Unemployment Benefits and Separation Agreements

Asked over 1 year ago - Chicago, IL

I was let go by my employer on March 4. They agreed to pay me a separation/severance fee but didn't cut the check until the 21st.

Do I have to claim the income the next time I certify?

Attorney answers (2)

  1. Charles Shinkle Watson

    Contributor Level 15

    1

    Lawyer agrees

    Answered . This is actually a much more complicated question than it appears. Generally severance payments, or payments in lieu of notice, are to be offset. However, there are circumstances under which that is not true – especially if the payment is late. My recommendation is to contact the employment security office you are working with, and ask what to do. The one thing you do not want to do is get crosswise with them. Having to repay unemployment payments, when you are unemployed, is not a good thing. Good luck to you.

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  2. Gerald William Napleton

    Contributor Level 13

    1

    Lawyer agrees

    Answered . Severance is generally not counted as wages under the rules of the Illinois Department of Employment Security. So long as you did not provide a service for the fee that you received, it is cannot be considered a wage. So, no, you should not have to claim it on your certification PROVIDED that the fee you received was not in exchange for any work performed.

    The exact language of the Illinois Unemployment Insurance Act is as follows:

    Section 2920.45 Severance Pay
    a) Amounts paid or payable to an individual for past services rendered by the individual to an employer or amounts paid or payable to an individual for pension or seniority rights lost upon separation or layoff shall be considered severance pay. Such pay shall not be considered wages payable or attributable with respect to the period subsequent to the individual's separation or layoff. Amounts paid or payable to the individual as severance pay shall not render
    the individual ineligible to receive benefits under Section 2920.5.

    The nature and purpose of such payments, rather than their characterization, shall determine whether or not such payments are considered severance pay under this Section.

    b) For the purpose of this Section, the status of payments as severance pay is not altered by the fact that:
    1) Such payments are voluntary; or that,
    2) Such payments are made periodically rather than in the form of a lump sum.

    A) Example 1: An employer's separation pay program provides for a lump sum payment based on the length of service. The purpose of the payment is to allow the individual to maintain his standard of living while he seeks other work. The individual performs no services after his date of separation. This lump sum payment constitutes severance pay under this Section and hence is not disqualifying. Title 56 IDES RULES Part 2920 R-191 (02/13)

    B) Example 2: The individual was notified that he was to be terminated from employment on April 17. The individual worked on the employer's premises until April 6 but performed incidental services to the employer from April 6 through April 17 by telephone in training a replacement. The wages received from April 6 through April 17 are not severance pay. Because the individual performed some services and received wages for the period April 6 through April 17, he was not unemployed under Section 239 of the Act and hence not eligible for benefits under the Act.

    Again, so long as it's severance (and you didn't work in exchange for it), it doesn't matter when or how it is paid - it doesn't count as wages.

    Please note that this answer is for informational purposes only and should not be construed as legal advice or an... more

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