For many years, Minnesota employers have been prohibited from seeking the waiver of an employee’s right to file a claim for unemployment insurance benefits. As of July 1, 2012, employers are also prohibited from agreeing not to contest unemployment claims. Specifically, employers are prohibited from entering into an agreement with an employee to not contest the employee’s application for unemployment insurance benefits or to not provide information in response to the employee’s application for unemployment benefits in exchange for the employee: (1) quitting; (2) taking a leave of absence; (3) leaving the employment temporarily or permanently; or (4) withdrawing a grievance or appeal of a termination. This amendment calls into serious question the common practice of many employers to agree not to contest an employee’s claim for unemployment benefits within a severance or separation agreement.

Waiver of Unemployment Claims Under the Old Law
Since the late 1990s, employers have been prohibited from negotiating for the waiver of an employee’s right to file an unemployment claim. Under Minn. Stat. § 268.192, subd. 1, “[a]ny agreement by an individual to waive, release, or commute rights to unemployment benefits or any other rights under the Minnesota Unemployment Insurance Law is void.” Any employer which violates this law is guilty of a misdemeanor. Id.

This provision, which acted as a safeguard for employees, was one sided. While employees could not waive their right to receive unemployment compensation benefits, and such waiver agreements would be considered void, nothing in the statute prohibited employers from privately agreeing to not contest the employee’s claim for such benefits. Employers routinely included such provisions in employment separation agreements, believing that employees would be more likely to release their potential civil claims knowing that the employer would not oppose their application for unemployment benefits.

How the New Law Changes Unemployment Claim Agreements
On April 20, 2012, Gov. Mark Dayton signed an amendment to Minn. Stat. § 268.192. Under this amendment, which took effect on July 1, 2012, an employer may not make an agreement that in exchange for the employer agreeing not to contest the payment of unemployment benefits, including agreeing not to provide information to the Minnesota Department of Employment and Economic Development (“MDEED”), an employee will: (1) quit the employment; (2) take a leave of absence; (3) leave the employment temporarily or permanently; or (4) withdraw a grievance or appeal of a termination. Minn. Stat. § 268.092, subd. 1a.

In light of the amendment, employers can no longer enter into private agreements not to contest claims for unemployment compensation benefits or not to provide information to the Department in response to such claims in the four circumstances listed above. Rather, in response to an employee’s application for unemployment insurance benefits, employers will be required to provide truthful information regarding the circumstances surrounding the employee’s separation of employment (e.g., the reason for termination). Based upon the information obtained from both the employee and employer, MDEED will make an independent determination as to whether the employee is eligible for unemployment benefits. In cases where the employee was terminated for misconduct, the employee may be barred from receiving unemployment benefits. Thus, in practice, the amendment may result in fewer employees qualifying for such benefits following the employer’s disclosure of the circumstances surrounding their termination.

Lessons for Employers
Employers should take the following steps to ensure compliance with the new amendment to the Minnesota Unemployment Insurance Law:

• First, employers should update their standard severance agreements to remove provisions under which the employer agrees not to contest the employee’s claim for unemployment insurance benefits in exchange for the employee quitting, taking a leave of absence, leaving the employment, and/or withdrawing a grievance or appeal of a termination decision. While the courts have not yet interpreted the four types of agreements invalidated by the new law, in practice the statute will likely invalidate most employer agreements not to contest unemployment claims.

• Second, employers should train their hiring managers and supervisors about the requirements of the new law. Specifically, managers should understand that they are not authorized to make any promises that the employer will not contest claims for unemployment benefits or provide information to MDEED in any of the four circumstances listed in the statute.

• Third, in response to an employee’s request not to contest their claim for unemployment insurance benefits, the employer should be prepared to explain that the company cannot enter into such an agreement and that the employer will truthfully respond to MDEED’s unemployment insurance questionnaire.

If you are an employer and need assistance updating your employment separation agreement, or in responding to an employee’s claim for unemployment insurance benefits, contact any of the employment law attorneys of Trepanier MacGillis Battina P.A.

If you are an employee and wish to maximize your eligibility for unemployment benefits notwithstanding the new amendment, or want legal representation in your unemployment compensation hearing, our law firm represents both employers and employees and may be able to help.
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About the Author:
Minneapolis employment attorney Craig W. Trepanier represents both employers and employees in a variety of employment law matters, including unemployment insurance claims and employment separation agreements. Craig may be reached at 612.455.0502 or craig@trepanierlaw.com. Trepanier MacGillis Battina P.A. is a Minneapolis employment law firm located in Minneapolis, Minnesota.