Finding yourself suddenly without a steady income can be scary. But there are ways to make it through until you get back on your feet. Learn how to navigate severance, unemployment insurance and workers’ compensation benefits so you can claim what you need if or when the time comes.
You’ve heard whispers in the office. layoffs are coming.
There’s never a good time to be unemployed, but sometimes the unexpected can happen at exactly the worst possible time for you or your family. Perhaps you have a recently unemployed partner, or you’re expecting a baby or caring for an elderly family member. or you just need a job (as most of us do).
So, what happens if you lose your job and don’t have a reserve of money to fall back on?
Fortunately, there are programs and systems in place to tide you over so you can manage while you search for a new job. However, there are still choices to make because you can’t “double-dip” or receive different types of benefits at the same time.
Let’s look at what you can do if you’re laid off, injured and can’t return to work, or have lost your job for another reason.
Unemployment insurance is available to a person who loses their job by no fault of their own. In other words, if you’re laid off because of downsizing, your position is eliminated, or a similar situation — not for cause — then you may be eligible for unemployment payments.
Like workers’ compensation, unemployment is run by the state and each state has its own set of eligibility requirements.
You are generally considered unemployed if:
“Actively” seeking employment could include submitting resumes for job openings, completing applications, placing or answering job ads, or performing an active job search by other means.
Unemployment insurance provides temporary support based on guidelines within your state of residence. Eligibility, benefit amounts, and the length of time benefits are available is determined by state law.
In general, you would need the following items in order to file an unemployment claim:
Once your claim for unemployment is approved, you can usually file a weekly claim online for your eligibility benefits. Most states offer unemployment benefits for up to 26 weeks (though some states offer fewer). Typical amounts of compensation are half your earnings up to a maximum amount.
You must pay federal income taxes for your unemployment benefits.
Enjuris tip:There is federal legislation that provides for extended unemployment benefits for people who lost jobs during or due to the COVID-19 pandemic. This includes the federal Coronavirus Aid, Relief and Economic Security Act (CARES) stimulus bill and the American Rescue Plan, which extends expanded benefits through September 6, 2021.
The CARES Act also allows for unemployment benefits to be issued to independent contractors and other people who might not normally be eligible for this benefit.
Workers’ compensation is available to a person who becomes hurt or ill while at work.
Workers’ compensation is no-fault insurance, which means you don’t have to prove that your employer, a coworker, or anyone else was negligent and that they caused your injury. Like unemployment insurance, workers’ compensation is designed to provide you with benefits until you’re able to return to work.
In some states, you can collect workers’ compensation and unemployment benefits at the same time. Usually, this happens if you are being paid for partial disability from workers’ compensation but are considered ready, willing, and able to work by the unemployment division.
If your doctor declares that your injury has left you completely disabled and unable to return to work, you generally can’t claim unemployment benefits — in that situation, you are only eligible for workers’ compensation.
However, even if you are able to collect both unemployment and workers’ compensation benefits simultaneously, you can’t collect more than your average weekly wage from both benefits. You would receive workers’ compensation benefits first and your unemployment would be reduced accordingly. You’re required to report your workers’ compensation benefits to the unemployment department.
Unemployment insurance provides you with a benefit similar to a paycheck. Workers’ compensation provides wage benefits and also covers medical treatment for the injury or illness you suffered at work.
An employer is not required to offer a severance package to a terminated employee. Many do, but not all and it’s at the employer’s discretion.
Many employers who provide a severance package will require the receiver to sign an agreement that specifies terms like a non-disparagement clause.
Receiving a severance package does not automatically disqualify you from receiving unemployment. Severance could be offered as either a lump-sum payment or in installments (like continuing to receive paychecks for a specified period of time).
If you’re receiving payment in installments, you might be less likely to qualify for unemployment because the payments would still be considered a stream of income. In this case, you could apply for unemployment when your installment period (called “continuation pay”) ends.
You’re allowed to take time to review a severance agreement before you sign it. In fact, the Older Workers Benefit Protection Act mandates that an employee over age 40 must be permitted 21 days to consider the offer and they have 7 days after signing to change their decision.
If you’re part of a group termination (layoffs), you have 45 days to consider your severance offer, regardless of your age.
A non-compete agreement prevents you from working for a competing company during a specified period of time. Sometimes a non-compete agreement will specify a geographic location. The reason employers want non-compete agreements when an employee leaves is to prevent the person from revealing proprietary or client information or business practices, or from taking clients to their new employer.
If you signed an employment contract upon hiring, there could be a non-compete agreement within that document. You could be asked to sign a non-compete agreement, a non-disclosure agreement, or a non-disparagement clause in order to receive a severance package.
Some states require an employer to pay for unused vacation time during a layoff.
| States in which unused vacation time must be paid: | States with no law requiring payment for unused vacation time: |
|---|---|
| California Illinois Louisiana Massachusetts Montana Nebraska North Dakota Rhode Island | Florida Idaho South Dakota Virginia Wyoming |
The 37 remaining states require an employer to pay for unused vacation time only if it was included in an employment contract.
Enjuris tip:Contributions you’ve made to a 401(k) belong to you. But an employer match could be unvested if you haven’t worked for the company for a certain period of time. If you haven’t been there for long and you’re laid off, ask whether you may keep the unvested shares of your retirement plan or other stock options. Always ask if you can keep your retirement plan with your employer or if you need to roll it into a different investment plan by a certain deadline.
Your mind might be racing from the stress and anxiety of losing your job, but there are things you can do to stay afloat financially.
If you’re facing options like whether to sign an agreement for a severance package, or you aren’t sure how to navigate making a workers’ compensation claim or file for unemployment, we suggest consulting an attorney who specializes in such matters.
Most employment or workers’ compensation lawyers understand the law, are familiar with employment and severance agreements and know how to work through the claims process for unemployment or workers’ compensation benefits. Your lawyer can help guide you through the right decisions and processes in order to receive the highest possible amount of benefits during your transition period.
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