No clause in a Minnesota employment agreement, handbook, or separation agreement can waive a former employee’s right to unemployment benefits or bind the state’s decision on eligibility. Minnesota decides eligibility only under its Unemployment Insurance Law, chapter 268 of Minnesota Statutes. That chapter voids any waiver of benefits and states that no agreement between the employee and employer binds the commissioner in determining entitlement. Your documents can prove the facts the statute tests: why the job ended, what standards the employee knew, and what money changed hands at separation. This page explains, from the employer’s side, which clauses help, which ones hurt, and which ones break the law, as part of Minnesota employment law.
How do contract clauses affect an unemployment claim in Minnesota?
An agreement between employer and employee does not decide a Minnesota unemployment claim, though it can be evidence of the facts that do. The Department of Employment and Economic Development (“DEED”) decides eligibility under chapter 268.
Minn. Stat. § 268.069, subd. 2, provides: “Any agreement between an applicant and an employer is not binding on the commissioner in determining an applicant’s entitlement.” The same subdivision states that an application “is not considered a claim against an employer but is considered a request for unemployment benefits from the trust fund.” Subdivision 3 rules out contract and fairness theories: “There is no equitable or common law denial or allowance of unemployment benefits.”
The practical result is that the department looks past the document to the facts. Under Minn. Stat. § 268.101, subd. 2, paragraph (c), an issue of ineligibility is decided on “information required of an applicant, any information that may be obtained from an applicant or employer, and information from any other source.” A well-drafted policy or agreement still matters, because it can be strong evidence of what the employee knew and why the job ended. For the full set of employer defenses, see defending a Minnesota unemployment claim.
What unemployment clauses does Minnesota law void or penalize?
Minnesota voids any clause that waives unemployment benefits and makes it a misdemeanor for an employer to obstruct an application. It also strips effect from a promise not to contest benefits given in exchange for the employee leaving. A separate penalty applies to a false statement made to the department without a good faith belief in its correctness, whether made to help an applicant collect benefits not owed or to prevent or reduce payment.
Minn. Stat. § 268.192, subd. 1, provides: “Any 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.” The same subdivision bars an employer from acting to “require or accept any waiver of any right or in any manner obstruct or impede an application or continued request for unemployment benefits,” and “Any employer or officer or agent of any employer who violates any portion of this subdivision is, for each offense, guilty of a misdemeanor.” A severance term that makes the employee repay severance for applying, or promise not to apply, falls within that language.
Subdivision 1a reaches a bargain in which the employer agrees not to contest the claim if the employee resigns. It provides that “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” quit, take a leave, “leave the employment temporarily or permanently,” or “withdraw a grievance or appeal of a termination.” The statute provides: “An agreement that violates this subdivision has no effect under this chapter.”
The penalty side is Minn. Stat. § 268.184, subd. 1. The commissioner must penalize an employer if “that employer or any employee, officer, or agent of that employer made a false statement or representation without a good faith belief as to correctness of the statement or representation or knowingly failed to disclose a material fact in order to” either “(1) assist an applicant to receive unemployment benefits to which the applicant is not entitled” or “(2) prevent or reduce the payment of unemployment benefits to an applicant.” The statute sets the amount: “The penalty is the greater of $500 or 100 percent of the following resulting from the employer’s action.”
How do conduct and attendance policies support a misconduct defense?
A written conduct or attendance policy supports a misconduct defense by proving the standard the employee was expected to meet and that the employee knew it. The policy does not define misconduct; the statute does, and its definition is exclusive.
Minn. Stat. § 268.095, subd. 6, paragraph (a), provides: “Employment misconduct means any intentional, negligent, or indifferent conduct, on the job or off the job, that is a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee.” Paragraph (e) adds: “The definition of employment misconduct provided by this subdivision is exclusive and no other definition applies.” A handbook that labels tardiness or a dress-code lapse as gross misconduct does not make it misconduct for unemployment purposes.
