If you’re reading this, you may have just lost your job and are wondering whether your severance will affect your unemployment benefits. You may even have been counting on both checks to help you get through the next few months. Here’s the important part: Severance does not mean you can never collect unemployment. But in states like Connecticut, it can affect when you collect and how much you receive.
What Exactly Happens When You Receive Severance?
Unemployment is decided one week at a time. Your former employer may send you one severance check, but the state may treat that check as pay for several weeks after your job ends. If your severance covers a particular week, the state may reduce your unemployment payment or not pay you for that week. In other words, a lump sum is not necessarily a work around the rule. States do not apply the same rules, so it is worth knowing which one applies to your claim.
What Happens in Connecticut?
In Connecticut, severance, separation pay, and wages in the place of notice generally affect benefits for the weeks to which the state assigns them. Connecticut ordinarily starts assigning dismissal pay to the weeks immediately after your separation. If the amount assigned to a week is less than your weekly unemployment benefit, it is likely deducted dollar for dollar. If it is at least as much as your benefit, you generally will not receive an unemployment payment for that week.[1] Connecticut Department of Labor will make the determination.
Here’s an example: Your employer says it will give you four weeks of severance after your last day. Even if you receive one check, Connecticut may treat that payment as covering four weeks after you leave. But do not assume you know exactly which weeks are affected without checking the payment terms and the Department of Labor’s determination. If the essential terms of the payment have not been agreed upon, a different allocation rule can apply.[2]
There is another change employees should know about. Before January 1, 2024, certain severance payments related to waiving legal claims were not assigned to unemployment weeks. For separations on or after that date, signing a release does not, by itself, take severance outside Connecticut’s rule.[3]
What Does This Mean for Me?
Apply promptly and be honest about your severance. Tell the unemployment agency what your employer agreed to pay, when you were last employed, and when the first payment was or will be made. Do not hide a payment just because it came in one check or because you signed a separation agreement. Keep a copy of that agreement and your payment records. Connecticut’s guide to collecting benefits[4] tells claimants to report separation payments.
Next, keep up with your state’s weekly claim or certification requirements while your claim is pending, following the agency’s directions. Do not assume that receiving no benefits for one week means you will receive none after the severance period ends. You may qualify for later weeks if you meet the other requirements. If you receive a decision you do not understand, read it carefully and pay attention to any deadline to challenge it.[5]
If you are still unsure, what do you do? Start with your state labor agency’s website and ask how your severance was assigned to specific weeks. If you cannot get a clear answer, talk with an employment attorney, particularly before signing a separation agreement. The most important thing to remember is that severance can change the timing of your unemployment benefits, but it does not automatically end your chance to receive them.
It’s important for employees to consult with an employment attorney to gain a comprehensive understanding of the specific legal requirements and obligations related to laws in the workplace within their jurisdiction. Please contact Carey & Associates, P.C. on our website or call us at (475) 242-8317 or by email at info@capclaw.com.
[1] Conn. Gen. Stat. § 31-236(a)(4)(B); Conn. Agencies Regs. § 31-236-45(a)–(b); Conn. Agencies Regs. § 31-236-46(a)–(b).
[2] Conn. Agencies Regs. § 31-236-46(a)–(b).
[3] Conn. Gen. Stat. § 31-236(a)(4)(A)–(B); Conn. Agencies Regs. § 31-236-46(c).
[4] https://portal.ct.gov/dolui/benefits-booklet/benefits-booklet—a-guide-to-collecting-benefits-in-connecticut
[5] https://portal.ct.gov/dolui/benefits-booklet/benefits-booklet—a-guide-to-collecting-benefits-in-connecticut