In order to spare New York employers from shouldering the cost of $200 million in interest payments on a loan to fund the New York Unemployment Insurance Trust Fund, the legislature has enacted a number of major reforms to the state unemployment insurance regime.

Perhaps of most interest to employers, amendments that took effect on January 1, 2014, implemented a new offset to unemployment insurance benefits for severance pay. Under the amendment, an employee who receives severance pay within 30 days of dismissal will not be eligible for unemployment benefits for those weeks during which the weekly severance exceeds the applicable maximum weekly benefit (presently capped at $405). Where severance pay is made in a lump sum, the NYSDOL will allocate it on a weekly basis in order to apply the offset. Upon exhaustion of severance pay, the employee will be eligible to collect benefits for the remaining numbers of weeks that benefits are available under state law.

In light of this new offset, employers may, in appropriate circumstances, wish to revisit their standard severance agreements to provide for payment on or after the thirtieth day following termination so as not to impact an employee’s ability to collect unemployment insurance.