UPDATE -- THE GENERAL ASSEMBLY ELIMINATED THE LOOPHOLE DESCRIBED BELOW. Severance now usually disqualifies you from receiving unemployment.
The answer: it depends. Here is a direct quote from the DLLR Employer's Quick Reference Guide (see page 19):
The receipt of severance payments will not be deducted from . . . benefits if the individual’s job has been abolished through layoff, facility closure, etc., unless the employer continues to pay all wages and benefits, including leave accrual, after the individual has physically stopped working.
Translation: Severance will not be deducted if your job was abolished when you were laid off unless during your severance period you are receiving ALL of your wages and benefits and are still accruing leave.
Nevertheless, be careful to answer of all the DLLR's questions about severance benefits truthfully, and disclose severance benefits whenever asked.
This (severance pay) may not be the case any more (2010):
"All severance payments are deductible from unemployment insurance
benefits. The severance payments are prorated based on the
individual’s last weekly pay rate."
@oys - You are correct. I updated this post when the General Assembly changed the law. You can see my comments on the changed law at http://mdemploymentlaw.blogspot.com/2009/06/important-changes-to-maryland.html
Question: If your severance is paid lump-sum, how is the time frame determined after which one becomes eligible for UI?
@kckingc, you should contact unemployment, but I believe they would divide the lump sum by your weekly pay rate to come up with the number of weeks one would ineligible for benefits.
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