to the post-one-year portion. Utah courts have read this as a hard cap rather than a blue-pencil opportunity to narrow the covenant — see ManpowerGroup Public Sector, Inc. v. SAIC, 2015 UT App, and subsequent district-court applications. Section 34-51-202 separately voids non-competes against broadcast employees (newsroom workers, anchors, reporters) for the duration of their broadcast contract — a HB 81 of 2018 carve-out. Apart from the one-year cap, Utah non-compete law follows common-law reasonableness: a covenant must (1) protect a legitimate business interest (trade secrets, confidential information, customer relationships, goodwill), (2) be reasonable in GEOGRAPHIC scope, (3) reasonable in the SCOPE of restricted activities, (4) be supported by adequate consideration, and (5) not impose undue hardship. Confidentiality, non-solicitation, and trade-secret provisions are NOT subject to the § 34-51-201 one-year cap and remain enforceable to the extent reasonable. Practical takeaway: any Utah non-compete with a duration EXCEEDING one year is unenforceable beyond year one. The non-compete release clause in your severance offer may have meaningful value for the first year but no value for years 2+. Have an attorney review the specific covenant duration against Utah Code § 34-51-201 before assigning value.

How does the Utah one-year cap (§ 34-51-201) compare to other state non-compete limits?

Utah's § 34-51-201 ONE-YEAR statutory cap on non-compete duration is among the strictest duration limits in the U.S. By comparison: (1) California, North Dakota, Montana, Oklahoma, and Minnesota statutorily VOID most employer non-competes regardless of duration (the strongest protections); (2) Hawaii voids non-competes against technology-sector workers under HRS § 480-4(d); New Mexico voids non-competes against healthcare practitioners under NMSA §§ 24-1l-1 to 24-1l-4; (3) Nevada NRS § 613.195 imposes statutory reasonableness requirements PLUS limits enforceability to the severance pay period during reductions in force (§ 613.195(5)) and exempts hourly workers (§ 613.195(3)); (4) Maine 26 M.R.S. § 599-A restricts non-competes against workers earning at or below 400% of federal poverty level; (5) Most other states (Florida, Texas, Tennessee, Georgia, the Carolinas, etc.) evaluate non-competes under common-law reasonableness with no fixed statutory time cap, though courts typically reject covenants exceeding 2 years as facially unreasonable. Utah's hard one-year statutory cap is distinctive in being a BRIGHT-LINE statutory rule that courts cannot extend even where the employer can show the non-compete is otherwise reasonable. PRACTICAL TAKEAWAY: in Utah, year 2+ of any non-compete is unenforceable by statute. Push back on multi-year non-compete provisions in your severance agreement — they are unenforceable as written.