My employer offered me unemployment benefits to resign but now disputes the claim. What can I do?

If the employer promised employees that it would not challenge their unemployment claims as an inducement to them to voluntarily separate, but then challenged their claims, the company might be liable to them under one of the following theories:

Breach of contract: the notion is that the company and the employee had an agreement (even if it was an oral, or spoken, rather than written, one), and the employee can sue to enforce the agreement.

Promissory estoppel: in reliance on the company’s promise (to not fight or challenge any claims), the employee materially changed his or her position (e.g. took voluntary separation) to his or her detriment (can’t receive unemployment); in these cases, courts sometimes enforce the promise as if it were a contract.

In either situation, since it is in essence a contractual cause of action, the employee could probably only sue for contractual damages—i.e. for the money he or she would have received for unemployment benefits, had the company honored its promise. That also means that to recover, the employee must have otherwise complied with terms and conditions of being paid unemployment, such as looking for work but not actually being employed at the time he or she seeks unemployment compensation.

A chief difficulty for employees will be proving the agreement, IF there was nothing in writing. (If there’s any writing setting out the company’s promise, even an email, the employees are in a much stronger situation.) Also, since lawsuits cost money—and if the company doesn’t voluntarily honor its responsibilities, the employees will need to sue it—it may be a good idea for the separated employees to consider jointly retaining an attorney, to spread or share the costs.

Anything the employees did receive for taking voluntary separation (e.g. severance) which they would not have received had they been fired, will be offset against what they could recover from their employer.

Finally, note that once an employee has voluntarily separated, for any reason, it is very unlikely they could be eligible for unemployment; their potential recourse is against the employer, not the Department of Labor or the unemployment insurance office.

Case Studies: Resolving Disputed Unemployment Claims

Case Study 1: John’s Breach of Contract Claim

John’s employer assured him that they would not contest his unemployment claim if he voluntarily left his job. However, after John resigned, the company disputed his claim. John could potentially sue his employer for breach of contract, arguing that an agreement existed between them, even if it was only oral.

Case Study 2: Sarah’s Promissory Estoppel Case

Sarah relied on her employer’s promise not to challenge her unemployment claim and chose voluntary separation. Unfortunately, the company reneged on its promise, leaving Sarah unable to receive benefits. Sarah might have a claim based on promissory estoppel, which treats the promise as enforceable. She demonstrate that she suffered a detriment by changing her position based on the promise.

Case Study 3: Mark’s Joint Legal Action

Mark, along with several other separated employees, faced a similar situation. They all received promises from their employer that their unemployment claims would not be contested. However, the company challenged their claims. To mitigate costs, Mark and his colleagues decided to jointly retain an attorney to share the expenses of taking legal action against the employer.