Jottings By An Employer's Lawyer

Wednesday, November 20, 2002

No ERISA Loophole for the Ban on Waiver of Unemployment Benefits

Texas, like all 49 other states and the District of Columbia, prohibits the waiver of claims for unemployment compensation. The plaintiffs in this case accepted a voluntary package, which included a waiver of all claims against the company. When they filed for unemployment for the time period between and beginning of the retirment pay, the company asked them to withdraw the claims, citing the waiver. When they didn't, the Company challenged the mandatory non-waiver under state law saying it was pre-empted by ERISA. The 5th Circuit reversed the trial court holding it was not preempted under the federal savings clause. It noted the requirement that a state ban waiver was necessary for a state's employers to get a lower unemployment tax rate. Mitchell Energy & Development Corp. v. Fain (5th Cir. 11/19/02) [pdf]. Even though the federal mandate is technically voluntary, the Court didn't think that was enough to take it out of the federal savings clause which excludes preempting any law or regulation under federal law. Bottom line, no waiver of unemployment benefits, regardless.

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