If your employer terminated you, they may have offered you a severance package to recognize your service with the company or reduce the financial impact of a layoff. It’s important to understand that you may still be eligible to collect unemployment benefits with severance. However, any severance pay you received may qualify as deductible income — and reduce your unemployment benefits accordingly.
A severance package is compensation offered to employees upon separation. An employer may present you with a severance agreement at the time of termination to address the end of the employment relationship, and protect themselves from potential litigation. While employers are not legally obligated to provide severance compensation, these packages can help protect their reputations in the event of a mass layoff and make them more competitive in their industry. Typically, in exchange for severance, an employee would be required to waive their right to pursue legal action against the employer in the future.
Before you decide to collect unemployment benefits with severance pay, it’s crucial to consider whether you should accept a severance package in the first place — there are many pros and cons. A knowledgeable employment law attorney can best advise you regarding the implications of accepting a severance agreement in your specific situation. They can also help ensure you understand the rights you would be waiving.
You should first evaluate whether the compensation being offered is fair based on how long you worked for the company, and the position you held there. In many cases, severance compensation will include continued health benefits, unused paid time off, stock options, and company perks. In some cases, a severance package will also provide an employee with assistance finding a new position.
A severance agreement can be negotiated to ensure the terms are in your best interests. Importantly, you may be able to negotiate any provisions in the agreement, including the amount of severance pay, the timing of your termination, the continuation of benefits, and any non-compete clauses. Any provisions concerning a release of claims may also be negotiated — this can be essential if you have a solid legal claim against your employer for employment discrimination or a wage and hour violation.
If you were terminated or laid off, you may be wondering whether you can receive unemployment benefits with severance pay. If you accepted a severance package, it does not mean you are disqualified from receiving unemployment. However, under Ohio law, severance pay is considered deductible income when it comes to claiming unemployment benefits. This means that the amount of unemployment benefits — and the duration you can collect them — may be impacted by your severance pay.
If your employer allocates severance pay to specific weeks after your termination, your unemployment benefits for those weeks could be reduced. In the event your employer pays your severance in one lump sum, your benefits the week payment was received may be affected. No benefits may be paid if the severance pay on any given week is equal to or greater than the weekly benefit amount calculated by the Ohio Department of Job and Family Services.
Workers in Ohio are required to report severance pay and any income received while receiving unemployment benefits to the Ohio Department of Job and Family Services. Notably, if you are earning income while unemployed, Ohio law allows 20% of your weekly benefit amount to be exempt from deductions. In other words, 20% of your weekly benefit amount would be disregarded when calculating the reduction in your benefits due to any earnings received.
In addition to severance pay, many other types of income can reduce the amount of unemployment benefits you receive, including the following:
It’s critical to be aware that unemployment benefits are not reduced by Social Security, Supplemental Unemployment benefits, Armed Forces Reserve pay for scheduled drills, dividends, and rental income.
If you would like to learn more about whether you can collect unemployment benefits with severance pay, it’s essential to consult with an experienced employment law attorney. Located in Westlake and providing skillful representation to clients throughout Ohio, the employment law attorneys of Lalak LLC handle a wide range of employment matters, including reviewing and negotiating severance agreements. Contact Lalak LLC today to schedule a free, confidential, no-obligation consultation and learn how we can assist you.
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