The Maryland employee separation process includes specific employee termination laws and employer obligations.
It’s important to understand the complexities of the process, especially if you work with employees in more than one state. This helpful employee separation checklist and guide is designed to provide an overview of key final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Maryland Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Maryland
Maryland state law mandates that employees who separate from their employer must be paid on the next scheduled payday, regardless of whether they were terminated or resigned. This includes all wages due, such as commissions, fringe benefits, and overtime. Sales representatives not covered by the state wage law must receive earned commissions within 45 days of when they would have been paid had the contract not been terminated.
Additionally, accrued and unused vacation time must be paid out upon separation unless the employer clearly communicated a policy to the contrary at the time of hire. Although Maryland law does not specify the method of final payment, it is recommended to use the regular channels of payment. Employers who fail to pay wages may face penalties, including being required to pay three times the unpaid wages, attorney’s fees, and employee costs in a court action.
Maryland state law requires all separated employees be paid on the next scheduled payday. This includes all wages due, such as commissions, fringe benefits, and overtime. Similarly, sales representatives not covered by the state wage law must receive their earned commissions within 45 days of when they would have been paid, if the contract had not been terminated.
Any accrued and unused vacation time must be paid out upon separation—unless the employer clearly communicated a policy to the contrary at the time of hire.
Finally, although Maryland law does not specify the method of final payment, best practice dictates using the regular channels of payment. Employers who fail to pay wages may face penalties, including being required to pay three times the unpaid wages, attorney’s fees, and employee court costs.
2. Firing Employees in Maryland
When separating from or firing employees, employers are required to inform separated employees that Unemployment Insurance Compensation is available. This notice is required upon separation, regardless of the reason. The Maryland Department of Labor provides a sample notice for employers to use.
If your organization provides a group health insurance plan, Maryland requires you notify separated employees of their right to continue coverage under Maryland’s state-level COBRA law. The law does not provide a set time frame within which notice must be provided, but Maryland’s Insurance Administration has published another sample notice for employers to use.
Finally, under Maryland’s WARN Act, employers with 50 or more employees must provide at least 60 days’ notice before implementing a layoff, shutdown, or relocation. The event must affect either 25 percent of the workforce or 15 or more employees, whichever is greater. This rule applies to both hourly and salaried workers, including managerial roles. However, it excludes those working less than 20 hours per week or employed for less than six months.
Exceptions to the 60-day notice requirement include bankruptcy, unforeseen business circumstances, natural disasters, or seasonal work. Employers must provide written notice to affected employees, union representatives, and local government officials. Failure to comply with these requirements can lead to penalties and legal action.
3. Severance Agreements in Maryland
If your employee separation process includes a severance agreement, there are several important rules to observe. First, be sure that your severance agreement only releases claims that happened prior to the agreement’s effective date.
Second, clearly define the claims the employee is releasing under both federal and state law. In Maryland, applicable claims include those under Maryland’s anti-discrimination laws (Md. Code Ann., State Gov’t § 20-601, et seq.), the Maryland Healthy Retail Employee Act, Maryland’s Equal Pay for Equal Work Act, Maryland’s leave laws, and Maryland’s minimum wage and overtime laws.
Third, note that non-disparagement clauses included as part of severance agreements are not allowed to restrict employees from disclosing or discussing information regarding work-related sexual harassment. This includes sexual assault or retaliation for reporting and/or asserting a rights or remedies, based on sexual harassment or sexual assault.
Finally, review any relevant federal laws pertaining to the agreement. For example, the NLRB’s 2023 McLaren decision and subsequent guidance from its General Counsel restrict the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Maryland
For employees with an Income Withholding for Support Order (“IWO”), employers are obligated to report the employee’s termination to the child support agency, court, or attorney that issued the IWO. You may register for online reporting with the Federal Office of Child Support Enforcement here.
If you don’t wish to report online, you may report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Fax or mail it to the issuing child support agency. You will need the following information:
- Employee Name
- Employee Case Identifier
- Last Known Home Address
- New Employer Address (if known)
- Date of Employee Separation
5. Withdraw Registration to do Business in Maryland
When your organization stops doing business in Maryland—for example, when you separate from your last Maryland employee—you may formally withdraw your state business registration.
Depending on your company’s legal structure, the form will be different: For-Profit Corporations will file this Application for Termination of Registration, Non-Profit Corporations file this Application for Termination of Qualification, and Limited Liability Companies (LLCs) must file this Certificate of Cancellation.
Stay Compliant with Maryland Employee Separation Requirements
Staying current Maryland Employee Separation Agreement rules and regulations helps employers ensure compliance, honor employee rights, and lessen legal risk.
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Looking for employee separation laws for a different state? Our interactive map makes it easy to find all employee termination requirements by state.
