44. Persons Receiving Severance Pay or Other Lump Sum Payments Upon Separation From Employment
An employee who receives any "remuneration" from his or her base period employer is not considered to be in unemployment. "Remuneration" is defined to include "severance, termination or dismissal pay." G.L. c. 151A, § 1(r)(3). Severance pay that is granted unconditionally (i.e., without requiring the employee to release claims against the employer) will disqualify the employee for the period it covers, i.e., if an employee is given six weeks of pay at the time of termination, the employee will be ineligible for UI until this payment period runs out. When the employee then applies for UI, this severance pay is included as base period earnings for purposes of establishing the claimant's monetary eligibility. Ruzicka v. Commissioner of the Dep't of Employment & Training, 36 Mass. App. Ct. 215, 629 N.E.2d 1012 (1994). The benefit year is extended by the number of weeks in which the employee's severance pay was disqualifying.
In contrast, an agreement by an employee to take a lump sum payment upon separation in return for the employee's release of claims against the employer will not constitute the kind of payment that disqualifies the employee from UI. White v. Commissioner of Dep't of Employment & Training, 40 Mass. App. Ct. 249, 662 N.E.2d 1048 (1996). See also Dicerbo v. Commissioner of the Dep’t of Employment & Training, 54 Mass. App. Ct. 128, 763 N.E.2d 566 (2002) (holding employees’ receipt of a lump sum separation package, paid regardless of whether employees had found new employment and which constituted an agreement by employees not to bring any future claims against the employer, was not “severance pay” and thus did not disqualify employee from receiving unemployment benefits).
Additionally, lump sum payments where there has been a plant closing at a business of 50 or more employees or at least 50% of employees are not disqualifying. G.L. c. 151A, § 1(r)(3).
For information concerning the effect of early retirement incentive packages and voluntary severance packages on UI eligibility, see Question 23.