Severance Pay in Michigan: Are You Entitled?

Federal law does not mandate severance pay. The Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. § 2101 et seq., requires employers with 100+ employees to provide 60 days' advance written notice of mass layoffs (50+ employees at one location) or plant closures. Failure to comply can result in back pay and benefits for affected employees, plus civil penalties of up to $30,000 per violation. The WARN Act is enforced by the U.S. Department of Labor, Wage and Hour Division. Additionally, the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., governs pension and health benefit severance obligations if promised in a plan document. However, neither law requires severance as a lump sum or ongoing payment; they only mandate notice or address promised benefits.

The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., requires payment of all earned wages through the final paycheck on the final day of employment, including accrued vacation if required by state law or employer policy. Employers cannot withhold unpaid wages as leverage against severance disputes.

Michigan follows the at-will employment doctrine under common law and has no statute requiring severance pay upon voluntary resignation or termination without cause. Michigan courts have repeatedly held that severance is a gratuity, not a legal entitlement, unless expressly promised in a written employment contract, collective bargaining agreement, or established company policy that rises to the level of a binding contract.

Under Michigan law, employers are free to offer—or refuse to offer—severance. However, if an employer makes a written promise of severance (whether in an offer letter, employee handbook, or severance agreement), Michigan courts will enforce that promise as a binding contract. In this case, the employer must pay the promised severance or face breach of contract claims under Michigan common law. Additionally, Michigan's Payment of Wages Law, MCL § 408.472, requires all earned wages to be paid on scheduled paydays. If severance is promised in a policy or contract, it may be considered earned compensation and thus subject to this statute.

Michigan employers are not stronger or weaker than federal law on severance itself—both allow non-payment—but Michigan's contract law protections for promised severance are robust. If severance is explicitly agreed to in writing, Michigan courts will enforce payment. Employers cannot unilaterally revoke severance if it was properly promised in binding terms. The Michigan Department of Labor and Economic Opportunity does not administer a severance statute; disputes over promised severance must be resolved through civil contract litigation or arbitration.

Severance is not required in Michigan in the following situations: (1) At-will terminations without a written severance promise—the employer has no obligation to provide anything beyond earned wages and accrued PTO if mandated by company policy. (2) Employees in positions exempt from at-will doctrine (rare in Michigan) are still not entitled to severance unless promised. (3) Employees who resign voluntarily are not entitled to severance unless agreed in advance. (4) Gross misconduct or violations of policy do not automatically disqualify an employee from receiving promised severance; if the severance agreement does not condition payment on cause, the employer must still pay it.

Key exceptions and defenses employers may raise: (1) No written agreement—if severance was discussed verbally or informally, it may be unenforceable under Michigan's statute of frauds unless the employer's own handbook or policy created a binding promise. (2) Conditional severance—if the severance agreement required signing a release of claims (including non-disparagement or non-compete clauses), the employee must comply or forfeit severance. (3) Bankruptcy—if the employer files for bankruptcy, severance obligations become unsecured claims in the bankruptcy estate. (4) Plant closure WARN Act exception—the federal WARN Act does not require severance; it only mandates notice. An employer can lay off 50+ employees with 60 days' notice and pay zero severance.

Union employees covered by collective bargaining agreements are protected under the National Labor Relations Act if severance terms are negotiated into the contract; Michigan state law does not add additional protections. Public sector employees in Michigan may have different protections under pension and contractual law, but are generally also not entitled to severance unless promised.

Step 1: Document the promised severance. Collect and preserve: (1) your offer letter or employment contract mentioning severance, (2) employee handbook pages defining severance policy, (3) any severance agreement the employer presented, (4) email exchanges in which the employer discussed severance terms, (5) pay stubs, final paycheck, and any severance check received or withheld. If you received partial severance, compare it to what was promised. Create a written summary noting the date you learned of the severance promise, the specific terms promised (amount, duration, conditions), and when the employer should have paid. Screenshot company website or handbook pages showing the severance policy as it existed at your termination date.

Step 2: Initiate an internal complaint and attempt resolution. Request a written explanation from your former employer about why severance was not paid or was paid in a reduced amount. Send an email to the HR department or relevant manager stating the promised severance amount, the contract/policy basis for the promise, and the date by which you expect payment. Keep a copy of this email. If you have an employment agreement listing a grievance procedure, follow it—failure to do so may weaken your legal position. Request a written response within 14 days. Document all communications and any responses.

Step 3: File a civil breach of contract claim in Michigan court. Michigan does not have an administrative agency that enforces severance disputes. You must file in Michigan District Court (for amounts under $25,000) or Circuit Court (for larger amounts). File in the county where you were employed or where the employer is located. You will need: (1) a copy of the written promise of severance, (2) proof of your employment and termination date, (3) documentation of non-payment or underpayment, (4) copies of all communications regarding severance. The filing deadline is 6 years from the date the severance was due (statute of limitations for contract claims under MCL § 600.5805). Small claims court in Michigan has a jurisdictional limit of $5,000 and may be an option if your severance claim is under that amount and you want to avoid attorney fees. The Michigan Courts website (courts.mi.gov) provides court locator tools and filing instructions. File online through the court's e-filing system or in person at the courthouse. Include a demand letter before filing if possible—this demonstrates good faith effort to resolve.

Step 4: Expect the investigation and litigation process. Once you file, the employer will be served with your complaint. The employer has 21 days to respond. Discovery will follow, during which both sides exchange documents and written questions (interrogatories). The employer may assert defenses such as: (1) no written agreement was made, (2) severance was conditional and you failed to meet the condition, (3) the employee handbook or offer letter does not create a binding contract. The case may proceed to summary judgment (court decides on undisputed facts) or trial. In Michigan breach of contract cases, you can recover: (1) the severance amount promised, (2) interest (typically 6% per annum from the due date), (3) attorney's fees if the contract explicitly allows them. Punitive damages are not available for simple breach of contract. Timeline: expect 6-18 months from filing to resolution, depending on court calendar and complexity.

Step 5: Consult an employment attorney before filing. Hire a Michigan employment law attorney who handles breach of contract claims. An initial consultation (often free or flat-fee) should confirm whether you have a written promise of severance and assess the strength of your claim. An attorney can: (1) send a demand letter on letterhead, which often prompts settlement without litigation, (2) negotiate a settlement before court filing, (3) handle discovery and court filings, (4) represent you at trial if necessary. If your severance amount is small (under $5,000), the cost of hiring an attorney may exceed recovery; small claims court may be more efficient. Michigan State Bar Lawyer Referral Service (1-800-968-1442) can connect you with qualified employment attorneys in your area.