Q: Do Severance Payments Preclude New Jersey Unemployment Benefits?

A: Currently, individuals may receive unemployment benefits even if they have been or are receiving severance as long as the severance is not viewed as extending employment.  For instance, an individual would be disqualified from receiving unemployment for any period of time that severance was paid in lieu of notice (e.g. employer was contractually required to give 60 days prior notice of termination but instead terminated without prior notice and paid severance for the notice period).  On the other hand, a person receiving severance payments based solely upon years of service is allowed to concurrently collect unemployment benefits. This may change in the very near future. In May 2012, a bill (A2654) was introduced in New Jersey to disqualify an individual from receiving unemployment benefits if they are receiving “severance pay” in an amount that significantly exceeds the statewide average annual or weekly wage. Under the proposed legislation, the definition of “severance pay” includes payments by an employer due to separation from the service of the employer, regardless of whether the employer is legally bound by contract, statute or otherwise to pay severance, but excludes from the definition payments for pension, retirement and accrued leave.

UPDATE - Bill A2654 was abandoned. 

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