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Beware: Employees Taking Voluntary Early Retirement Packages May Have Claim for Unemployment Benefits



The North Carolina Court of Appeals recently handed down a decision that granted an employee unemployment compensation after the employee took a voluntary early retirement package (VERP).  Carolina Power & Light Co. v. Employment Sec. Comm’n of N.C., 665 S.E.2d 141 (N.C. Ct. App. 2008).  The employer, Carolina Power & Light Co. (CP&L) announced in January 2005 that it was downsizing, and notified an employee, Roberts, that his current position was being eliminated.  CP&L assigned Roberts to a temporary position in another facility until the downsizing was complete.  Roberts asked his supervisors if he was going to be transferred back to his original facility, but received no reply.  CP&L then offered several employees, including Roberts, a voluntary early retirement package.  Roberts asked his supervisors if he would still have a job if he didn’t accept the package, but again received no response.  Roberts accepted the VERP and then filed a claim for unemployment compensation.

Generally, where an employee is willing and able to work and is terminated without cause, the employee is entitled to unemployment benefits.  However, where an employee is notified that he/she will be severed from employment at some future date, and the employee leaves before that date because of the impending termination, the employee is deemed to have voluntarily terminated employment and is not entitled to unemployment benefits.  In contrast, where an employee resigns at the request of his/her employer, the employee is entitled to full benefits.  Although CP&L argued that Roberts voluntarily terminated employment, the Court of Appeals found the facts to be more analogous to a request for resignation.  The Court cited CP&L’s lack of communication with Roberts and its failure to answer Roberts’ question about future employment as the cause of Roberts’ acceptance of the VERP.  Therefore, the Court concluded that Roberts’ acceptance of the VERP was “valid and not indicative of an unwillingness to work . . . and a result of actions by the employer.”  As such, Roberts was entitled to receive unreduced unemployment benefits in addition to the VERP.

Although CP&L has appealed the decision to the North Carolina Supreme Court, North Carolina employers should communicate carefully with employees offered a VERP, as otherwise an employee may be entitled to unemployment benefits even if he or she accepts a VERP.

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