Minnesota Employers Cannot Agree To Refrain From Contesting A Claim For Unemployment Benefits

06/29/2012 / Daniel J. Ballintine

The law in Minnesota has long-provided that employers cannot ask employees to waive their rights to unemployment benefits and that any agreement to that effect is void. The applicable statute is Section 268.192, subd. 1 of the Minnesota Statutes, which provides in relevant part that “[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.” In the past, however, some employers have offered to refrain from contesting a claim for unemployment benefits as consideration for an employee’s release of claims in a separation agreement, for example. Although this practice has not been explicitly prohibited under the law, there has been risk associated with it since employers cannot commit fraud in dealings with the Minnesota Department of Employment and Economic Development (“DEED”), which administers the state’s unemployment benefits program. For example, an employer cannot lie to DEED and report that an employee was fired when, in fact, he or she voluntarily resigned. To address this issue, employers have often clarified their agreements with employees to provide that while they will not contest a claim for unemployment benefits, they can and will provide truthful information in response to any questions from DEED.
This practice may now be purely a thing of the past. The Minnesota Legislature has amended Section 268.192 of the Minnesota Statutes in an apparent attempt to proscribe it. Effective July 1, 2012, Subdivision 1a. of Section 268.192 was added to the statute and provides as follows:
Subd. 1a. Agreements not allowed. 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 department, 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.
An agreement that violates this subdivision has no effect under this chapter.
Minn. Stat. § 268.192, subd. 1a. It remains to be seen how the courts will interpret and apply this new subdivision. It is unclear whether this subdivision prohibits an agreement to refrain from contesting unemployment benefits purely in exchange for a release of claims by an employee, for example, as opposed to one of the four specific types of provisions listed. The subdivision’s mandate that any “agreement that violates this subdivision has no effect under this chapter,” however, may result in a court voiding the entirety of any separation agreement between the employer and employee which contains such a term, including any release of claims by the employee. Accordingly, employers should beware when considering any such term in their agreements with employees.
For more information on the subject of this article, contact the author of this article, or the Larkin Hoffman attorney who customarily handles your matters. Larkin Hoffman Daly & Lindgren Ltd. has proudly served the legal and business counseling needs of clients since 1958. The firm includes over 70 attorneys serving clients’ legal needs throughout the state, the country and around the globe. As a full-service law firm, it provides counsel and legal guidance in more than 20 areas of law to clients ranging from individuals to emerging companies and Fortune 500 corporations.