Minnesota Severance Agreements: Drafting Rules

Is severance pay required by law in Minnesota?

No statute makes you pay severance just because employment ends. The U.S. Department of Labor puts the federal answer plainly: “There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay. Severance pay is a matter of agreement between an employer and an employee (or the employee’s representative),” U.S. Department of Labor, Severance Pay. Minnesota’s separation-pay statutes, Minn. Stat. § 181.13 for a discharge and Minn. Stat. § 181.14 for a resignation, set deadlines for wages and commissions already earned and do not mention severance.

The baseline is at-will employment. “Where the hiring is for an indefinite term, as in this case, the employment is said to be ‘at-will.’ This means that the employer can summarily dismiss the employee for any reason or no reason, and that the employee, on the other hand, is under no obligation to remain on the job,” Pine River State Bank v. Mettille, 333 N.W.2d 622, 627 (Minn. 1983). Neither side owes the other a payment for ending the relationship unless something else creates the duty.

Your own documents are usually that something else. The same opinion holds “that personnel handbook provisions, if they meet the requirements for formation of a unilateral contract, may become enforceable as part of the original employment contract,” so a written severance policy, an offer letter, or an employment agreement that promises severance can be enforced as a contract. A formal severance plan can also be an employee benefit plan; the Department of Labor notes that its Employee Benefits Security Administration “may be able to assist an employee who did not receive severance benefits under their employer-sponsored plan.” Before you treat a separation as severance-free, read every document the employee signed or received.

If the law does not require it, why pay severance? Three reasons drive most offers:

• A release of claims. Severance buys the employee’s release of claims for discrimination, retaliation, wrongful termination, breach of contract, and the rest. A weak claim still costs money to defend.
• Controlled separation terms. The agreement lets you set what the employee may say about the company, how clients transition, what stays confidential, and which post-employment obligations the employee confirms.
• Finality. A signed release closes the chapter. Without one, the risk of a claim stays open until the limitations periods run.

Does an employee who resigns get severance? Voluntary termination and voluntary separation

A voluntary termination, also called a voluntary separation or resignation (and sometimes, in HR forms, a “willful termination of employment”), is a departure the employee chose. Minnesota’s unemployment statute gives the clearest working definition: “A quit from employment occurs when the decision to end the employment was, at the time the employment ended, the employee’s,” Minn. Stat. § 268.095, subdivision 2(a). An involuntary termination is the opposite: “A discharge from employment occurs when any words or actions by an employer would lead a reasonable employee to believe that the employer will no longer allow the employee to work for the employer in any capacity,” and “[a] layoff because of lack of work is a discharge,” § 268.095, subdivision 5(a). The statute also settles a common gray area: “An employee who has been notified that the employee will be discharged in the future, who chooses to end the employment while employment in any capacity is still available, has quit the employment,” subdivision 2(c).

Severance pay for a voluntary resignation follows the same rule as severance generally. No law requires it, so a resigning employee receives severance only when a contract, plan, or policy promises it on a resignation, or when you choose to offer it in exchange for a release. Three things do change when the employee quits:

• Final pay runs on the resignation clock. Earned wages and commissions are due “not later than the first regularly scheduled payday following the employee’s final day of employment,” with a delay to the second payday allowed only when the first falls less than five calendar days out, and never more than 20 calendar days, Minn. Stat. § 181.14, subdivision 1(a). The final-pay section below covers the penalty.
• Unemployment usually ends. “An applicant who quit employment is ineligible for all unemployment benefits” unless one of the statute’s listed exceptions applies, such as a good reason caused by the employer, Minn. Stat. § 268.095, subdivision 1. Employees weighing a voluntary severance package often ask about this, and you cannot change the answer by agreement, as the release section explains.
• Your policy language decides the rest. A voluntary resignation policy can promise severance on resignation, condition it on notice or a release, or say it is paid only on an involuntary termination. Pine River notes that “[l]anguage in the handbook itself may reserve discretion to the employer in certain matters or reserve the right to amend or modify the handbook provisions,” 333 N.W.2d at 627. Write the eligibility rule into the policy so a resigning employee cannot read a promise into silence, and pay final wages under § 181.14 whatever the policy says about severance.

When you offer a voluntary severance package to a group (a buyout or voluntary separation program), the OWBPA group rules apply to any age-discrimination waiver; see the group exit-incentive section below.

Does an employee terminated for performance still get severance?

No legal entitlement attaches to a performance termination. Severance is “a matter of agreement” under the Department of Labor guidance above, and nothing in the at-will rule changes that because the reason was performance. The contract question still applies: if your policy or the employee’s agreement promises severance on any termination without cause, a performance discharge may trigger it, so check the definitions.

Employers often pay severance in performance cases anyway. A performance-based termination can still produce a discrimination, retaliation, or contract claim, particularly where the employee will argue the performance reason was a pretext. A modest payment for a valid release often costs less than defending even a weak claim.

How much severance pay is typical in Minnesota?

There is no statutory minimum. For a valid ADEA waiver the law asks only for “consideration in addition to anything of value to which the individual already is entitled,” 29 U.S.C. § 626(f)(1)(D), and it sets no amount. In practice, many employers build severance on a weeks-of-pay-per-year-of-service formula, commonly one to four weeks per year of service. Factors that move the number:

• the employee’s seniority and role;
• the strength of any claim the release resolves (a credible discrimination or whistleblower claim commands more);
• the scope of the release and of any new restrictive covenants;
• what your policy or past practice has paid similar employees, because inconsistency invites a discrimination argument; and
• the employee’s leverage, such as client relationships or knowledge you need transferred.

When should you use a severance agreement?

