Employers who offer buyouts to their employees provide them with financial incentives to voluntarily sever their employment relationships. An employee who accepts a buyout may not be able to collect unemployment insurance benefits depending on state laws. If your employer offers you a company buyout package, you should consider the effects that accepting the package would have on collecting unemployment insurance benefits.
Employers are not required to offer their employees severance packages or financial incentives in order to terminate them, according to federal laws and the doctrine of employment-at-will. However, some employment contracts require employers to offer their employees financial compensation before terminating them. Furthermore, many employers voluntarily offer compensation packages to their terminated employees to sever their employment relationships and to reduce the possibilities of subsequent wrongful termination lawsuits. Buyouts may include accrued holiday pay, sick pay and unused vacation pay. They may also include retirement benefits and severance pay based on an employee's total years of employment service. Many states prohibit employees who accept company buyouts from collecting unemployment insurance benefits.
Many states consider an employee's acceptance of a buyout as a disqualifying event for unemployment insurance purposes. State unemployment insurance agencies may perform fact-sensitive reviews to decide whether an employee's acceptance of a buyout was purely voluntary. In other words, an employee who accepts a company buyout may have done so under the belief that if she did not accept the offer, her company would have terminated her anyway. In most states, an employee who voluntarily terminates employment does not qualify for unemployment benefits unless the voluntary termination was based on good cause.
In some states, such as Michigan, an employee who accepts a company buyout may be ineligible to receive unemployment insurance benefits. If you live in Michigan, and you reasonably believed that you would be terminated regardless of accepting the buyout, you may be eligible for unemployment insurance benefits. According to the Michigan Unemployment Insurance Agency, you would have had a good cause reason to terminate employment if your company told you that accepting a buyout would be in your best interest because it planned on firing you. However, if the agency believes that you could have continued working, the fact that you accepted the buyout may be considered a voluntary resignation without good cause.
If you live in Ohio, you can typically accept a company buyout and collect unemployment insurance benefits, since the Ohio Department of Job and Family Services considers acceptance of a company buyout as a good cause reason for terminating employment. However, although the agency will not disqualify you from receiving unemployment insurance benefits after accepting your company's buyout offer, it will reduce your weekly allowance by the amount of your weekly buyout compensation.