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Can severance deal address unemployment?

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in Compensation and Benefits,Firing,Human Resources

Q. We want to terminate an underperforming employee and are considering offering a severance agreement in which we agree not to contest unemployment benefits and he agrees to resign and release the company from any claims. Is that OK?

A. Minnesota recently enacted a new law that your proposed agreement might violate. It prohibits employers from entering into agreements that call for employees to quit, take a leave of absence, temporarily or permanently leave employment or withdraw a grievance or appeal of a termination in exchange for an agreement not to contest unemployment benefits.

However, for purposes of qualifying for unemployment, a forced resignation is treated as a termination. Consequently, you should be able to accomplish your goal of assisting the former employee in qualifying for benefits without entering into an agreement that violates the new statutory provision.

If you need to address unemployment benefits in the severance agreement, simply state that if the company  must answer an inquiry about the circumstances of the former employee’s departure, you will state that the termination was initiated by the employer and that you are not contesting the employee’s application for benefits.

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