Texas : how does severance affect unemployment benefits? (collect, file, receive)
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There is conflicting info out there on the internet... some sources say receiving a severance negates unemployment whereas other sources say it does not affect it.
Question - if I get a severance on departure from my employer can I immediately still claim unemployment benefits like I normally would?
Baring any issues over the reason for your unemployment, in Texas, it all depends on what the severance covers and how structured. So, in order to get a good answer, we would need to know:
1. Why you are being unemployed? (quit, fired, laid off)
2. Why are they paying you? (cause they didn't give notice, just because they like you, contractually obligated)
3. How is it being paid? (lump or in installments)
4. Does the pay come with any employment benfits? (health plan deduction, accruing time, extend official termination date)
The general rule in TX is if the severance is based on payment of wages, it impact unemployment payments. Examples of these are:
1. Payment for period where a regulatory notice (think WARN) was not provided so they are paying you the wages associated with that notice period.
2. If paying out for a time period in advance (think paying you PTO time as if working) where benefits are still accruing .
3. If paying wages even if you are not allowed to report to work and your termination date is officially at the end of that period.
If severance is based on a non wage payment, it normally would not impact unemployment payments. Examples of these would be:
1. Paying you a lump to make you leave and not shoot up the place.
2. Written policy to pay X (day's wage) based on Y (each year of service) not tied to your continued employment.
3. Legal settlement.
4. Back wages or monies owed (paying lump for PTO) not attributable to future employment work time.
Basically, you don't want it to be seen as continued wage payments but rather a company "gift" not tied to future work time.
In the first scenario, I had a paid notice period of 2 months, then received a much larger severance payment that was lump sum. I was not able to collect unemployment during my two month notice period, but was able to start collecting upon the first day after that - the last day I was paid for was considered my last day or employment even though I stopped working two months prior (yes, it was a sweet deal lol).
In the second scenario, I received two months of severance, paid on the normal payroll schedule. I was not able to collect unemployment during this time, since I was being paid regularly. I never ended up filing, because I started a new job a month in, so I never had a period for which I was not being paid (actually had a month where I was being double paid so that was quite nice).
In the first scenario, I had a paid notice period of 2 months, then received a much larger severance payment that was lump sum. I was not able to collect unemployment during my two month notice period, but was able to start collecting upon the first day after that - the last day I was paid for was considered my last day or employment even though I stopped working two months prior (yes, it was a sweet deal lol).
In the second scenario, I received two months of severance, paid on the normal payroll schedule. I was not able to collect unemployment during this time, since I was being paid regularly. I never ended up filing, because I started a new job a month in, so I never had a period for which I was not being paid (actually had a month where I was being double paid so that was quite nice).
I am in New York, so Texas may work differently.
Each state's severance laws as they apply to unemployment benefits differs.
There is conflicting info out there on the internet... some sources say receiving a severance negates unemployment whereas other sources say it does not affect it.
Question - if I get a severance on departure from my employer can I immediately still claim unemployment benefits like I normally would?
This is in Texas.
Go ahead and apply immediately to unemployment. They will ask the questions and screen you, and if they find a conflict with your severance package let them advise you. But I wouldn't take the approach to avoid applying for unemployment because you suspect they won't approve it.
I know someone who was terminated from a job (not in Texas) and since he was given a severance the employer instructed him not to apply for unemployment because they were being given severance. He applied for unemployment anyway, and they went to arbitration and he won. He got the unemployment benefits and the severance. I don't recall if he was paid severance first and then got the unemployment benefit payments or it was simultaneously.
It is the unemployment office that makes the determination who is and isn't eligible, not the employer. The employer can fight it just like you, but that doesn't mean they will win, you can win. I believe he said that going to arbitration didn't cost him anything. Their corporate attorney talked big about this, but ended up not showing up for arbitration. Always apply for unemployment benefits, and all them to make a determination. Too often people also repeat false information that if you resigned from a job you can't get unemployment benefits either and that isn't always true, it depends on the circumstances of your separation from the company.
As always, consultant with an attorney with experience in employment law in your state.
In any state, severance wouldn't "negate" unemployment. And you should always file for unemployment immediately.
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