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NY State has modified the Unemployment Laws

It is now prohibited in NYS NOT to answer requests from the DOL concerning unemployment questions of a former worker. "Most notably, the change in the law prevents employers from ignoring unemployment insurance notices as part of an agreement with a former employee to not contest unemployment." But the big change is for SEVERANCE payments: "...an individual cannot obtain unemployment insurance benefits during any week in which his or her severance pay exceeds the maximum weekly unemployment benefit rate – currently $405 and increasing to $420 in October 2014. Ineligibility for unemployment insurance benefits will continue for each week in which the weekly severance payment exceeds the maximum weekly unemployment benefit rate. In the event the employer structures the severance payment as a lump sum, the New York State Department of Labor will employ a formula (using the former employee’s prior actual or average weekly pay) to determine the number of weeks of ineligibility for unemployment insurance benefits." What do you think? Quotes taken from Client Advisory of CM&M LLP

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Wayne,

A biased point of view here: I completely agree. Both items are how we do it in CA, and makes perfect sense to me. If you look at severance as giving a former employee a buffer, instead of as a reward for leaving, then it is not unlike unemployment insurance. The policy helps avoid double-dipping, similar to any other insurance policy that won't pay if you've already gotten paid through another insurance provider. There is significant moral hazard in allowing multiple-dipping, along with the problem of increasing costs to the insurance pool when you have excessive claims in this manner.

Similarly, it is mandated that we reply to requests for information, both for the above reason and so as to confirm that they employee left in a involuntary manner. You don't get to collect if you quit (similar to you wouldn't collect if you deliberately crashed your car), as again that's moral hazard territory *and* defeats the general spirit of the insurance.

Similarly, if you resign because you're retiring, the company has to report that fact, in which case you lose eligibility as the departure is voluntary. Like NY (I had employees there in the past), your rates are effected by your turnover...so there is some incentive to terminate people voluntarily so that they aren't paid. Here it is quite common to have it explicit in the release of claims contract that the company won't assert that the departure was voluntary.

Cheers

KP

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