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IF YOU HAVE SEVERANCE PAY, CHECK YOUR NUMBERS BEFORE COLLECTING UNEMPLOYMENT

QUESTION: I am being laid off at the end of the month. The company is giving everyone severance pay, equal to two weeks’ salary. The severance will be paid out in two installments after we leave on our usual pay days, every two weeks. Can I file for unemployment at the end of the month, or do I have to wait until I’ve received my two severance checks?

ANSWER: Under the Michigan Employment Security Act, severance pay is considered “remuneration” and treated as earnings. You may apply for unemployment as soon as you are officially laid off, but you may not be eligible to receive any benefits until after the period in which you receive severance pay. And, if you are eligible, the UIA will reduce the amount of your weekly benefit, depending on the amount of severance pay you receive. If you want to receive the maximum unemployment benefits, you may wish to wait and file after you have received all severance payments.

If you were paid every two weeks, the Unemployment Insurance Agency (UIA) will allocate the payment over both weeks, for a weekly amount. That is, if your severance payment for the two-week period was $1,500, the UIA would treat that as two payments of $750 each.

If your severance payment for a week equals or exceeds 1.6 times your weekly benefit amount (typically $362.00) with the UIA, you would not be eligible to collect benefits for that week. If your severance payment for the week is less than 1.6 times your benefit amount, but more than the benefit amount itself, the severance amount is subtracted from 1.6 times the weekly benefit amount. You can still collect the remaining amount, but taking the reduced amount will still count as one of your 20 weeks of unemployment benefits. Finally, if your severance payment is equal to or less than the weekly benefit amount, 40 percent of your weekly severance payment (payment x 0.4) would be subtracted from your weekly benefit amount. Again, taking the reduced payment would count as one of your 20 benefit weeks.

For example, if your “weekly” severance amount was $750 (based on two checks of $1,500 each, every two weeks), as above, you would not be entitled to any unemployment benefits, because that amount is more than 1.6 times the usual $362 benefit amount ($362 x 1.6 = $579.20) You would not be allowed to claim any benefits for that week.

If your two-week severance check was $800, or just $400 per week, you would be eligible to receive benefits ($400 is less than 1.6 times the benefit amount ($579.20), but more than the benefit amount itself, then the full $400 would be subtracted from 1.6 times the benefit amount ($579.20-$400=$179.20). In this scenario, in addition to your severance, you would receive $179.20 for the benefit week.

Finally, if your “weekly” severance payment is equal to or less than your benefit amount, the UIA would subtract 40 percent of your severance payment from the benefit amount. So, if your “weekly” severance amount was just $300 (based on only $600 every two weeks), your benefit amount would be reduced to $242.00 for that week ($362 – $300(0.4) = $242.00.)

If you decide to start taking your unemployment benefits before you have received all your severance pay, make sure you report ALL severance payments to the UIA. Failure to do so could result in a finding of “misrepresentation” against you, and subject you to repayment of any benefits you receive, plus four times that amount.

If a finding of misrepresentation is entered against you, you may wish to seek the advice of an attorney. The lawyers at GWINN TAURIAINEN are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinntauriainenlaw.com.

The lawyers at GWINN TAURIAINEN PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinntauriainenlaw.com.

ASK THE LAWYER
By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN TAURIAINEN PLLC
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3300
(248) 247-3310 facsimile
[email protected]
www.gwinntauriainenlaw.com