Paragraph (b) lists conduct that is not employment misconduct, including “simple unsatisfactory conduct,” “good faith errors in judgment if judgment was required,” and “absence because of illness or injury of the applicant, with proper notice to the employer.” Paragraph (d) states that when the firing rests on “only a single incident, that is an important fact that must be considered in deciding whether the conduct rises to the level of employment misconduct under paragraph (a).”
The Minnesota Supreme Court has treated a reasonable policy, known to the employee and broken anyway, as strong evidence. In Schmidgall v. FilmTec Corp., 644 N.W.2d 801 (Minn. 2002), the court stated: “As a general rule, refusing to abide by an employer’s reasonable policies and requests amounts to disqualifying misconduct.” The employer there had a handbook rule requiring same-shift injury reports. It ended the employment after the employee “failed to make a timely report of the third injury, following individual instruction and written warning.” The court decided the case under an older common-law standard. That standard limited misconduct to “conduct evincing such wilful or wanton disregard of an employer’s interests as is found in deliberate violations,” and the court stated that it “need not reach whether Tilseth has been superseded by subsequent legislation.” The current definition, by paragraph (e), is exclusive. I suggest policies that state the expected behavior and the business reason for it, with a signed acknowledgment, because those are the facts the statute’s “right to reasonably expect” language asks about. More on the definition is in what counts as employment misconduct.
What happens when an employer skips a step in its progressive discipline policy?
Skipping a step in a handbook’s progressive discipline policy does not by itself turn a misconduct firing into an eligible one. The Minnesota Supreme Court held that the misconduct question looks at the employee’s conduct, not at whether the employer followed its own procedures.
In Stagg v. Vintage Place Inc., 796 N.W.2d 312 (Minn. 2011), the employer’s manual set a five-step schedule for attendance violations, and the employer fired the employee without imposing the fourth step, a ten-day suspension. The court of appeals awarded benefits because the employer skipped a step. The Supreme Court reversed and reinstated the denial of benefits, reasoning: “Thus, the focus of the inquiry is the employee’s conduct, not that of the employer.” It added that “whether an employer follows the procedures in its employee manual says nothing about whether the employee has violated the employer’s standards of behavior.”
The holding rests on the record facts and on the 2010 definition. First, the court found that “the record supports the ULJ’s findings that Stagg was aware of the attendance policy, as well as the reasons for it, and knew that he was expected to comply,” and that “the record establishes that Stagg failed to comply with the employer’s attendance policy on at least five occasions.” Second, the court applied the 2010 wording of the definition, which asked whether conduct “displays clearly” either “a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee” or “a substantial lack of concern for the employment.” The current text in subdivision 6(a) keeps the serious-violation test and drops both “displays clearly” and the second prong. The court also noted that whether a handbook is a contract the employer breached is a question for a breach-of-contract claim: “But such claims are necessarily brought in a different forum.” For that reason I suggest permissive discipline language in the handbook (“may,” not “will”). That wording matters because the unemployment defense may survive a skipped step, while a contract claim built on mandatory steps is a separate exposure.
How do resignation-notice and resign-in-lieu terms change the quit analysis?
An employee who has been told a firing is coming and chooses to leave “while employment in any capacity is still available” has quit, and the coming firing is not a good reason caused by the employer. An employer that refuses to let a resigning employee work out the notice period has discharged that employee, subject to a timing rule in the statute.
Minn. Stat. § 268.095, subd. 2, paragraph (c), provides: “An employee who has been notified that the employee will be discharged in the future, who chooses to end the employment while employment in any capacity is still available, has quit the employment.” Subdivision 3, paragraph (e), adds: “Notification of discharge in the future, including a layoff because of lack of work, is not a good reason caused by the employer for quitting.” A resign-in-lieu-of-termination offer leads to a quit analysis under that paragraph when the employee resigns while some job with the employer is still available. The quit exceptions in subdivision 1 still apply. The offer also cannot be paired with a promise not to contest (subdivision 1a of § 268.192, covered above).
