Often times when an employee just doesn’t “work out,” employers agree to not contest unemployment as part of the employee’s separation agreement. In addition to a severance payment or continuation of health care benefits, the employer’s agreement not to contest unemployment is an additional benefit (or “consideration”) for the employee’s promise not to sue.
However, the Minnesota Legislature has stepped in to put an end to that practice by making such agreements invalid. This means that unless you have offered other consideration in addition to this promise, the separation agreement, including the employee’s promise not to bring suit, may be invalid.
Specifically, beginning July 1, 2012, an employer may not agree to not contest the payment of unemployment benefits, including agreeing not to provide information to the Minnesota Department of Employment and Economic Development, in exchange for an employee agreeing to:
- Quit the employment;
- Take a leave of absence;
- Leave the employment temporarily or permanently; or
- Withdraw a grievance or appeal of a termination.
2012 Minn. Laws. Ch. 201 Art. 3, Sec. 7 (to be codified as Minn. Stat. § 268.192, subd. 1(a)). According to the new law, “[a]n agreement that violates this subdivision has no effect under this chapter.”
Note that this new law states that an agreement promising to not contest benefits “has no effect under this chapter.” (Emphasis supplied). This means that the agreement not to contest benefits will be ignored in the context of the unemployment process but will not affect the rest of the agreement. However, if the promise not to contest benefits is the only thing that the employer offers in return for the release of all claims, the entire release won’t be valid because the employer will not actually have given up anything in return for that release.
For this reason, employers should make sure that they have included other benefits, such as a severance payment, payment of specified benefit premiums, or other similar items, to ensure that the employee’s promise not to sue is supported by adequate consideration. Simply promising not to contest unemployment benefits is now a legally empty promise.