Losing your job can feel like having the rug pulled out from under you. Between the emotional stress and financial pressure, you’re left scrambling for answers, especially with severance pay and your right to collect unemployment benefits. If you’re dealing with a recent layoff or separation, understanding whether accepting severance disqualifies you from unemployment in Connecticut and what happens if you negotiate more pay or delay your last day are important considerations.

How Severance Pay Works in Connecticut

Severance pay is money your employer may offer when they let you go. It’s not required by law in most cases, but it’s common in layoffs, corporate restructures, or high-level terminations. Sometimes, it comes as a goodwill gesture. Other times, it’s tied to signing an agreement that waives your rights to sue or discuss the circumstances of your departure.

Here’s how severance typically shows up:

• Lump-sum payments: You receive one check covering several weeks or months of pay.
• Salary continuation: You stay on payroll for a set time but don’t actually work.
• Conditional pay: The employer only pays if you sign a release or agree to specific terms.

In Connecticut, employers have discretion over whether and how much severance to offer. That said, it’s worth looking closely at the agreement. These documents often include language that limits your legal rights, such as non-disparagement clauses, non-competes, or waivers of wrongful termination claims, all essentially reducing your right to speak about your experience.

If you’re offered severance, don’t sign anything right away. Take time to review the terms and get advice before agreeing to anything that could affect your future.

Remember that severance can impact other aspects of your post-employment life. For example, if your health insurance is bundled into your severance, that could delay your eligibility for COBRA or state coverage options.

The timing and structure of severance payments can also influence how state agencies calculate your unemployment benefits, and when you are eligible to receive unemployment benefits. Therefore, it is important to get advice about how your severance agreement will impact your claim for unemployment benefits before you sign the severance agreement.

It’s also important to report all income accurately when you file for unemployment benefits. If you omit severance or incorrectly mark your last day of work, it can cause problems with your claim or even lead to an overpayment that you may be required to repay.

How to Navigate Your Separation Strategically

Whether you’ve already been let go or you’re in talks about your exit, there are steps you can take to protect your finances and your future.

1. Review the severance agreement carefully. Most severance packages come with strings attached. You may be asked to waive your right to sue, stay silent about your departure, or accept restrictive covenants that affect future employment. These are legal documents, and signing without fully understanding the terms can cost you more than the money you’re receiving.
2. Don’t assume the offer is final. In many cases, severance is negotiable—especially if your termination was sudden, if you’re being asked to give up rights, or if your employer is concerned about potential legal claims. You may be able to increase the payout, extend insurance coverage, or narrow the scope of any waivers.
3. Time your unemployment claim carefully. Before applying for benefits, confirm your official last day of work and how your employer will report any severance pay. If you're unsure whether the payment will delay your eligibility, you can still file and let the CTDOL make a determination. But be transparent. Failure to disclose payments or incorrectly stating your employment status can lead to denials or even fraud allegations.
4. Keep track of paperwork and communications. If you’re laid off, you should receive a separation notice or a statement explaining the reason for termination. If not, ask for one. Keep copies of all emails, agreements, pay stubs, and correspondence about your severance and final paycheck. These documents can be critical if there’s a dispute over benefits or claims later on.
5. Reach out for guidance before signing or filing. Employment laws are complex, and every case is different. Severance agreements often include language that protects your former employer—not you. Since receiving severance benefits can also impact your claim for unemployment benefits, it is important to get advice from a lawyer before you sign the severance agreement. Filing for unemployment can also be a bureaucratic headache if your pay status isn’t clearly communicated. You don’t have to navigate this alone.

You Deserve Clarity—We’re Here to Help

At Madsen, Prestley & Parenteau, we represent workers across Connecticut who are navigating layoffs and severance offers. If you’ve been offered a severance package or need help understanding your rights when applying for benefits, we can help you make sense of your options and protect what you’ve earned.

Contact our legal team online or call us at 860-246-2466 to schedule a consultation, and make sure your next steps are the right ones.