Notice clauses work the other way. Subdivision 2, paragraph (d), states: “A notice of quitting in the future does not constitute a quit at the time the notice is given.” Subdivision 5, paragraph (d), governs the employer that sends the employee home early: “An employee who gives notice of intention to quit the employment and is not allowed by the employer to work the entire notice period is discharged from the employment as of the date the employer will no longer allow the employee to work. If the discharge occurs within 30 calendar days before the intended date of quitting, then, as of the intended date of quitting, the separation from employment is a quit from employment subject to subdivision 1.”
Staffing services have their own clause requirement. The rule that treats certain failures to request a new assignment as a quit applies only if, at hire, “the applicant signed and was provided a copy of a separate document written in clear and concise language that informed the applicant of this paragraph and that unemployment benefits may be affected.” A sentence buried in the general application does not meet that text.
Why does an executive agreement’s good reason definition not control unemployment?
An employment agreement’s definition of “good reason” decides severance rights under the contract, not unemployment eligibility. Chapter 268 has its own definition of a good reason caused by the employer, and the statute makes it exclusive.
Under Minn. Stat. § 268.095, subd. 1, clause (1), a quit does not disqualify an applicant who “quit the employment because of a good reason caused by the employer as defined in subdivision 3.” Subdivision 3 requires a reason directly related to the employment, for which the employer is responsible, that is adverse to the worker and “would compel an average, reasonable worker to quit and become unemployed rather than remaining in the employment.” Paragraph (g) states: “The definition of a good reason caused by the employer for quitting employment provided by this subdivision is exclusive and no other definition applies.”
A contract can define good reason more broadly, for example a change in title or reporting line, and the executive may collect contract severance while still failing the statutory test. Paragraph (c) adds a step of its own: “If an applicant was subjected to adverse working conditions by the employer, the applicant must complain to the employer and give the employer a reasonable opportunity to correct the adverse working conditions before that may be a good reason caused by the employer for quitting.” A contract’s notice-and-cure clause and that statutory complaint step are separate requirements. For drafting the contract side, see good reason clauses in executive agreements.
How does severance pay affect when unemployment benefits start?
Severance pay that counts as wages or is subject to FICA tax postpones unemployment benefits in Minnesota for the weeks the payment covers. Vacation, sick, and PTO pay paid out at a permanent separation does not.
Minn. Stat. § 268.085, subd. 3b, paragraph (a), provides that an applicant “is not eligible to receive unemployment benefits for any week the applicant is receiving, has received, or will receive separation pay, severance pay, bonus pay, or any other payments paid by an employer because of, upon, or after separation from employment.” The rule applies if the payment is “subject to the Federal Insurance Contributions Act (FICA) tax imposed to fund Social Security and Medicare” or is wages under the unemployment law. The definition of wages in Minn. Stat. § 268.035, subd. 29, expressly includes “severance payments.” Paragraph (b) applies the payment “to the period immediately following the later of the date of separation from employment or the date the applicant first becomes aware that the employer will be making a payment,” and under paragraph (e), “if the payment with respect to a week is equal to or more than the applicant’s weekly unemployment benefit amount, the applicant is ineligible for benefits for that week.”
Payment timing does not change the result: “The date the payment is actually made or received, or that an applicant must agree to a release of claims, does not affect the application of this paragraph.” A lump sum is spread over weeks; under subdivision 3, “if the payment is made in a lump sum, that sum is divided by the applicant’s last level of regular weekly pay from the employer.” In a week where the severance falls short of the weekly benefit amount, “unemployment benefits are reduced by the amount of the payment.”
PTO is different. Subdivision 3, paragraph (a), delays benefits for any week the applicant is receiving “vacation pay, sick pay, or personal time off pay,” but that paragraph does not apply “(1) upon a permanent separation from employment.” The label on the payment therefore matters, and it should match what the payment actually is. For the agreement itself, see drafting a Minnesota severance agreement.
What should a Minnesota separation agreement say about unemployment?
A Minnesota separation agreement should describe the separation accurately, leave unemployment rights out of the release, and commit the company to answering the department truthfully. The release of other claims has its own federal and Minnesota requirements.
