Severance Pay in Maryland: Are You Entitled?

Federal law does not mandate severance pay. The Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA) do not require employers to offer severance upon termination. However, the ADEA does impose strict requirements on severance waiver agreements: if an employer conditions severance on the employee signing a waiver of age discrimination claims, the waiver must be knowing and voluntary, written in plain language, provide at least 21 days to consider the agreement (45 days if part of a group reduction), and allow 7 days to revoke. The Equal Employment Opportunity Commission (EEOC) enforces these protections. Violations of ADEA severance waiver requirements can render the waiver unenforceable and expose the employer to damages. Otherwise, severance negotiations are contractual matters between the parties.

At the federal level, employers are free to offer or withhold severance as a business decision. Some employers use severance as a retention tool, a reward for loyalty, or as consideration for a separation agreement and general release of claims. The Department of Labor (DOL) does not oversee severance agreements, but the EEOC may scrutinize severance waivers that could have a discriminatory effect or that violate the ADEA's procedural requirements.

Maryland law does not require employers to pay severance under any circumstance. Maryland Code, Labor and Employment Article § 3-505 addresses final wage payment but does not mandate severance. The statute requires employers to pay employees all earned wages on the regular payday following separation, but "earned wages" refers to compensation for services actually performed, not severance payments. This distinction is critical: severance is not earned in the traditional sense—it is a gratuity or additional payment offered voluntarily or by contract.

However, Maryland recognizes the enforceability of employment contracts. If an employment agreement, written employee handbook, or other document creates an enforceable promise to pay severance, Maryland courts will enforce that promise as a breach of contract claim. The employee would need to establish: (1) the existence of a valid contract or binding policy that promised severance; (2) the specific terms and conditions under which severance would be paid; (3) the employer's breach of that obligation; and (4) damages suffered as a result.

Maryland courts apply general contract law principles, including the requirement that contract terms be sufficiently clear and definite. Vague references to severance (e.g., "employees may be eligible for severance") may not be enforceable as binding promises. In contrast, clear contractual language stating "upon termination without cause, the employee is entitled to X weeks of severance pay" would be enforceable.

Maryland is an at-will employment state, meaning either the employer or employee can terminate the relationship without cause and without advance notice. Severance pay does not change this default rule—it is simply an additional payment if the parties have agreed to it. Importantly, Maryland also applies a whistleblower protection statute (Maryland Code, Courts and Judicial Proceedings Article § 5-501 et seq.) that prohibits retaliation against employees who report violations of law. If an employer withholds promised severance as retaliation for whistleblowing, the employee may have both a breach of contract claim and a retaliation claim.

Maryland's lack of a severance requirement creates broad exceptions. First, no employer is required to offer severance at all, regardless of the circumstances of termination—whether termination is for cause, without cause, due to reduction in force, or even due to workplace closure. Second, even if an employee believes they "deserve" severance (e.g., due to length of service, company profitability, or industry custom), Maryland law provides no legal entitlement.

Third, if severance is promised but conditioned on signing a waiver of legal claims (a "separation agreement and general release"), special rules apply if the employee is 40 or older. Under the ADEA, any waiver of age discrimination claims must comply with federal requirements: the agreement must be in writing, in plain language, specifically reference age claims, give the employee at least 21 days to consider it (45 days if part of a group termination), allow 7 days to revoke it, and not waive claims that arose after the agreement was signed. Maryland courts will enforce releases that satisfy ADEA standards, but will not enforce age discrimination waivers that fall short of federal requirements.

Fourth, if severance is promised under a written employment contract but the employer unilaterally amends or eliminates the severance provision, Maryland courts will examine whether the amendment is valid. If the employer provides new consideration (e.g., continued employment) for the amendment, it may be enforceable. If the amendment occurs without the employee's consent and without consideration, it may not be enforceable against the employee, though the employee's continued employment after receiving notice of the change may constitute acceptance.

Fifth, public sector employees may have different rules. Federal employees are not entitled to severance under general law but may receive separation pay under specific federal statutes or agency regulations. State and local government employees in Maryland may have severance entitlements under union contracts, collective bargaining agreements, or statutory provisions specific to that employer.

Sixth, if the employee is terminated in violation of a specific law (e.g., for refusing an illegal act, for reporting a violation of law, or based on a protected characteristic), the failure to pay severance is not itself actionable as discrimination, but the wrongful termination is. Severance may be part of damages in a successful wrongful termination suit but is not a separate legal right.

Step 1: Document the Severance Promise. Collect and preserve all written evidence that severance was promised. This includes: your original employment contract or offer letter, any employee handbook or personnel policy manual (especially sections on separation, termination, or severance), written communications from HR or management mentioning severance (emails, letters, memos), any severance agreement presented to you at termination, witness statements from coworkers who heard the severance promise, and any internal company documents discussing severance pay practices. Save these documents in multiple formats (email, cloud storage, external drive) to prevent loss. If you received a severance agreement at termination, do not sign it immediately; read it carefully and consider consulting an attorney before signing, especially if you are 40 or older and the agreement includes a waiver of claims.

Step 2: Request Severance Formally and Document the Employer's Response. Send a written request to your former employer (or their HR department) asking for the promised severance. Email is acceptable and preferable because it creates a written record. In the email, reference the specific date the severance was promised, cite the document or communication where the promise was made, state the amount of severance you understood was due, reference the date of your termination, and request payment within a specific timeframe (e.g., 14 days). Keep a copy of this email. If the employer responds, save that response regardless of whether it grants or denies the request. If the employer does not respond within a reasonable time, send a follow-up reminder and document the non-response.

Step 3: Consult an Attorney Before Filing a Claim. This is critical for severance disputes because the law is contract-based, not statutory. Contact an employment law attorney licensed in Maryland. Many offer free initial consultations. Bring all the documentation from Step 1, including the written severance promise, your employment contract, termination letter, any severance agreement you were offered, and the employer's response to your request. The attorney will assess whether the severance promise is enforceable and whether you have a viable breach of contract claim. Maryland courts require contracts to have clear, definite terms, so a vague promise may not be enforceable. The attorney will also advise you on potential damages (the severance amount plus interest and potentially attorney fees if the contract allows it) and the likelihood of recovery. If the attorney believes you have a strong case, they may contact the employer's counsel to attempt settlement before filing suit.

Step 4: Attempt Settlement or Demand Letter. If your attorney believes you have a valid claim, they may send a formal demand letter to the employer stating the legal basis for the severance obligation, the amount owed, and a deadline for payment (typically 14-30 days). This letter serves two purposes: it provides the employer with an opportunity to resolve the dispute without litigation, and it creates a record of the demand that may be useful in court. The employer may respond by paying the severance, disputing the claim, or ignoring the letter. Many employers will settle severance disputes at this stage to avoid the cost and publicity of litigation.

Step 5: File a Civil Breach of Contract Lawsuit. If settlement is not reached, your attorney will file a complaint in District Court (for claims under $30,000) or Circuit Court (for larger claims) in the county where you worked or where the employer is located. The lawsuit will name your former employer as the defendant and seek damages equal to the unpaid severance, plus interest from the date it was due. Maryland calculates pre-judgment interest at the applicable federal rate, which varies. Your attorney will also seek attorney fees and costs if the employment contract or company policy allows for it. The employer will have 30 days to respond to the complaint. Discovery will follow, meaning both sides will exchange documents and take depositions (sworn testimony). The case may settle during discovery or proceed to trial before a judge or jury.