Is an employer allowed to change their mind after the fact about severance allocation?

When I was laid off, I opted to take a severance package rather than be placed on a recall list. I asked my employer twice whether the payments would be counted as lump sum or allocated over several weeks, because I was concerned about it affecting my eligibility for unemployment. I was told lump sum both times I asked. I waited until after I received my severance to apply for unemployment in Michigan, but six months later, unemployment is asking for remuneration because my employer actually allocated the severance. Is an employer allowed to change their mind after the fact about allocation? Shouldn't the employer be required to notify me in some way if the lump sum payment, which I did receive, was actually allocated?

1 answer  |  asked Jan 27, 2016 07:49 AM [EST]  |  applies to Michigan

Answers (1)

David Blanchard
It sounds like your problems may have been caused by the unemployment system and not necessarily the employer, according to the way the UIA has been treating claims in the last few years. If the employer does not respond to requests for information, it appears that the UIA is assuming that all payments are attributable to payroll continuation. This is contrary to the stated rule that severance type payments are attributable as payroll continuation only when the employer designates it as such. You have rights to appeal the determination (if you are within the deadline) and you should. You might even find that your employer would be helpful in providing documentation that the payment was a one time payment. This is a good illustration about how careful review of severance contracts is essential. The fact that it was paid as a lump sum, in itself, does not make a difference. What you need is a clear statement that the lump sum payment was in exchange for a release of claims and not attributable to payroll continuation. It would have been best to get that in the severance but maybe you can still get that statement now and be well prepared for your UIA appeal hearing.

posted by David Blanchard  |  Jan 27, 2016 7:50 PM [EST]

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