How do Separation / Severance Payments Affect Unemployment

Document created by 1002070 on Feb 16, 2015Last modified by 1002070 on Mar 10, 2017
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Pat Rountree.jpgIn North Carolina, employees who are eligible for unemployment benefits (determined based on the reason for separation from the company and monetary/work eligibility) cannot waive their right to those benefits.  North Carolina law also expressly prohibits employers from interfering with or offering any incentive to employees to waive their right to unemployment benefits.  Employers who violate this law may be subject to fine and/or imprisonment.


Severance pay in exchange for filing a release/waiver of claims permitted by state and federal law or other separation pay will delay the employee’s eligibility for unemployment benefits to which they are otherwise entitled. Other separation pay may also delay unemployment benefits in accordance with North Carolina General Statute 96-15.01(c):


Separation Payments. - An individual is not unemployed if, with respect to the entire calendar week, the individual receives or will receive as a result of the individual's separation from work remuneration in one or more of the forms listed in this subsection. If the remuneration is given in a lump sum, the amount must be allocated on a weekly basis as if it had been earned by the individual during a week of employment. An individual may be unemployed, as provided in subsection (b) of this section, if the individual is receiving payment applicable to less than the entire week:


(1)      Wages in lieu of notice.

(2)      Accrued vacation pay.

(3)      Terminal leave pay.

(4)       Severance pay.

(5)       Separation pay.

(6)       Dismissal payments or wages by whatever name.


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