Usually, yes, at some point. Rules on severance vary by state. Severance can be paid weekly, or in a lump sum. Some states, like CA and NJ, disregard severance entirely, regardless of how paid. On the other hand and most commonly, some states will not pay benefits the week a lump severance is paid, but thereafter benefits resume. Still others will pay not pay benefits if severance is paid weekly, or is equivalent to “weeks” of work.
The most draconian states reduce the actual dollar amount of an unemployment monetary award due under a claim. This can be avoided if claimant delays filing for benefits until the severance weeks have passed – assuming enough wages remain in the base-period for a claim filed at a later time. In cases of long-term employment, in certain states claimant can delay filing for benefits up to a year, possibly longer, after termination and still have eligibility for a 26-week claim.
In addition, some states delay payment of benefits until severance is exhausted, but only with varying parameters. Examples are:
- Pennsylvania, for example, overlooks the first approximately $22,000 of lump-sum severance, but will delay payment of benefits over and above that amount equivalent to the number of severance weeks remaining.
- New York, on the other hand, will delay payment of benefit until severance is exhausted IF severance is paid within 30 days of discharge. BUT, in NY, people who receive their first (or only) severance check more than 30 days after termination of their employment can collect full unemployment benefits. Many NY employers intentionally delay severance, which allows employees the best of both worlds – immediate payment of both severance and unemployment benefits.
In both the above situations, a delay in filing a claim should be considered for severance packages which would prevent collection of the full 26-week benefits.
In short, generally severance is not a preclusion to benefits and, depending on the state involved, strategically timing the filing of an unemployment claim can allow payment of unemployment benefits, as well.