Because § 268.192, subd. 1 (quoted above), voids any waiver of unemployment benefits, I suggest a carve-out stating that the release does not reach unemployment benefits. A release that appears to cover them is void on that point and could expose the company to a misdemeanor charge under the same subdivision. I also suggest a sentence that the company will respond to any department request truthfully. Section 268.184 (quoted above) penalizes a false statement made to help an applicant collect benefits as well as one made to prevent payment.
I once negotiated a separation agreement in which the word for the exit was itself a bargained point: the departing employee weighed whether to accept “resignation,” because that label would likely count against an unemployment claim. Section 268.069 keeps the label from binding the department, but the employee must still report the reason for leaving, and the department may consider information from any source. I suggest an honest, neutral description that matches the employer’s records, because the department can compare the agreement with those records and with the employee’s own report.
The release of other claims carries its own conditions. A release of federal age discrimination claims must meet 29 U.S.C. § 626(f), which provides that an individual may not waive any right or claim under that chapter “unless the waiver is knowing and voluntary.” Among other things, it requires that “the individual is given a period of at least 21 days within which to consider the agreement.” For a waiver requested in connection with “an exit incentive or other employment termination program offered to a group or class of employees,” that period is “at least 45 days within which to consider the agreement” instead. The agreement must also provide that “for a period of at least 7 days following the execution of such agreement, the individual may revoke the agreement.” A release that settles a filed age charge or lawsuit falls under a separate paragraph, which does not include the 21-, 45-, or 7-day periods. It requires instead “a reasonable period of time within which to consider the settlement agreement.” Under Minn. Stat. § 363A.31, subd. 2, a release of Minnesota Human Rights Act claims “may be rescinded within 15 calendar days of its execution,” unless given in settlement of a filed claim. The statute adds: “A waiving or releasing party shall be informed in writing of the right to rescind the waiver or release.” See severance conditioned on a signed release for sequencing those periods with payment.
Finally, conduct after separation is outside the unemployment analysis. Under § 268.095, subd. 7, “An applicant may not be held ineligible for unemployment benefits under this section for any acts or omissions occurring after the applicant’s separation from employment with the employer.” Non-disparagement and confidentiality terms are enforced through the agreement, not through the claim.
How does an employer raise an ineligibility issue when the department asks?
An employer raises an ineligibility issue by telling the department specifically why the former employee should be ineligible. A bare objection does not count, and the department decides the issue on all the information it has.
Minn. Stat. § 268.101, subd. 2, paragraph (b), provides: “A communication from an employer must specifically set out why the applicant should be determined ineligible for unemployment benefits for that communication to be considered to have raised an issue of ineligibility for purposes of this section.” The paragraph adds that a statement of protest or a similar term, without more information, does not raise an issue. The issue can arise without the employer at all: under subdivision 1, when the reason the applicant reports “is other than a layoff because of lack of work, that raises an issue of ineligibility that the department must determine.” The response should name the policy, the conduct, the dates, and the documents, which is where the clauses discussed above become evidence. Under subdivision 2, paragraph (f), “A determination of eligibility or determination of ineligibility is final unless an appeal is filed by the applicant or employer” within the period that paragraph sets.
Benefits paid also affect the company’s costs. Under Minn. Stat. § 268.047, subd. 1, benefits paid “will be used in computing the future tax rate of a taxpaying base period employer” or charged to a reimbursing employer’s account, subject to listed exceptions. If the employee asks in writing for the reason for an involuntary termination, Minn. Stat. § 181.933, subd. 1, requires the employer, “Within ten working days following receipt of such request,” to “inform the terminated employee in writing of the truthful reason for the termination.” I suggest that this letter, the separation agreement, and the department response give the same reason.
Contesting a claim has limited effect on other litigation. Minn. Stat. § 268.105, subd. 5, paragraph (b), bars use of hearing testimony “for any purpose, including impeachment, in any civil, administrative, or contractual proceeding,” with exceptions for human rights agencies with enforcement powers, proceedings the department starts, and criminal cases. Subdivision 5a bars an unemployment law judge’s findings from being “conclusive or binding or used as evidence in any separate or subsequent action in any other forum,” except proceedings provided for under chapter 268. For the hearing itself, see the unemployment appeal hearing guide and responding to Minnesota unemployment claims.
