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Hellmuth & Johnson

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Unemployment Benefits and Severance

Employees who lose their jobs in Minnesota have lots of problems. Obtaining unemployment compensation benefits can be a challenge, especially because employees prevail in less than one-third of all contended proceedings.  See the chart below for the statistics for the past five years in cases in which employees have opened unemployment benefits.

But some of this despair from discharge may be alleviated by a pair of recent ruling of the Minnesota Court of Appeals. The two decisions from this past summer provide a road map for terminated employees to receive unemployment benefits as well as other payments from their employer.

Generally, an employee who receives “severance pay… and any other payments” cannot receive unemployment benefits commensurate with the time period covered by those payments. Under Minn. Stat. §268.085 subd 3(a), the receipt of these payments results in a delay of unemployment benefits, which may result in a reduction of benefits or elimination of them altogether once the employee gets another job. But the court in van de Werken v. Bell & Howell, LLC, 2834 N.W.2d 220 (Minn. App. 2013), the appellate court ruled that an employee could keep the unemployment benefits he received before he obtained a severance payment following discharge from his job. It refused to apply the severance payments retroactively, to offset unemployment benefits, as argued by the Department of Employment and Economic Development (DEED), the agency that oversees the unemployment system in this state, allowed the ex-employee to keep the benefits and the subsequent severance.

Construing the statute liberally in favor of employees, the court held that severance payments received after unemployment benefits have been paid out does not give rise to a reimbursement obligation because the severance “applied to the time period…the applicant is actually receiving the payments,” not the prior period when unemployment benefits were collected by the ex-employee.

In another case, Moore v Waterstone Capital Management, 2013 WL 4504433 (Minn. App. 2013) (unpublished), the court held that a “settlement” of $100,000, in exchange for a release of claims, should not be offset against unemployment benefits because the payment did not constitute wages subject to the set of provisions.

The upshot of these cases is that terminated employees can maximize their economic conditions by:

1.   Trying to delay receipt of any severance as long as possible in order to draw more unemployment benefits.

2.   Seeking to obtain a settlement accompanied by a release of claims, which will not count against unemployment benefits.

Jobless employees face plenty of difficulties even in getting unemployment benefits. But these two cases can be utilized by them to maximize their unemployment benefits, and economic conditions.