44. Persons Receiving Severance Pay or Other Lump-Sum Payments Upon Separation From Employment
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 six 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. Comm'r of the Dep’t of Emp't & 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 payment upon separation in return for the employee’s release of claims against the employer will not disqualify the claimant from receiving UI concurrently with such payment. White v. Comm'r of the Dep’t of Emp't & Training, 40 Mass. App. Ct. 249, 662 N.E.2d 1048 (1996); Dicerbo v. Comm'r of the Dep’t of Emp't & Training, 54 Mass. App. Ct. 128, 763 N.E.2d 566 (2002) (holding employees’ receipt of a 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). See AH c. 9,§ 3(B)(4)(b) (Payments made in exchange for employee’s release of legal claimsagainst the employer differ from severance payments because they are not given in exchange for services previously rendered, even if the amount of the payment may be based on length of service. Release may be limited to one or more specific claims, or broadly written to cover multiple or all claims. The key is that the payment is contingent on releasing one or more claims against the employer).
In these circumstances, where a claimant agrees to take a 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 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);430 CMR 4.41; BR-0065 7004 32 (2/1/22) (Claimant not in total payment where received lump-sum severance pay in connection with closing of retail store employer; in such circumstances severance pay does not constitute remuneration under G.L. c. 151A, § 1(r), 430 CMR 4.41).
For information concerning the effect of early-retirement incentive packages and voluntary severance packages on UI eligibility, see Question 23.