Ciattarelli Proposes Delaying Unemployment Benefits for Workers Who Receive Severance Pay

State Assemblyman Jack M. Ciattarelli is proposing that the State of New Jersey delay unemployment benefits for those who receive full severance pay in an effort to strengthen New Jersey’s Unemployment Insurance Trust Fund.

“Through common sense reform, hard work and bipartisan cooperation, New Jersey has nearly dug itself out of an abysmal hole in the Unemployment Insurance Trust Fund,” Ciattarelli, R-Somerset, Hunterdon, Mercer and Middlesex, said. “However, there are additional common sense reforms that are more than fair and reasonable and will help ensure a solvent system over the long-term.”

New Jersey’s unemployment fund became insolvent in 2009 and reached a $2.1 billion deficit in 2011. Reforms have positioned the fund toward solvency. Rules were reformed for terminated workers, saving $165 million in less than three years, Ciattarelli said.

Ciattarelli’s proposal, Assembly Bill 4109, would delay unemployment insurance benefits until full severance pay ends. The idea has been endorsed by the bipartisan Unemployment Insurance Task Force.

Severance pay is money that an employer provide to someone who is leaving their employment. Normal circumstances that can warrant severance pay include layoffs, job elimination, and mutual agreement to part ways, for whatever reason. No law requires an employer to pay severance.

Under the bill, workers could not receive unemployment benefits in any week they received severance pay equivalent to a full week’s worth of wages. Lump sum payments would be divided by an individual’s weekly wage to determine the number of weeks the unemployed worker would be ineligible for unemployment benefits. The bill would preserve full state and federal unemployment benefits after full severance payments have ended.

“Government’s job is to provide programs that serve citizens during times of great need. Citizens, however, also have a responsibility in this social pact to only use governmental programs when, in fact, they are in great need,” Ciattarelli said. “Collecting unemployment benefits while also receiving full severance pay is inconsistent with the spirit and intent of this program. While it is heartbreaking for anyone to lose their job, they haven’t lost their pay when receiving full severance.”

“We can strengthen New Jersey’s unemployment insurance system, lower taxes on workers and employers, and ultimately grow the economy with common sense policies such as this one, which, I hope, will have broad bipartisan support,” he said.