In a case entitled Black-Melone et al v. Board of Review, an appellate New Jersey court has affirmed a lower court ruling that denied former Verizon Communications Inc. employees unemployment benefits because they chose to accept an early retirement package in which they received severance benefits. The court held that the workers had no reasonable basis to believe they would be laid off shortly.

The plan was voluntary and stemmed from an internal company study that showed that nearly 18,000 employees nationwide were able to retire and other employees were considering quitting for personal reasons. In order to minimize the disruption and uncertainty associated with a large number of employees leaving the company at various times, the Company implemented a voluntary, incentive-driven separation plan.

Under New Jersey law (and the laws of most other states) employees who quit voluntarily are disqualified from receiving unemployment benefits. Here, the workers claimed that they feared for their jobs, but the court was unpersuaded, finding that they had voluntarily left their jobs and fell under the scope of the disqualification. Indeed, the appeals court held that the employees had taken advantage of the Verizon separation program and entered the program with an informed knowledge as to what that meant. Thus, any supposed fears of imminent firing were lacking a reasonable basis.

Put differently, there was simply no evidence that Verizon had intimated that the employees would be fired within two months of the implementation of the buyout program.

It is important to understand the ramification of early retirement plans and the severance payments associated with them. One issue is whether unemployment benefits will be denied because the severance payments constitute wages. The other aspect, as in this case, is whether the worker has voluntarily instigated his own separation from the job, i.e. a voluntary quit. In a situation where the supposed employer-induced separation is not imminent, the employee will run the risk of ineligibility for benefits when he accepts the package.