An employee who receives any remuneration from their 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 (that is, without requiring the employee to release claims against the employer) will disqualify the employee for the period it covers—for example, if an employee is given 6 weeks of pay at the time of termination, she will be ineligible for UI until this payment period runs out. When she then applies for UI, this severance pay is included as base-period earnings for purposes of establishing her 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 receiving UI concurrently with the severance payment. White v. Commissioner of the Dep’t of Employment & Training, 40 Mass. App. Ct. 249, 662 N.E.2d 1048 (1996); 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 that 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).
In these circumstances, where a claimant agrees to take a lump-sum payment in return for a release of claims, it is important that the employer not contest the claimant's UI eligibility. Helpful language to be included in a release of claims to secure this outcome will specify that, if contacted by DUA, the employer will accurately state that the claimant was terminated [for reasons adequately consistent with the facts and consistent with eligibility], that there was no misconduct or rule violation, and the employer does not dispute that the claimant is eligible for UI as of [specified date].
Lump sum payments where there has been a plant closing at a business of 50 or more employees, or where at least 50 percent of employees have lost their jobs, 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.