Can You Collect Unemployment in Alabama if You Received Severance Pay?

Unemployment benefits in Alabama are registered by the state's Department of Industrial Relations. To qualify for benefits, you must meet a number of conditions, one of which involves the nature of your relationship with your previous employer.

The first condition for benefit eligibility is that you be either fully unemployed or working reduced hours. If you are working full time, you cannot receive benefits. The Alabama Department of Industrial Relations considers you to be employed full time if you are working the customary number of hours for your occupation. In other words, there is no specific number of weekly or monthly hours of work that you must not exceed. Therefore, if the agreement with your employer mandates that you work full time until a specific deadline to be eligible for the severance package, you must wait until you are no longer working or are working reduced hours, before applying for unemployment benefits. If the severance payment does not mandate such continued employment, it will not disqualify you from unemployment benefits.

An additional consideration is the amount of money you earned while you were employed. Your eligibility is determined based on your wages during the base period, which is the first four of the last five completed calendar quarters before your first unemployment claim. The average earnings of your two highest base period quarters must be equal to at least the minimum amount specified by law. In addition, your total base period wages must be at least one and a half times your high quarter earnings. Keep in mind, however, that the severance payment you have received does not qualify as a wage.

In Alabama, as in all other states, you cannot receive unemployment compensation if you have voluntarily quit your job or were fired for gross misconduct. If the severance package was part of a corporate buyout whereby employees who voluntarily terminate their relationships with the firm are offered a lump-sum payment, you are ineligible for unemployment benefits. The disqualifying factor here is not the payment, but the voluntary nature of your employment termination.

To continue receiving benefits, you must also actively search for a job. The Alabama Department of Industrial Relations states that you must make a reasonable and active effort to seek new employment and defines the criteria for such job search efforts in the "A Handbook for Alabama Unemployment Compenstion Claimants." You need to document the job search effort by writing down the names of the companies and persons you have contacted, as well as retaining copies of correspondence, such as email and fax exchanges.