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Thursday, June 4, 2009

Severance Packages May Cause Denied or Delayed Unemployment Benefits

MIAMI - NOVEMBER 20:  (L-R) Lily Smith, Lazaro...Image by Getty Images via Daylife

Has your unemployment benefits been denied or delayed because you received a severance allowance from your employer?

I fought the battle and won – here's how.

Unemployment is new to me. In my 30+ years of working I had never experienced one day of unemployment till this year. I lost my job as part of a reduction in force (RIF) action by my employer in January. When I filed for unemployment benefits with the State of Colorado Department of Labor and Employment, with 48 hours I received a letter called a “Monetary Determination of Unemployment Insurance Benefits”. The letter documented that I was eligible for benefits, the weekly benefit amount and maximum payable benefit amount for a year. With all the things to deal with as a result of the RIF, filing for unemployment seamed very straight forward and the state agency was very responsive. It had appeared that the benefits I expected were underway and I could concentrate on the job of getting a job.

About two weeks into the process I received a “Notice of Decision” letter from the state department of labor and employment. It started with a legal citation referencing the Colorado Employment Security Act Section 8-73-110 (1) (a) (III), (1)(b) bla, bla bla … Bottom line, it said that because I received a severance allowance from my employer, my benefits would be delayed by the weeks of severance pay and that benefits would be reduced to almost $0.

When I was RIF’d I was in good company, hundreds of other co-workers around the world were affected and more to-be-affected as soon as local laws will allow my previous employer to proceed. I networked with several of these folks and found that most were receiving benefits from Colorado and other states, but a few were in the same boat as myself. We determined that each state was spot-checking information and apparently many who were checked and had received a severance allowance from their employer were experiencing denied or delayed benefits.

The notice of decision letter clearly outlined the appeal process. It provided a link to the quoted Colorado laws and after reading it (no I am not a lawyer) I thought it was pretty clear that the decision was based on fact and in alignment with state law. A former co-worker told me that a week earlier, he had received a call from the state unemployment agency, asking if he had received a severance allowance from our former employer. He argued with them that it was not a severance allowance but a separation package. Also that he was required to sign a “Release and Waver” agreement that included waving any claims arising from the termination of employment in exchange for the separation payment which also included COBRA and other benefits. This seemed to satisfy the caller and he continued to receive benefits. So I appealed the decision and waited for what I though would be similar telephone conversation with someone from the state.

About a week later I received a “Notice of Unemployment Insurance Appeal Hearing” scheduled in 7 days in Denver at 11:30 AM. I prepared my case.

Studying the Colorado Employment Security Act, I also found that the law provides that individuals who receive payments from an employer other than wages shall be considered to have received an “other cash payment” and that special consideration would be given to this type of payment. I would build my case on the fact that the payment I received was not wages; it was received because I signing the release and waver thus giving up my right to pursue legal action (lawsuit) connected with my termination. I faxed a copy of the “Release and Waver” agreement to the assigned hearing officer.

I arrived an hour early to the Colorado department of labor and employment located in downtown Denver. Although requested to attend, my former employer did not send any representation. I was greeted with respect, cleared security and waited for the hearing officer to call my name. She called me exactly on time, we reviewed the facts and I pleaded my case. The hearing lasted about 20 minutes then the hearing officer said I would be notified of a decision within 20 days and explained the process for further appeal should I feel the need for one. I felt my chances of a successful appeal were less than 50%.

The next day I received the hearing officer’s decision in the mail. The hearing officer agreed with my position and documented that section 8-73-110 (1) (a) (III), (1)(b) and (1.2) of the Colorado Employment Security Act was not applicable.

Conclusion: Don’t be intimidated by letters sent from state agencies. Work with them, understand their process and ask them questions. Of course be completely truthful and sincere. At one time I though, “I don’t have a case”, I called the department of labor and employment to cancel the hearing as I was ready to accept their decision. I actually got a knowledgeable, courteous professional; I briefly outlined my thoughts and they encouraged me to continue with the appeal. And I’m glad I did.

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Anonymous said...

Thanks Joe, I thought that because I received a severance package I was not eligible for UI benefits - I will now check into it

Anonymous said...

Good for you Joe - I know its tough out there and even those lucky enough to get a severance package are eating into their savings - this will help stretch things till the job market turns around - I hope soon for all of us - best of luck - Paul

Anonymous said...

Thank you
Interesting word choice...I will follow up with it.
This law is a piece of garbage...

Anonymous said...

Timely post, my hearing date is next week - thanks for the tips Joe !

Anonymous said...

Hi Joe, Just received my notice of decision which cites 8-73-110 (1) (A) & (B) Reg. 2.9.2. Letter also says I received additional renumeration (new word for severance?) so my benefits cannot be paid until the renumeration period is complete. UI is counting my unused vacation payment and separation payment against me. Any additional tips regarding the appeal process?

Unemployed over 50 said...

My advise is to appeal - If you had to sign a release and wavier agreement in order to get your additional remuneration (Severance) then that is your basis for your appeal. You had to give up something in order to get the payment. If you did not have to sign a waver and everyone got the same remuneration then you have a tough fight.

Hope that helps - Joe

KC said...

Thanks for sharing your story Joe. I'm in the same boat and also had to sign a Release and Waiver to get my severance payment. In discussing with others, the precedent for this is Moore v. Digital Equip. Corp., 868 P.2d 1170 (Colo. Ct. App. 1994) which stated that the payment was not wages but rather a payment in exchange for signing the release.

Anonymous said...

wondering if KC was awarded benefits -i read the DEC document and it certainly makes sense. I am now in the same boat, thanks, bn

Anonymous said...

This didn't work for me. I had my hearing on Nov. 2nd, submitted my Release and Waiver and made my case as reviewed on this blog, but the hearing officer ruled that the law had changed substantially June 2, 2009 and denied my appeal. However, he shortened the time of deferment from December to September. I don't speak Lawyer well enough to explain from the reply why this is so. If the benefits go back retroactively I still haven't received them yet. I am left confused.