Working through the Massachusetts employee separation process can be daunting, especially when you’re not familiar with employee termination laws and your employer obligations.
Not to worry—this employee separation checklist and guide provides an overview of the key rules you need to know, including final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Massachusetts Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Massachusetts
Under Massachusetts law, terminated employees must be paid immediately. Those who resign must receive payment on the next scheduled payday, or the following Saturday if no payday is scheduled. Sales representatives are required to be paid earned commissions within 14 days of contract termination.
Note that all accrued and unused vacation and holiday time must be paid upon separation. However, employers may impose reasonable caps on vacation accrual if they provide adequate notice and allow sufficient time for employees to take their vacation.
Failure to comply with these requirements can result in severe penalties for employers, including paying triple the unpaid wages and facing civil or criminal penalties. For initial violations, employers face fines up to $25,000 and one year of imprisonment, with more severe penalties for repeat offenses. While Massachusetts law does not specify the method of payment for final paychecks, best practice suggests using regular payment channels.
2. Firing Employees in Massachusetts
Massachusetts is an at-will employment state. Regardless of whether you are firing employees or they resign, all employees must be provided Form 590-A – How to File a Claim for Unemployment Insurance Benefits within thirty days of separation. This applies to everyone, including temporary workers.
Under the Massachusetts WARN Act, employers with 50 or more employees must promptly notify the Department of Career Services and inform employees of their benefits continuation rights when closing or partially closing a facility. A “facility” refers to any place of employment in Massachusetts with 50 or more employees in the six months prior to the closure. The Act defines a partial closing as the permanent cessation of a significant portion of business operations, while a plant closing involves the permanent separation of at least 90 percent of the employees within six months before the closure date.
Employers must provide notice to the Director of the Department of Career Services. Massachusetts law requires prompt notice. Employers receiving financing from quasi-public agencies are expected to make a good-faith effort to give 90 days’ notice to affected employees. Voluntary advance notice to employees, or their collective bargaining agents, is encouraged.
3. Severance Agreements in Massachusetts
Employers in Massachusetts can only include non-compete clauses in severance agreements if the employee is terminated “for cause.” They must receive a seven-day period to revoke the agreement.
Employers should clearly specify which federal and state law claims the employee is waiving in the severance agreement. In Massachusetts, these include claims under Massachusetts Wage Payment Act (M.G.L. c. 149 § 148), Massachusetts Act to Establish Pay Equity, Massachusetts Fair Employment Practices Act, Massachusetts Equal Rights Act, Pregnant Workers Fairness Act, Massachusetts Employee Privacy Act, and Massachusetts’ leave laws.
The release should only include claims arising before the agreement’s effective date, not future claims. Finally, employers should be mindful of federal regulations. Pay particular attention to the NLRB’s 2023 McLaren decision and subsequent guidance from its General Counsel which restrict the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Massachusetts
If you have an employee with an Income Withholding for Support Order (“IWO”), you must report the employee’s termination as soon as possible to the child support agency, court, or attorney that issued the IWO. To expedite the reporting, register for online reporting with the Federal Office of Child Support Enforcement here.
Alternatively, you may report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Then fax or mail it to the child support agency that issued it. Prepare 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 Massachusetts
If separating from your last Massachusetts employee ends your business in the state, you may formally withdraw your business registration. All organizations, regardless of legal structure, file the same form with the Massachusetts Secretary of State. For-Profit Corporations, Non-Profit Corporations, and Limited Liability Companies (LLCs) should file this Certificate of Withdrawal through Massachusetts’ online filing system.
Stay Compliant with Massachusetts Employee Separation Requirements
Staying on top of the requirements for a Massachusetts Employee Separation Agreement helps employers ensure regulatory compliance, honor employee rights, and mitigate risks.
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