Can Unemployment Benefits Be Waived in a Separation and Release Agreement?
By Mark Soycher
CBIA HR Counsel
Q: We paid a terminated employee several weeks’ severance after he signed a separation and release agreement waiving any and all claims against the company. Before the severance ran out, however, he filed for and was awarded unemployment benefits. Did he violate the release agreement by filing an unemployment claim against our company? And by receiving severance along with unemployment benefits, isn’t he “double dipping”?
A: While a separation and release agreement is effective in foreclosing legal claims against a company, there are limits on the types of claims that can be waived. In particular, state law specifically prohibits waivers of unemployment claims by employees.
Connecticut General Statutes Section 31–272 states, “No agreement by an employee to waive, release, or commute his rights to benefits or any other rights under this chapter shall be valid.”
Some separation and release agreements distinguish among those claims that are being released and those that the separating employee may still pursue. Other agreements express the waiver provision in more global terms. But, the bottom line is that a release agreement cannot override statutory prohibitions against waiving certain rights.
Besides unemployment claims, employees cannot agree to waive state and federal labor law rights to be paid for time worked or receive minimum wage or overtime (unless the work falls within statutory exemptions from minimum wage and overtime).
In addition, final settlements of workers’ compensation rights or claims cannot be agreed to without approval of the Workers’ Compensation Commissioner. And since a worker, including a former employee, may file a workers’ compensation claim up to one year after the date of an injury—and up to three years from the date of the first manifestation of a symptom of an occupational disease—it would be both impractical and impermissible to seek release of such potential work injury claims at the time of separation.
As for your departed employee’s simultaneous receipt of severance and unemployment benefits, he’s not “double dipping.”
Ordinarily if an employee receiving unemployment benefits also receives wages in that same week as a result of new employment, part-time employment, or severance pay (with no strings attached), the weekly unemployment benefit amount is reduced by two-thirds of the amount of wages received.
However, if the severance pay is available only if the worker signs a release agreement “forfeit[ing] a right or claim independently established by statute or common law against the employer as a condition of receiving the payment,” the law ignores the severance, and there is no unemployment benefit reduction or disqualification based on the receipt of severance. In such cases, the severance is considered the payment in exchange for the worker’s promise not to sue the employer, rather than characterized as a form of continuing wages.
Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling 860.244.1900.