Not every departure needs one. Consider a severance agreement when:

• The termination carries litigation risk. The employee is in a protected class, recently complained about workplace conditions, or has a factual basis for a claim.
• The employee holds institutional knowledge. The agreement can add cooperation, transition, and knowledge-transfer duties.
• Client relationships are at stake. Non-solicitation and transition terms protect them.
• The employee had access to confidential information or trade secrets. Restating confidentiality duties at separation reduces the risk of misuse.
• You want finality. For senior employees and contentious departures, a signed release has real business value.

What does Minnesota law require to make a severance release enforceable?

A Minnesota severance release that touches discrimination claims must satisfy two parallel rules. Federal OWBPA at 29 U.S.C. § 626(f) governs ADEA waivers for employees age 40 and over. The employee must get at least 21 days to consider an individual agreement, or at least 45 days when the waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, plus the written disclosures required by § 626(f)(1)(H). Either way, the employee gets at least 7 days after signing to revoke, and the agreement is not enforceable until that period expires. A waiver settling an EEOC age-discrimination charge or a court action the employee filed needs only “a reasonable period of time” for consideration rather than the 21 or 45 days, and the requirements of § 626(f)(1)(A) through (E) still apply, 29 U.S.C. § 626(f)(2).

State law at Minn. Stat. § 363A.31, subdivision 2, lets an employee rescind a release of Minnesota Human Rights Act claims within 15 calendar days of signing, unless the release was given in settlement of a claim filed with the department or another administrative agency or judicial body, in which case it is valid and final upon signing; the releasing party must be informed of that right in writing. The window does not apply to a release given to settle a charge already filed with the Department of Human Rights, another agency, or a court, which is final on execution. The same section voids any provision that waives MHRA claims arising after the release is signed, subject to the Revisor’s note that subdivision 1 was held preempted as to arbitration agreements in Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790 (Minn. 1995).

An OWBPA-compliant release satisfies the federal ADEA waiver requirements, including the 21- or 45-day consideration period and the 7-day revocation window. It does not automatically satisfy Minn. Stat. § 363A.31: the federal 7-day revocation window does not satisfy the state requirement, and the state rescission right applies regardless of the employee’s age. Two of the state limits do have federal analogues, because 29 U.S.C. § 626(f)(1)(C) likewise bars ADEA waivers of post-execution claims and § 626(f)(1)(G) gives at least 7 days to revoke.

Drafting to the OWBPA alone is a common template error. Minn. Stat. § 363A.31, subdivision 2, separately requires that a party releasing Minnesota Human Rights Act claims “shall be informed in writing of the right to rescind the waiver or release,” exercisable “within 15 calendar days of its execution,” more than twice the seven-day revocation period the OWBPA requires. Minn. Stat. § 363A.31, subdivision 2, prescribes no penalty for omitting the notice. The published Minnesota decision on point enforced the agreement because it released no chapter 363 rights, McClaine v. Independent School District No. 16, 503 N.W.2d 810, 813 (Minn. Ct. App. 1993). Omitting the notice is an open litigation risk to the MHRA release, not an established ground of unenforceability. See also What Makes a Severance Agreement Unenforceable and Waiver of Rights Under the Age Discrimination Laws.

How does the OWBPA validity test work for employees age 40 and over?

The OWBPA, codified at 29 U.S.C. § 626(f)(1), sets eight lettered requirements, (A) through (H), for a knowing and voluntary ADEA waiver. Seven of them, (A) through (G), govern an individual severance waiver: the agreement must be written in a manner calculated to be understood, specifically refer to ADEA rights, waive no claims arising after the signing date, provide consideration beyond anything of value the employee is already entitled to, advise the employee in writing to consult an attorney, give at least 21 days to consider, and give 7 days to revoke with the agreement unenforceable until that period expires. Two further requirements attach only when the waiver is requested “in connection with an exit incentive or other employment termination program offered to a group or class of employees”: subparagraph (F)(ii)’s 45-day consideration period and subparagraph (H)’s written disclosures.

A release settling an age claim already filed with the EEOC or in court runs on a different track. Under 29 U.S.C. § 626(f)(2), that waiver requires only subparagraphs (A) through (E) of paragraph (1) plus “a reasonable period of time within which to consider the settlement agreement,” so no 21-day or 45-day clock and no 7-day revocation window apply. The EEOC’s rule adds a safe harbor: a settlement waiver that gives the employee the section 7(f)(1) time periods anyway “will be considered ‘reasonable’” for that purpose, 29 C.F.R. § 1625.22(g)(5).

Build each element into the face of the document, because the proof burden is yours. Under 29 U.S.C. § 626(f)(3), “the party asserting the validity of a waiver shall have the burden of proving in a court of competent jurisdiction that a waiver was knowing and voluntary.”

Two limits cap what even a compliant release accomplishes. No waiver may affect the EEOC’s enforcement rights, and “[n]o waiver may be used to justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the Commission,” 29 U.S.C. § 626(f)(4). The implementing rule reaches further than an outright bar: no waiver agreement may include “any provision imposing any condition precedent, any penalty, or any other limitation adversely affecting any individual’s right to” file a charge with or participate in a proceeding conducted by the EEOC, 29 C.F.R. § 1625.22(i)(2)-(3). Tender-back, fee-shifting, and covenant-not-to-sue language all run into that paragraph, so carve the EEOC rights out expressly.

