Severance Pay and Unemployment Benefits

In response to case law holding that severance received in exchange for a release of claims was not disqualified from unemployment benefits, the Arizona legislature recently passed a law that disqualifies former employees from collecting unemployment benefits during a severance pay period, regardless of an execution of a release of claims. The legislature took this action to prevent what it saw as employee double- dipping and to protect the solvency of the state’s unemployment trust fund. As of July 24, 2014, employers can now be assured that departing employees who receive severance pay will not be eligible for unemployment benefits until after the severance pay period expires. As a reminder, Arizona law requires employers to prominently post in their place of business a Notice to Employees that provides information about the Unemployment Insurance program to their employees. A copy of the poster can be downloaded here. This poster was recently amended to notify employees that they can obtain information about filing for unemployment benefits in a pamphlet entitled “A Guide to AZ Unemployment Insurance Benefits” by downloading a copy at www.azui.com.