The Michigan employee separation process includes multiple employer obligations. In fact, Michigan’s employee termination laws may vary dramatically from other states in which your organization does business.
This employee separation checklist and guide will help you understand the state’s final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Michigan Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Michigan
Michigan administrative code requires that employees who separate from their employer must be paid on the next regularly scheduled payday, in that pay period. All earned wages and any accrued, unused vacation time must be paid out. The exception is when the employer has a clear policy, agreed to in writing by the employee, that denies vacation payout upon separation.
While the law doesn’t specify how final payments should be made, best practice is to use regular payment methods. Employers who fail to pay wages may face penalties, including fines up to $1,000, imprisonment for up to one year, or both.
2. Firing Employees in Michigan
Michigan is an at-will employment state. However, whether you’re firing employees or they’re resigning, all employees in Michigan who separate from employment must be provided Form UIA 1711 – Unemployment Compensation Notice. This notice should be given at the time of separation.
Under the Michigan WARN Act, employers are encouraged, though not required, to provide advance notice when closing or relocating an establishment with 25 or more employees. “Closing” is the permanent shutdown of operations at a facility with at least 25 employees, while a “relocation” involves moving part of a business’s operations to a new location, which results in losing 25 employees. Employers are encouraged to notify the Michigan Department of Labor, affected employees, any representative organizations, and the local community as early as possible before such events occur. However, the law does not specify the exact content of these notices.
3. Severance Agreements in Michigan
If your severance agreement includes claims releases for employees, you must specify any claims waived under both federal and state law. In Michigan, this includes claims under the Elliott-Larsen Civil Rights Act, Persons With Disabilities Civil Rights Act, Bullard-Plawecki Employee Right to Know Act, Social Security Number Privacy Act, Internet Privacy Protection Act, Michigan’s leave laws, and Michigan’s minimum wage and overtime laws.
The release should only cover claims arising before the agreement’s effective date. Finally, review any relevant federal laws. This includes 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 Michigan
For employees with an Income Withholding for Support Order (“IWO”), employers should promptly 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.
Employers may opt to 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, with 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 Michigan
When a Michigan-based organization ceases operations and has no remaining employees in the state, it can formally withdraw its registration by filing the appropriate paperwork with the Michigan Secretary of State. The specific form required depends on the type of legal entity involved.
For-Profit Corporations and Non-Profit Corporations should file an Application for Certificate of Withdrawal. Corporations should also request a Tax Clearance from the Michigan Department of the Treasury, within 60 days of filing their application. Limited Liability Companies (LLCs), on the other hand, must file this Application for Certificate of Withdrawal, and request a Tax Clearance from within 60 days of filing their application.
Stay Compliant with Michigan Employee Separation Requirements
Understanding the requirements for a Michigan Employee Separation Agreement can be complicated—but it also helps employers ensure compliance, respect employee rights, and mitigate legal liability to the company.
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