The two clocks behave differently. The 7-day revocation period “cannot be shortened by the parties, by agreement or otherwise,” 29 C.F.R. § 1625.22(e)(5), so an early signature merely commences it and severance paid before day 8 may have to be recovered if the employee revokes. The consideration period is partly yours to manage: it runs from the date of your final offer, material changes restart it and immaterial changes do not, and “[t]he parties may agree that changes, whether material or immaterial, do not restart the running of the 21 or 45 day period,” 29 C.F.R. § 1625.22(e)(4). An employee may also sign before the 21 or 45 days expire, which is permissible only if that decision is knowing and voluntary and was not induced “through fraud, misrepresentation, a threat to withdraw or alter the offer prior to the expiration of the 21 or 45 day time period, or by providing different terms to employees who sign the release prior to the expiration of such time period,” 29 C.F.R. § 1625.22(e)(6). A sign-by-Friday bonus is the common way employers void their own waiver.

In my practice, the recurring sticking point is the consideration element: severance offers that simply repackage accrued paid time off (“PTO”) or already-promised final wages fail the “in addition to anything of value” test and unwind on review.

How does the MHRA 15-day rescission rule layer on top of OWBPA?

Minn. Stat. § 363A.31, subdivision 2, gives an employee 15 calendar days from execution to rescind a release of MHRA claims. The rescission is the employee’s unilateral right; no breach by the employer is required. The agreement must inform the employee in writing of the right to rescind.

Get the delivery mechanics into the document. To be effective, the rescission must be in writing and delivered to the released party by hand, electronically with the receiving party’s consent, or by mail within the 15-day period, and a mailed rescission must be postmarked within the 15 days, properly addressed to the released party, and sent by certified mail return receipt requested, Minn. Stat. § 363A.31, subdivision 2. Name the person and the address to which a rescission goes, because “properly addressed” is where the fight lands. Electronic delivery has been available only since the 2021 first special session amended the subdivision, so a form agreement listing hand delivery or certified mail as the only channels is describing pre-2021 law, Laws of Minnesota 2021, 1st Spec. Sess., ch. 11, art. 3, § 16.

Releases of claims already filed with the Minnesota Department of Human Rights or another administrative agency or judicial body are valid and final upon execution and cannot be rescinded under this subdivision, a useful carve-out when settling an active charge. The MHRA’s 15-day rescission runs independently of the OWBPA 7-day revocation: an MHRA-and-ADEA release has both clocks running, and the longer one usually controls the practical date on which severance should be paid if you want to avoid paying before the release is no longer revocable or rescindable. Drafters who mirror only the federal 7-day revocation language create a release the employee can unwind for another eight days under state law. A general release also reaches Minnesota Paid Leave claims and starts a third clock, because Minn. Stat. § 268B.09, subdivision 3, paragraph (c), allows a release of chapter 268B rights to “be rescinded within 15 calendar days of its execution,” so the pay-after date should run from the longest of the three windows.

One qualifier belongs on the prospective-waiver ban. The Revisor’s note to the section records that subdivision 1 was found preempted by federal law with regard to arbitration agreements in Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790 (Minn. 1995), so an arbitration clause in a severance agreement is not void under it. That carve-out is narrower than it was: since March 3, 2022, at the election of the person alleging conduct constituting a sexual harassment or sexual assault dispute, “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable” as to that case, 9 U.S.C. § 402.

What additional consideration does Minnesota require beyond what the employee is already owed?

For a waiver of ADEA rights, 29 U.S.C. § 626(f)(1)(D) requires that “the individual waives rights or claims only in exchange for consideration in addition to anything of value to which the individual already is entitled,” and the EEOC’s rule defines that phrase as “anything of value in addition to that to which the individual is already entitled in the absence of a waiver,” 29 C.F.R. § 1625.22(d)(2). Minnesota common law states no rule in those terms. It states that a release, as with any contract, requires consideration, voluntariness, and contractual capacity, Karnes v. Quality Pork Processors, Inc., 532 N.W.2d 560 (Minn. 1995). An employer that pays nothing beyond what it already owes gives no new consideration, but the exposure comes from the general consideration requirement rather than from a Minnesota counterpart to the federal formula.

Minnesota states the rule affirmatively and negatively in the same opinion. “Consideration is something of value given in return for a performance or promise of performance that is bargained for; consideration is what distinguishes a contract from a gift,” and “[a] promise to do something that one is already legally obligated to do does not constitute consideration,” Deli v. Hasselmo, 542 N.W.2d 649, 656 (Minn. Ct. App. 1996).

Earned wages due under Minn. Stat. § 181.13, accrued PTO that policy already vests, the final paycheck, vested equity, and any payment you were already contractually obligated to make are NOT consideration; they are owed regardless of whether the employee signs. The PTO qualifier does real work. Paid time off is wages under § 181.13(a) only to the extent the employer’s own policy or contract makes it payable, because “the vacation wages that an employee has actually earned are defined by the employment contract between the employer and the employee,” Lee v. Fresenius Medical Care, Inc., 741 N.W.2d 117, 127-28 (Minn. 2007). PTO that the policy conditions or forfeits at separation is therefore not already owed, and paying it anyway can be genuine additional consideration.

Severance must be additional value: a lump sum or schedule of payments, extended benefits you were not obligated to extend, outplacement services, or some other thing of value. A recurring soft spot in the severance reviews I do for Minnesota employers is the consideration element, usually because a template treated PTO payout as part of the severance number. The fix is straightforward: identify what the employee is already owed, pay it on the statutory timeline, and structure severance as a separate, identifiable additional payment.

How do Minnesota’s final-pay rules interact with severance timing?

