If you tell an employee you think it’s time for him or her to leave and offer a severance package as an inducement, you still may have to pay unemployment. That’s true even if the employee signs a statement saying he or she quit voluntarily in order to get the extra money.
Recent case: David Linn, who was director of operations for Washington Inventory Service, discovered what he considered illegal business practices. When he brought these issues to the attention of upper, he was told it “might be in his best interest to leave.” Linn then negotiated a severance package and signed a preprinted resignation letter that said he quit voluntarily.
Linn applied for unemployment compensation; the company objected. A referee concluded that Linn tried to keep his job, but his employer wanted him out. It didn’t matter that Linn said he was voluntarily leaving when the underlying facts showed his employer instigated the departure. (Linn v. Florida Unemployment Appeals Commission and Washington Inventory, No. 3D06-3081, Court of Appeals of Florida, 2007)
Final note: When calculating severance, take into account any possible unemployment compensation liability.
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