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  • The Impact of Separation Agreements on Unemployment Insurance

    How does your company handle separation agreements, and why are these agreements so important when it comes to managing your unemployment costs?

    In the absence of documentation to serve as proof that something transpired, the state will typically take the claimant’s testimony over that of the employer. This occurs because the employer carries the additional weight of the burden of proof when discharging personnel.

    One of the key components of the “burden of proof” documentation is the separation agreement. We often discuss things like employer policies, signed acknowledgments of policies or handbooks, and prior warnings related to progressive discipline. But the separation agreement itself can be easily overlooked and that can be detrimental to the employer’s protest of a claim.

    The separation agreement is a final coming to terms when the claimant and/or the employer decide to part ways. Separation agreements are typically signed by the employee when they leave under amicable circumstances, or when they receive a severance payment/package. Having one centralized document that summarizes the separation details, signed by both the claimant and the employer, is the key component of proof that the employer is tasked with producing.

    A good separation agreement should include the following:

    • Name & SSN or Employee ID
    • Job title
    • Rate of pay
    • Date of hire
    • Last physical day worked
    • Termination date (if different from Last Day Worked)
    • Manager or Supervisor’s name & title
    • Work schedule
    • General category of separation (Quit, Discharge or Lack of Work)
    • Specific reason for separation, e.g.
      – Quit for personal reasons
      – Discharge for attendance issues
      – Lack of work for seasonal assignment
    •  Final incident (date & description)
    •  Policy violated
    •  Progressive discipline (dates & types)
    •  Separation payment amount, type & date paid (Vacation, Severance, Sick, Wages in Lieu)

    The separation agreement is not a place to try and get an employee to agree to matters like non-competes, disparaging the employer, return of company property, etc. . . . unless they were clearly outlined at the time of hire. If these topics were outlined at the time of hire, the separation agreement is a good place to reinforce them.

    Further, an employer should avoid anything that would appear as coercing the employee to sign the separation agreement. In addition, the employer should not discourage the employee from filing claims for UI benefits or with the EEOC, and should not withhold wages or benefits that were already earned. Regardless of what is agreed upon in the separation agreement, anyone can file a UI claim at any time. The state will not find fault on the claimant’s part for choosing to file.

    If you have questions on separation agreements or any other UI topics, please reach out to your Employers Group Team.