Final pay and severance are two different things on two different clocks. Under Minn. Stat. § 181.13, a discharged employee’s earned wages and commissions are due upon the employee’s written demand, which “need not state the precise amount of unpaid wages or commissions.” If they go unpaid for 24 hours after that demand, the employer is in default and owes a penalty equal to the employee’s average daily earnings, at the regular rate or the rate required by law whichever is greater, for each day of default, up to 15 days, “until full payment or other settlement, satisfactory to the discharged employee, is made.” Wages count as actually earned and unpaid if the employee “was not paid for all time worked at the employee’s regular rate of pay or at the rate required by law, including any applicable statute, regulation, rule, ordinance, government resolution or policy, contract, or other legal authority, whichever rate of pay is greater.”

Two mechanics inside the same section matter when you are racing the deadline. The wages must be paid in the usual manner unless the employee requests mail, and wages sent by mail at the employee’s request “are paid as of the date of their postmark.” For a public employer whose expenditures require governing-board approval, the 24-hour period does not commence until the date of the first regular or special meeting of the governing board following the discharge.

An employee who resigned rather than being discharged falls under Minn. Stat. § 181.14 instead. Subdivision 1 requires earned wages and commissions to be paid in full no later than the first regularly scheduled payday following the final day of employment, unless a collective bargaining agreement provides otherwise; if that payday falls less than five calendar days after the final day of employment, payment may be delayed to the second regularly scheduled payday but may never exceed 20 calendar days. Subdivision 2 carries the parallel penalty: unpaid wages become immediately payable on the employee’s demand, and if they are not paid within 24 hours after that demand the employer owes the employee’s average daily earnings “for every day, not exceeding 15 days in all,” until payment or a settlement satisfactory to the employee.

One timing extension is built into the statute. Where the departing employee was entrusted with the collection, disbursement, or handling of money or property, where the employee was, during employment, entrusted with the collection, disbursement, or handling of money or property, the employer has ten calendar days after termination to audit and adjust the accounts before wages come due, and the penalty applies “only from the date of demand made after the expiration of the period allowed for payment,” Minn. Stat. § 181.14, subdivision 4.

Offsets are tightly limited. An employer cannot deduct from an employee’s final wages for lost or stolen property, damage to property, or any other claimed debt the employee owes the employer, except as permitted by Minn. Stat. § 181.79 (Minn. Stat. § 181.14, subdivision 4). Minn. Stat. § 181.79 allows the deduction only where the employee voluntarily authorizes it in writing after the loss occurred or the claimed indebtedness arose, or where a court of competent jurisdiction holds the employee liable. Even then the deduction “may not be in excess of the amount established by law as subject to garnishment or execution on wages,” and an employer who violates the section “shall be liable in a civil action brought by the employee for twice the amount of the deduction or credit taken.” Three situations sit outside the section entirely, and one of them matters at separation: where an employee, before making a purchase or loan from the employer, voluntarily authorizes in writing that the cost be deducted from wages, that deduction may be taken at regular intervals or upon termination of employment, Minn. Stat. § 181.79, subdivision 1(c). Routine lawful withholdings such as taxes and garnishments are not affected.

Can you deduct a sign-on bonus repayment from final wages?

You usually cannot rely on the hiring paperwork alone. A signing bonus payback agreement creates a claimed debt “running from employee to employer,” and Minn. Stat. § 181.79, subdivision 1(a), allows a wage deduction for that debt only if “the employee, after the loss has occurred or the claimed indebtedness has arisen, voluntarily authorizes the employer in writing to make the deduction,” or a court holds the employee liable. A repayment clause signed at hire comes before the debt arises. The pre-authorization exception in subdivision 1(c)(3) reaches only “a purchase or loan from the employer,” and “[a]ny agreement entered into between an employer and an employee contrary to this section shall be void.” The authorization must also “set forth the amount to be deducted from the employee’s wages during each pay period,” and the deduction cannot exceed the garnishment limit. Two practical routes work: get a fresh written authorization at separation (the severance agreement is a natural place for it, because the debt has arisen by then), or pay final wages in full and collect the sign-on bonus repayment separately under the repayment agreement.

Earned wages cannot be conditioned on signing the release. Severance may be, because severance is contractual consideration rather than wages actually earned at discharge: the Minnesota Supreme Court has read section 181.13(a) as “a timing statute, mandating not what an employer must pay a discharged employee, but when an employer must pay a discharged employee,” Lee v. Fresenius Medical Care, Inc., 741 N.W.2d 117, 125 (Minn. 2007). Severance is therefore properly held until after the 7-day OWBPA revocation period and the 15-day MHRA and Paid Leave rescission periods have run. The cleanest sequence: pay earned wages on the statutory clock; deliver the unsigned severance offer; advise the employee in writing of the right to consult counsel and to rescind; pay severance after the longest of the three windows closes. See MN Statutes on Final Pay & PTO Payout Obligations for the underlying rules.

What claims can a Minnesota severance release validly cover?

A Minnesota release can validly cover past, accrued claims under most federal and state employment statutes: ADEA, Title VII, the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”) for claims based on past employer conduct, the MHRA, the Minnesota Whistleblower Act (“MWA”) at Minn. Stat. § 181.932, and common-law tort and contract claims arising from the employment relationship. The FMLA line has a published boundary: employees “cannot waive, nor may employers induce employees to waive, their prospective rights under FMLA,” but that rule “does not prevent the settlement or release of FMLA claims by employees based on past employer conduct without the approval of the Department of Labor or a court,” 29 C.F.R. § 825.220(d).

A release cannot cover several categories, and each has its own authority.

Future MHRA claims. Minn. Stat. § 363A.31, subdivision 1, voids any provision that “purports to waive claims arising out of acts or practices which occur after the execution of the waiver or release.”

