Jun 3 2024
Amanda DeMatteis: Hi, Josh.
Josh Goodbaum: Hi, Amanda. What are we talking about today?
DeMatteis: I thought we’d talk about unemployment benefits. A question we get asked a lot: “If I’m getting severance from my previous employer, am I still entitled to unemployment benefits?” I understand the answer to this varies depending on where the employee lives and works. I’m wondering what you can tell employees in Connecticut about this issue.
Goodbaum: Yeah, you’re right. This is an answer that’s going to vary depending on where you live and work because the rules of unemployment are based on state law. They’re not based on a federal law. So, it’s not one rule for the whole country. It’s a different rule, depending on where you are. And that applies to the sub-issue about the interaction between severance payments or settlement payments and unemployment benefits.
So, if you live in California, for example, and you’re receiving a severance, you can also receive unemployment. Period. In California, severance is not considered wages as an offset against unemployment. The background principle is that, if you’re earning wages, then you’re not entitled to unemployment, or at least, if you’re earning wages that are enough – that are over the amount of money you would be getting from unemployment – then you can’t also receive unemployment benefits.
New York has a quirky rule: as long as your severance payments start more than 30 days after you separated from your employer, then they’re not an offset against unemployment. If they start before that 30 day window, then they can be an offset. Pretty strange, but that’s the rule in New York.
Connecticut, until very recently, had a rule that was a lot like California. And the rule was, if you’re receiving a severance because you agreed not to sue your employer – that is, you signed a document that said, “I am not going to sue you for anything related to my termination” – and you received money in exchange for signing that legal release, then the money you received was not an offset against unemployment benefits. But the rule in Connecticut changed. Starting January 1, 2024, if you receive severance pay, it is an offset against unemployment in Connecticut, regardless of whether you had to give up any of your legal rights to sue in order to get it.
Now, you might be asking, “What if I get a lump sum severance? Does that just disqualify me from unemployment in one week? Or is that going to disqualify me from unemployment, period?” And the answer, we think, is that the Connecticut Department of Labor will look at what your wages previously were when you were working with this employer, try to figure out what amount of time the lump sum severance payment is meant to cover, and then you will be disqualified from receiving unemployment benefits for the duration of that severance. You’re not disqualified from receiving all unemployment benefits. It’s just that you’re not allowed to double-collect. This is from a law that was passed a couple of years ago, but it went into effect January, 2024.
So that’s the answer right now in Connecticut. And if you don’t live in Connecticut, or don’t work in Connecticut, you need to consult the law of your state where you are to figure out the answer to this question.
DeMatteis: Thank you so much, Josh. Still an area we’ll be touching on as the Department of Labor clarifies how they interpret this new law in Connecticut. But thank you so much for telling us that. And thank you so much for watching. Take care.
Posted by Garrison, Levin-Epstein, Fitzgerald & Pirrotti, P.C. in Commentary
Tagged Amanda DeMatteis, Joshua Goodbaum, Severance Agreements, Unemployment
