Will I forfeit unemployment benefits if I sign a severance agreement?

Asked on October 19, 2015 under Employment Labor Law, Texas

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If an employee signs some sort of severance agreement and it states that the separation is voluntary on the employee's part e.g. that the employee resigned, this might make the employee ineligible to receive unemployment compensation. This is true because only involuntray termination allows an employee to be eligible for unemployment insurance. Therefore, if an employee signs a document stating that they left by their own free will, the agreement can be used to oppose the employee&rsquos unemployment compensation claim.
Additionally, if an employee receives severance pay and it is paid all at once, it doesn&rsquot affect their end date of employment. They are still terminated whenever they are taken off the payroll. However, sometimes instead of a lump-sum severance, an employer will pay severance over time by keeping the employee on payroll even though the person has been terminated. This type of severance will prevent the employee from receiving unemployment compensation until the last payment is made.
Therefore, while severance does not automatically bar an employee from collecting unemployment, there are circumstances under which it can. It is vital to review the terms of any severance or release and separation agreement.


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