Future ADEA claims. A waiver is not knowing and voluntary unless “the individual does not waive rights or claims that may arise after the date the waiver is executed,” 29 U.S.C. § 626(f)(1)(C).

Workers’ compensation claims. A comp claim is settled only through a chapter 176 stipulation: an agreement to settle any claim for compensation “is valid where it has been executed in writing and signed by the parties and intervenors in the matter, and, where one or more of the parties is not represented by an attorney, the commissioner or a compensation judge has approved the settlement and made an award thereon,” Minn. Stat. § 176.521, subdivision 1(a). An ordinary severance release does none of that.

Unemployment insurance rights. “Any agreement by an individual to waive, release, or commute rights to unemployment benefits or any other rights under the Minnesota Unemployment Insurance Law is void,” and an employer or officer or agent who violates the subdivision “is, for each offense, guilty of a misdemeanor,” Minn. Stat. § 268.192, subdivision 1. The neighboring subdivision reaches a term severance agreements commonly contain: you may not agree not to contest unemployment benefits in exchange for the employee quitting, taking a leave, leaving employment, or withdrawing a grievance or appeal of a termination, and an agreement that violates that rule “has no effect under this chapter.”

Minnesota Paid Leave rights. Minn. Stat. § 268B.09, subdivision 3, makes void any provision of an agreement that “purports to be a waiver by an individual of any right or remedy provided in this chapter” as to acts or practices occurring after execution. Subdivision 1 separately bars an employer from retaliating against an employee “for requesting or obtaining benefits or leave, or for exercising any other right under this chapter.” Paragraph (a) of subdivision 3 voids any agreement to waive chapter 268B rights “except for a voluntary settlement agreement resolving disputed claims or a valid separation agreement releasing putative claims,” so a release reaching accrued Paid Leave claims has to sit inside that exception. Paragraph (c) then allows the employee to rescind such a release “within 15 calendar days of its execution,” requires that the “waiving or releasing party must be informed in writing of the right to rescind the waiver or release,” and sets the same delivery mechanics as § 363A.31, subdivision 2: in writing, delivered by hand, electronically with the receiving party’s consent, or by certified mail return receipt requested postmarked within the 15-day period. Subdivision 8, paragraph (f), adds that an employee “cannot waive their right to a jury trial under this section including, but not limited to, by signing an agreement to submit claims to arbitration,” so an arbitration clause in a severance agreement needs a chapter 268B carve-out alongside the whistleblower-bounty carve-out.

Vested pension benefits under ERISA. A pension plan must provide that benefits “may not be assigned or alienated,” 29 U.S.C. § 1056(d)(1). Two limits belong with that. The protection runs to pension plans and not to welfare plans such as severance or health coverage, 29 U.S.C. § 1051(1), and a knowing and voluntary release does validly settle a disputed claim, because “[a] fiduciary and a beneficiary can settle a disputed claim that the fiduciary breached its fiduciary responsibilities under ERISA if the claim is knowingly and voluntarily released,” Leavitt v. Northwestern Bell Telephone Co., 921 F.2d 160 (8th Cir. 1990). The anti-alienation rule also does not automatically void a waiver where the waiving party does not direct the interest to someone else, Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009).

Agency charge and cooperation rights. On the federal side, 29 U.S.C. § 626(f)(4) preserves the right to file a charge or participate in an EEOC proceeding. On the state side, interfering with the commissioner is itself an unfair discriminatory practice: it is unlawful to “resist, prevent, impede, or interfere with the commissioner” in the performance of duty, Minn. Stat. § 363A.14, clause (3).

Section 7 rights under the National Labor Relations Act. Section 7, 29 U.S.C. § 157, protects concerted activity, and the National Labor Relations Board holds that “employees may not broadly waive their rights under the NLRA,” and that agreements restricting employees from protected activity, “from filing unfair labor practice charges with the Board, assisting other employees in doing so, or assisting the Board’s investigative process, have been consistently deemed unlawful,” McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023). The Board views severance agreements requiring the forfeiture of Section 7 rights, whether accepted or merely proffered, as unlawful unless narrowly tailored, and the mere proffer of such an agreement violates the Act. That doctrine is current but under open reconsideration: on April 7, 2026, the Board applied McLaren Macomb as extant precedent while two members wrote that they “would be open to reconsideration of that precedent in a future appropriate proceeding,” Prime Communications, LP, 374 NLRB No. 88 (Apr. 7, 2026). Check coverage before importing the carve-out into an executive package: the Act’s definition of employee excludes “any individual having the status of an independent contractor, or any individual employed as a supervisor,” 29 U.S.C. § 152.

Whistleblower bounty awards. The Commodity Futures Trading Commission program provides that “[t]he rights and remedies provided for in this section may not be waived by any agreement, policy form, or condition of employment including by a predispute arbitration agreement,” 7 U.S.C. § 26, subsection (n)(1). The anti-money-laundering award program carries the identical bar, 31 U.S.C. § 5323, subsection (j)(1). The Securities and Exchange Commission program rests on a rule rather than a statutory clause: 17 C.F.R. § 240.21F-17(a) bars any action to impede an individual from communicating directly with Commission staff about a possible securities law violation. Your arbitration clause needs a matching carve-out, because “[n]o predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section,” 7 U.S.C. § 26, subsection (n)(2).