Can we pay severance only if the employee agrees not to apply for unemployment?
No. Minn. Stat. § 268.192, subd. 1, makes any agreement to waive unemployment rights void. It also bars an employer from obstructing or impeding an application in any manner, and it makes a violation a misdemeanor for the employer and any officer or agent involved. Severance still affects the claim lawfully: under Minn. Stat. § 268.085, subd. 3b, severance that is wages or subject to FICA tax postpones benefits for the weeks the payment covers.
Can we agree to call a firing a layoff in the separation agreement?
You can agree on wording, but it will not decide the claim. Under Minn. Stat. § 268.192, subd. 1a, an employer may not agree not to contest benefits, including by not giving the department information, in exchange for the employee quitting, taking a leave, leaving the employment, or withdrawing a grievance or appeal of a termination. Such an agreement has no effect under chapter 268. Minn. Stat. § 268.069, subd. 2, states that any agreement between an applicant and an employer is not binding on the commissioner. Minn. Stat. § 268.184 requires a penalty if the company later makes a false statement to the department without a good faith belief in its correctness, or knowingly fails to disclose a material fact, to help the former employee receive benefits the former employee is not entitled to. The penalty is the greater of $500 or 100% of the resulting overpayment. I suggest describing the separation accurately, because the department is not bound by the label and a statement made without that good faith belief draws the penalty.
Does a signed policy acknowledgment mean a fired employee will be denied benefits?
No. The acknowledgment is evidence that the employee knew the rule, which helps, but Minn. Stat. § 268.095, subd. 6, still decides whether the firing was for employment misconduct. The conduct must be a serious violation of standards you can reasonably expect. The statute excludes simple unsatisfactory conduct, good faith errors in judgment if judgment was required, and absence for illness with proper notice. A single incident is an important fact the department must weigh.
What if a former employee breaks the non-disparagement clause after leaving?
The breach cannot cost the former employee unemployment benefits. Minn. Stat. § 268.095, subd. 7, provides that an applicant may not be held ineligible under that section for any acts or omissions occurring after the separation from employment. Your remedy is the one the agreement provides, such as a claim for breach of contract, which a court or arbitrator decides rather than the unemployment department.
Should we let a resigning employee leave before the notice period ends?
You can, but releasing the employee early changes how the separation is classified. Under Minn. Stat. § 268.095, subd. 5, paragraph (d), an employee who gives notice and is not allowed to work the entire notice period is discharged as of the date the employer stops the work. The statute then provides that if that discharge occurs within 30 calendar days before the intended quit date, the separation becomes a quit as of the intended date. I suggest checking the current text before relying on the timing, because a summary can be out of date.
Can unemployment hearing testimony be used against us in a later lawsuit?
Generally no. Minn. Stat. § 268.105, subd. 5, bars using hearing testimony for any purpose, including impeachment, in any civil, administrative, or contractual proceeding. The exceptions are human rights agencies with enforcement powers, proceedings the department starts, and criminal cases. Subdivision 5a adds that an unemployment law judge’s findings and decision may not be held conclusive or binding or used as evidence in any other forum, except proceedings under chapter 268.
Which Unemployment Terms Help a Minnesota Employer?
Minnesota gives employers no clause that waives unemployment benefits or binds the state’s eligibility decision, and the attempt carries penalties. The documents that help are the ones that record the facts accurately. Those are reasonable policies the employee acknowledged, discipline language that does not promise steps you may skip, and resignation terms you apply as the statute reads them. They also include severance and release terms that leave unemployment rights alone. I can analyze your separation agreement, policy, or response to the department and tell you whether its unemployment terms match what chapter 268 allows. If you would like that analysis, email me at aaron@aaronhall.com with a brief description of the situation. More on how Minnesota employers handle these issues is on the Minnesota employment law page.
