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Why does NOT signing a "release of claims" despite receiving severance pay affect receiving unemployment?

Norwood, MA |

I was laid off and received a lump sum severance check. Unemployment will hold off payments until the length of the severance is over. I've been told this is because I was not asked to sign a "release of claims" on my last day.

Attorney Answers 3

  1. Your receipt of severance is an employee benefit. That benefit has the affect of compensating you for having been selected for lay off. Had your employer conditioned the receipt of severance on your executing a comprehensive separation agreement and release of all claims then you would be giving up something (the right to sue) to receive something that you would not otherwise have been entitled to receive (the consideration set forth in the severance agreement). For this reason, your weekly unemployment compensation checks will be postponed until after the period of severance has been exhausted. Good luck and best regards, Rob Fortgang

  2. Attorney Forgang has given a great answer. If you had signed a release of claims, the lump sum would have been in exchange for that, so it would have fallen outside the category of payments that must be exhausted before unemployment benefits are paid.

    This seems counterintuitive, but think of it this way: where there is no release of claims (or anything else for which the payment is exchanged), the payment is made just on the basis of the work relationship; it's similar to getting paid a normal paycheck for the equivalent prorated period without having to work. Under those circumstances unemployment benefits are not paid because the employee would be in essence getting double payments, one from the employer and one from the state, while not having to work. However, this rationale doesn't apply when the lump sum is instead paid in order to buy something from the employee-- a waiver of the right to sue.

  3. In addition to the good info provided so far, I wanted to point out that the severance payment need not be a "lump sum" and its not about the delivery of the money that is the issue. It could very likely be that the sevance is a continuation of weekly wage payments for a certain period of time. Again, whether or not that money (however paid out) is considered remuneration by the Division of Unemployment Assistance! thus delaying your eligibility for unemployment, is based on whether or not there is a release of claims for the reasons the other respondents have already addressed.

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