Wage-and-hour claims under the Fair Labor Standards Act (“FLSA”) sit outside what a severance release can reach. In the Eighth Circuit, which covers Minnesota, “because FLSA rights are statutory and generally cannot be waived, companies can settle claims in only two ways”: before suit, the employee must accept and receive full payment of a settlement supervised by the Secretary of Labor under 29 U.S.C. § 216, subsection (c), and after suit is filed, the parties must agree on an amount and the district court must enter a stipulated judgment, Beauford v. ActionLink, LLC, 781 F.3d 396, 405-06 (8th Cir. 2015). There is no court-approval route for a pre-suit severance release, because court approval arrives only through a stipulated judgment in a filed case. The Eighth Circuit has also recognized the circuit split and reserved the question, writing that “we have never had occasion to interpret whether 29 U.S.C. § 216 requires judicial approval of all FLSA settlements,” Barbee v. Big River Steel, LLC, 927 F.3d 1024, 1026-27 (8th Cir. 2019), which is a reason for more caution in drafting, not less.

Draft the release narrowly to past, accrued claims; carve out the categories above by name; and avoid catch-all language that overreaches into prospectively-waived rights. See Minnesota Whistleblower Law for the underlying claim structure.

How should a Minnesota severance agreement handle a pre-2023 noncompete or a new restrictive covenant?

Minn. Stat. § 181.988, subdivision 2(a), provides that “Any covenant not to compete contained in a contract or agreement is void and unenforceable” except in the narrow sale-of-business and dissolution carve-outs in subdivision 2(b). The applicability clause is in the session law rather than the codified section: “This section is effective July 1, 2023, and applies to contracts and agreements entered into on or after that date,” 2023 Minn. Laws ch. 53, art. 6, § 1. Because the clause keys on the containing contract, a severance agreement signed after that date is itself a covered agreement, so a new restraint inside it falls within the ban even where it “extends” or “restates” a prior noncompete. A noncompete in the original employment agreement signed before July 1, 2023, is generally not reached.

Two consequences follow for the rest of the document. A void noncompete does not take the release, the confidentiality terms, or the payment obligations down with it, because “[n]othing in this subdivision shall be construed to render void or unenforceable any other provisions in a contract or agreement containing a void or unenforceable covenant not to compete,” Minn. Stat. § 181.988, subdivision 2(c). But leaving a dead noncompete in the agreement is an affirmative cost rather than a harmless nullity: “a court may award an employee who is enforcing rights under this section reasonable attorney fees,” Minn. Stat. § 181.988, subdivision 2(d).

Minnesota’s noncompete ban does not reach confidentiality and nonsolicitation clauses by its own terms: a covenant not to compete “does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information,” nor “a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer,” Minn. Stat. § 181.988, subdivision 1(a). Being outside the statutory ban is not the same as being enforceable: those clauses remain subject to Minnesota common-law reasonableness review, and a non-solicit written broadly enough to function as a bar on working invites a court to treat it as a covenant not to compete whatever its heading says. A separate statute voids one category of solicitation restraint outright: “No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider,” and any such provision in an existing contract “is void and unenforceable,” Minn. Stat. § 181.9881, subdivision 2, for contracts entered into on or after July 1, 2024.

The drafting move at separation is to (i) leave the pre-2023 noncompete alone and not restate it, (ii) draft any new restraints as NDAs, trade-secret protections, or customer non-solicits, and (iii) confirm that any restrictive covenant the agreement newly imposes does not push the employee’s claims out of state. On that last point, an employer may not require an employee who primarily resides and works in Minnesota, as a condition of employment, to agree to adjudicate a Minnesota-arising claim outside Minnesota or to forgo the substantive protection of Minnesota law, and a provision violating that rule is voidable at the employee’s election, Minn. Stat. § 181.988, subdivision 3. That protection covers arbitration as well as litigation, but it reaches only claims arising under section 181.988, so it does not by itself govern the choice-of-law and venue clause applied to the rest of the severance agreement. Subdivision 3 is written against a provision required “as a condition of employment,” so whether it reaches a covenant first imposed in a separation agreement signed after employment ends is untested, which is a reason to draft to it rather than around it. Last year I reviewed several severance offers that “renewed” pre-existing noncompetes at separation; each of those provisions falls within the ban on the statute’s terms. See How a Non-Compete Differs from Non-Solicit.

How should the scope of released wage and whistleblower claims be drafted?

Wage claims and whistleblower claims need separate scope analysis. For wage claims, a release can cover past, accrued claims for wages earned through the date of execution under Chapter 177 and Chapter 181, including § 181.13 demand-and-default claims that have already accrued.

A release also cannot reach retaliation that has not happened yet. Minn. Stat. § 181.03, subdivision 6, bars an employer from discharging, disciplining, penalizing, interfering with, threatening, restraining, coercing, or otherwise retaliating against an employee “for asserting rights or remedies under this section, sections 177.21 to 177.44, 181.01 to 181.723, or 181.79,” and a violation carries “a civil penalty of not less than $700 nor more than $3,000 per violation.” That prohibited-conduct list has been that broad only since July 1, 2023, so pressure applied during a severance negotiation is now within the statute’s own words, 2023 Minn. Laws ch. 53, art. 11, § 21. The claim arises only when the employer retaliates, so a release signed earlier has no accrued claim to discharge. Chapter 181 states no general nonwaiver rule reaching accrued wage claims, and § 181.03 carries none, though § 181.79, subdivision 1(c), voids any agreement contrary to that section.

Do not lean on the MHRA for that ceiling. Minnesota codifies an express prospective-waiver bar for the Human Rights Act: Minn. Stat. § 363A.31, subdivision 1, makes a waiver of “any right or remedy provided in this chapter” void as to “acts or practices which occur after the execution of the waiver or release.” The Paid Leave chapter carries the parallel bar in the same formula, Minn. Stat. § 268B.09, subdivision 3. Chapters 177 and 181 carry no general counterpart reaching accrued wage claims, so limit the release to claims accrued through the signing date rather than rely on a statutory nonwaiver rule that does not reach the wage statutes.

