Unemployment Tip: Mutual Separations and Separation Agreements

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Unemployment benefits. We recently wrote a blog with some basic information about how it works, who decides if an individual will receive unemployment benefits and who pays for unemployment. You can read that here for a quick recap.

In some cases, when an employee is separated from employment, the separation will be considered a “mutual agreement.” Termination by mutual agreement can happen naturally; when an employee is under contract and that contract expires, when an employee retires or when an employee is forced to resign. The term “mutual” leads you to believe that both parties are happy with the arrangement; however, this is not always the case. It just means they have both formally agreed to the conditions of the separation.

In these instances, the State must decide who initiated the separation and determine if unemployment benefits should be awarded. As we mentioned in our previous blog, the State plays the role of the impartial third party and determines who will and will not receive unemployment benefits. If the employer terminated the employee, the State must assess if the cause for termination was for poor behavior during employment. If poor behavior during employment was not the cause, then the claimant is usually provided unemployment benefits. On the reverse side of this, if a former employee is the one who initiated termination, then the State must then determine if the claimant had good cause. If no good cause is found, then the State may not grant unemployment benefits.

When a separation agreement is carried out, it will outline terms of the separation and will usually have the employee sign an agreement waiving the right to sue the employer for wrongful termination. In this case, the employer would provide severance pay. This agreement is also known as a severance agreement or a termination agreement. A severance agreement or a termination agreement can never include a statement that attempts to prevent the employee from filing for unemployment benefits. As that is a statutory right everyone has and cannot be taken away.

For any questions regarding mutual separation, separation agreements or any other HR related matter, please reach out to your assigned DecisionHR Human Resources Business Partner at 1.888.828.5511.

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