Historically, employees who received a severance payment upon termination would have to wait until the amount of time represented by separation pay elapsed, before receiving unemployment benefit payments. For example, an employee who received two weeks of separation pay would experience a two-week delay receiving unemployment benefits.
Effective January 2021, there will no delay for certain separation payments. More specifically, “a payment made by an employer to an individual is not a ‘severance allowance’ (subject to the delay) if the purpose of the payment is to induce the individual to waive rights or claims against the employer.” C.R.S. § 8-70-103. Accordingly, as long as an employee is asked to sign a release of employment claims as a condition of receiving the separation payment, and does sign the release, the payment will not trigger the mandatory postponement rule that delays unemployment benefits. Employees who receive severance payments without waiving any rights are presumed to still be covered by the mandatory postponement rule.
Every contract and employment situation is different – if you are unsure about your severance agreement and how it will affect you and your unemployment benefits, contact us and we can help.