The same wage section constrains a term severance agreements often try to include. After an employee has resigned or been terminated, an employer “may not alter the method of payment, timing of payment, or procedures for payment of commissions earned through the last day of employment . . . if the result is to delay or reduce the amount of payment,” and an employer who violates the section “is liable in a civil action brought by the employee for twice the amount in dispute,” Minn. Stat. § 181.03, subdivisions 2 and 3.

For whistleblower claims, a release can discharge retaliation claims that had already accrued under Minn. Stat. § 181.932, whose remedies are set by Minn. Stat. § 181.935. Neither section limits waiver, so the temporal cutoff comes from the release language itself, which should be drafted to reach only claims accrued through the execution date. The MWA’s prohibited-conduct list is broad: an employer “shall not discharge, discipline, penalize, interfere with, threaten, restrain, coerce, or otherwise retaliate or discriminate against an employee regarding the employee’s compensation, terms, conditions, location, or privileges of employment” because the employee in good faith reports a violation, suspected violation, or planned violation of law. What a released claim gives up is likewise substantial: an injured employee “may bring a civil action to recover any and all damages recoverable at law, together with costs and disbursements, including reasonable attorney’s fees, and may receive such injunctive and other equitable relief as determined by the court.” The 2025 legislature broadened the state-employee clause to cover any state employee, to reach state programs, services, or financing including fraud or misuse, and to add an employer, any governmental body, and a law enforcement official as protected recipients, 2025 Minn. Laws ch. 39, art. 2, § 57.

The confidentiality clause and the whistleblower carve-out can coexist. The MWA “does not permit disclosures that would violate federal or state law or diminish or impair the rights of any person to the continued protection of confidentiality of communications provided by common law,” Minn. Stat. § 181.932, subdivision 5, so a confidentiality term aimed at privileged and legally protected material stands.

The cleanest drafting approach is to recite the wage statutes and the MWA by chapter and section, limit the temporal scope to claims accrued through the execution date, and add an express carve-out for future-arising claims. A common finding in the severance reviews I do for Minnesota employers is overbroad wage or whistleblower release language that has to be narrowed before sending. See Minnesota Rules on Non-Disparagement in Severance Deals and Legal Implications of Non-Disclosure Agreements in Severance for related clause-level drafting.

Are non-disparagement clauses in severance agreements still enforceable?

Yes, if they are narrow, and the risk sits in the broad version. In McLaren Macomb the Board found that a severance agreement’s “nondisparagement provision on its face substantially interferes with employees’ Section 7 rights,” explaining that “[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act,” McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023). The clause there barred any statement “which could disparage or harm the image of [the] Employer,” was “not even limited to matters regarding past employment,” and “provide[d] no definition of disparagement.” The Board treats such a forfeiture as unlawful “unless narrowly tailored,” but it also wrote that “[w]e are not called on in this case to define today the meaning of a ’narrowly tailored’ forfeiture of Sec. 7 rights in a severance agreement.” No Board decision draws the safe line for you.

For employers, three points follow:

• A broad clause is the exposure. “No negative statements about the company” is the McLaren Macomb pattern, and under that decision the violation is the offer itself, whether or not the employee signs.
• The enforcement guidance is gone; the decision is not. On February 14, 2025, the Board’s Acting General Counsel issued GC 25-05, and the rescinded memos include “GC 23-05 on severance agreements,” the guidance that had implemented McLaren Macomb, NLRB, GC 25-05 Rescission of Certain General Counsel Memoranda. The Board decision itself remains precedent, as the Section 7 discussion above explains.
• Supervisors are outside it. The Act’s employee definition excludes “any individual employed as a supervisor,” 29 U.S.C. § 152, so the McLaren Macomb analysis matters most for non-supervisory staff.

How I suggest narrowing a non-disparagement clause:

1. Define disparagement as knowingly false statements of fact, so opinions and complaints about working conditions fall outside it.
2. Carve out truthful statements to government agencies, testimony in legal proceedings, and responses to a subpoena, consistent with the agency-rights limits in 29 C.F.R. § 1625.22(i).
3. Carve out discussion of wages, hours, and working conditions with coworkers and others, which is Section 7 activity under 29 U.S.C. § 157.
4. Limit the subject and the time to the employment and the company, rather than every statement forever.
5. Consider making it mutual. A company promise not to disparage the employee (usually framed as instructing named managers) makes the clause easier to accept and easier to defend as a bargain.

Can a severance agreement keep its own terms confidential?

Yes. A promise to keep the agreement’s terms confidential is an ordinary contract term, and it holds up when it leaves room for the disclosures the law protects. Draft these carve-outs into it:

• Advisers and family. Let the employee tell their attorney, tax advisor, and spouse or domestic partner, each of whom should be bound to the same confidentiality.
• Government agencies. No waiver may impose “any condition precedent, any penalty, or any other limitation adversely affecting any individual’s right to” file a charge with or participate in an EEOC proceeding, 29 C.F.R. § 1625.22(i). Carve out the EEOC, the NLRB, the Department of Labor, and the Minnesota Department of Human Rights by name.
• The NLRB in particular. McLaren Macomb found unlawful a provision that “broadly prohibits the subject employee from disclosing the terms of the agreement ’to any third person,’” because the employee “is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement.”
• The employee’s own wages. An employer may not “require an employee to sign a waiver or other document which purports to deny an employee the right to disclose the employee’s wages,” Minn. Stat. § 181.172, paragraph (a)(2). The same section permits protection of “proprietary information, trade secret information, or information that is otherwise subject to a legal privilege or protected by law,” paragraph (b)(2), so the confidentiality clause can still guard those.

How should you structure the severance payment?

Lump sum or salary continuation. A lump sum is simpler and gives clean finality. Salary continuation spreads the cost and can ease benefits administration, but it keeps you paying a former employee who may already have a new job; decide in the agreement whether new employment ends or reduces the payments.

Effect on unemployment benefits. Severance delays Minnesota unemployment benefits however you time it. “An applicant is not eligible to receive 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,” where the payment is wages under Minn. Stat. § 268.035, subdivision 29 (which lists “severance payments”), or is subject to FICA tax, Minn. Stat. § 268.085, subdivision 3b(a). The payments “are applied to the period immediately following the later of the date of separation from employment or the date the applicant first becomes aware that the employer will be making a payment,” and “[t]he date the payment is actually made or received, or that an applicant must agree to a release of claims, does not affect the application of this paragraph,” subdivision 3b(b). A lump sum “is divided by the applicant’s last level of regular weekly pay from the employer” to count the weeks, subdivision 3(c), which subdivision 3b(d) adopts. For each week, a payment at or above the weekly benefit amount makes the employee ineligible, and a smaller payment reduces benefits by the amount of the payment, subdivision 3b(e).

Tax withholding. Severance is wages for federal income-tax withholding: “Any payments made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitute wages regardless of whether the employer is legally bound by contract, statute, or otherwise to make such payments,” Treas. Reg. § 31.3401(a)-1(b)(4). A lump sum is usually a supplemental wage, because “[s]upplemental wages include wage payments made without regard to an employee’s payroll period,” Treas. Reg. § 31.3402(g)-1(a)(1)(i), which opens the supplemental-wage withholding methods in that section. Minnesota follows the federal definition: for state withholding, “wages” means the same as in “section 3401(a), (f), and (i) of the Internal Revenue Code,” and “[e]very employer making payment of wages shall deduct and withhold upon such wages,” Minn. Stat. § 290.92, subdivisions 1(1) and 2a(1). Run the payment through payroll, and confirm FICA treatment with your payroll provider before it issues.

Benefits continuation. If the package includes health coverage beyond what COBRA requires, structure it to fit your group health plan’s terms. Paying the premiums directly on the employee’s behalf is often cleaner than a cash equivalent, and the agreement should say when the subsidy ends.

How do group exit-incentive programs differ from individual severance?

When severance is offered to a group or class of employees as part of an exit-incentive or termination program, OWBPA’s group rules at 29 U.S.C. § 626(f)(1)(F)(ii) and (H) apply. The consideration period extends from 21 days to at least 45 days.

At the start of that 45-day period, and in a manner calculated to be understood by the average individual eligible to participate, you must inform each eligible individual in writing of any class, unit, or group of individuals covered by the program, any eligibility factors, and any time limits applicable to the program, together with the job titles and ages of all individuals eligible or selected for the program and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected. For that second group the statute requires ages only, not job titles. A defective or omitted group disclosure can make the ADEA waiver invalid for each employee who received it, and the release is then unenforceable as to the ADEA claim irrespective of the contract’s validity as to other claims, Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998).

Group programs may also trigger notice obligations under the federal Worker Adjustment and Retraining Notification Act (“WARN Act”), which bars an employer from ordering a plant closing or mass layoff until the end of a 60-day period after written notice to each representative of the affected employees, or to each affected employee if there is no representative, to the state rapid response entity, and to the chief elected local official, 29 U.S.C. § 2102, subsection (a). The Act reaches a business enterprise that employs 100 or more employees, excluding part-time employees, or 100 or more employees who in the aggregate work at least 4,000 hours per week, 29 U.S.C. § 2101, subsection (a)(1). Coverage turns on headcount and on whether the action fits the statutory plant closing or mass layoff thresholds, 29 U.S.C. § 2101. Staging a reduction in force into sub-threshold waves does not avoid the Act: employment losses for two or more groups at a single site within any 90-day period are aggregated “unless the employer demonstrates that the employment losses are the result of separate and distinct actions and causes and are not an attempt by the employer to evade the requirements of this chapter,” 29 U.S.C. § 2102, subsection (d).

Minnesota has no mini-WARN statute, so a group severance program triggers no state employee-notice duty. Minn. Stat. § 116L.976, subdivision 1(a), directs only that the commissioner of employment and economic development “shall encourage” employers to give notice “as early as possible,” and it sets no notice period and no penalty. The section’s one mandatory employer obligation, in subdivision 2, is a report to the commissioner of “the names, addresses, and occupations of the employees who will be or have been terminated,” owed by an employer already giving notice under the WARN Act or under subdivision 1. State notice does not substitute for federal notice, because subdivision 1(a) states that it “shall be in addition to any notice required under the Worker Adjustment and Retraining Notification Act.” Build the OWBPA group disclosures, the federal WARN notice, and the Minnesota report into the program timeline before announcing it.

A Minnesota severance release is a three-statute drafting problem layered on top of contract law. OWBPA sets the federal validity floor for ADEA waivers; § 363A.31 and § 268B.09 each add a 15-day rescission window that the federal seven-day revocation period does not satisfy; § 181.13 and § 181.14 keep earned wages on a separate clock that the release cannot extend; and § 181.988 voids any new noncompete the agreement tries to introduce. Templates that handle one or two of those layers consistently miss the others. If you would like a second set of eyes on a Minnesota severance agreement before it goes out, email aaron@aaronhall.com with a brief description of the situation. Sending that email does not create an attorney-client relationship, so please hold confidential material and the draft itself until we have run a conflicts check. The employment practice hub collects additional drafting guidance.