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  1. #1
    Whistleman is offline Junior Member
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    Wrongful termination settlement - Do I have to pay back Unemployment Bene's?

    What is the name of your state (only U.S. law)? Florida

    I am in the process of negotiating a wrongful termination settlement (we have not filed yet) as cover under the whistleblower act. The settlement from the employer/defendant has deemed that the payment is to be for back wages and that a W-2 will be issued to include tax withholdings. I am perfectly ok with having to pay taxes, however I am concernced that the unemployment office will receive the W-2 and consider this as earned wages and then ask for the unemployment benefits I have received back. From my research (I THINK) if I was to be able to receive this as "other income" (Form 1099-MISC box 3 or 7) then this would not affect my unemployment claim. Is there a way I can get them to cut a check so that it isn't reported on a W-2? This settlement isn't all that much, and if I have to return my unemployment I am not any better financially after paying the lawyer and returning my benefits.

    Again, I'm not trying to get out of taxes, I just don't want it to count against my unemployment.

    I have 1 day to respond, so your fast replies are greatly appreciated.

    TIA!!
  2. #2
    Proseguru is offline Member
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    The answer is no, you do not have to pay back unemployment.
  3. #3
    Whistleman is offline Junior Member
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    Proseguru,

    Thanks for your quick reply. Are you sure? Does it matter whether or not they distribute the money on a W-2?

    I came across this:

    [url=http://www.w-p.com/CM/Articles/MN_Court_of_Appeals_Rules_Settlement_Payment_Reduces_EEs_UC_Benefits.asp]Employee to repay over $9,000 in unemployment compensation benefits[/url]

    and was concerned that this might happen with me.

    Thanks again.
  4. #4
    Zigner is offline Senior Member
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    If you receive wages to cover the period of time that you received unemployment, then why shouldn't you pay it back?
  5. #5
    Whistleman is offline Junior Member
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    Because, as my post described earlier, if i have to pay back my benefits I am no better off than if I hadn't sued them. The whole point of lawsuits are to make people whole.
  6. #6
    eerelations is offline Senior Member
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    Quote Originally Posted by Whistleman View Post
    Because, as my post described earlier, if i have to pay back my benefits I am no better off than if I hadn't sued them. The whole point of lawsuits are to make people whole.
    This doesn't make sense.

    If you're so sure you know the answer to your question, why did you post it here? That doesn't make sense either.
  7. #7
    HomeGuru is offline Senior Member
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    Quote Originally Posted by Whistleman View Post
    Because, as my post described earlier, if i have to pay back my benefits I am no better off than if I hadn't sued them. The whole point of lawsuits are to make people whole.
    **A: and a good many lawsuits make people hole and in the hole. You not only have pretzel logic but peanuts too.
  8. #8
    cbg
    cbg is offline Senior Member
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    That's right. To make them whole. Not to provide a windfall, like being paid AND getting UI for the same time.
    Two things I am tired of typing: 1.) A wrongful termination does not mean that you were fired for something you didn't do; it means that you were fired for a reason prohibited by law. 2.) The above answer, whatever it is, assumes that no legally binding contract or CBA expressly says otherwise. If it does, the terms of the contract apply.
  9. #9
    Proseguru is offline Member
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    Because its not earned income ... its a settlement. What does your settlement say? Does it say back wages? I'll bet it does not. And what's the big rush?

    I have read the link ... the judges were wrong ... not surprising.

    Also, are you in the jurisdiction of the court? If not, its not even close to being binding on you.

    This decision is goofy and harmful. Who would ever settle a case if this was correct?
    Last edited by Proseguru; 01-19-2012 at 12:54 PM.
  10. #10
    HomeGuru is offline Senior Member
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    Quote Originally Posted by cbg View Post
    That's right. To make them whole. Not to provide a windfall, like being paid AND getting UI for the same time.
    **A: is that considered double dipping.
  11. #11
    swalsh411 is offline Senior Member
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    I know a fair amount about Unemployment and do not know the answer to this. I bet Commentator does and I'm sure she will be along to answer.

    I wouldn't be so quick to jump to the conclusion that it's "double dipping". The settlement would not be wages and unemployment only considers wages as income. If the employee won a lawsuit in some unrelated case that just happened to be going on at the same time he certainly would not be required repay benefits.

    The answer will hinge on how "wages" are defined.
  12. #12
    cbg
    cbg is offline Senior Member
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    I'm less certain than swalsh that a settlement that is intended to cover wages will not be considered wages, but I do agree with him/her on two points:

    1.) The answer will hinge on the definition of wages
    2.) Commentator will know.
    Two things I am tired of typing: 1.) A wrongful termination does not mean that you were fired for something you didn't do; it means that you were fired for a reason prohibited by law. 2.) The above answer, whatever it is, assumes that no legally binding contract or CBA expressly says otherwise. If it does, the terms of the contract apply.
  13. #13
    Proseguru is offline Member
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    Quote Originally Posted by HomeGuru View Post
    **A: is that considered double dipping.
    Well, UI payments are done per time (you worked one week, no benefits for that week..even if you made $1,000,000 that week)...its the time issue I see as also be problematic.

    Say you were out of work (100K/yr job) for 3 years. You get a 40K settlement for a wrongful discharge...how do they say they say that this is so many weeks of "work"? You get the $$ all at once. So over the 3 yrs you got, say, 75K ... in this instance would you have to pay back all the money? See, it does not make sense.

    The IRS may consider this wages but UI I think looks at earned wages for a specific time period.


    Also, severance packages are NOT held against one for unemployment if it has stipulations that you give up rights to sue...I suspect that the OP's settlement settles more than just the suit before the court but any and ALL possible suits. This may also be a reason why the court's ruling may not apply to the OP.
    Last edited by Proseguru; 01-19-2012 at 01:13 PM.
  14. #14
    commentator is offline Senior Member
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    Okay the unemployment was for the specific weeks you filed for. It is not based on your income. You are not being paid for the specific weeks in this settlement. You are receiving a cash settlement that would cover some back wages for the time after you were discharged. (Really? Are you?
    I don't feel really sure about this, from reading what you've posted.)

    I am assuming that you have now drawn out at least most of the unemployment benefits you were filing for. What you said each time you filed was "I did not do any work for which I was paid or will be paid this week." You were telling the absolute truth at the time. If you are still filing for unemployment, you won't need to report this settlement money the week you receive it, because it is not wages paid for work performed this week. As I've said before, the unemployment system has no interest in your total family income for the week, just wages you've received for work performed.

    If you eventually receive a W-2 for this money and it is called backpay just as if it was wages and you turn it in on your income tax for the year, you might eventually receive a question or two from the unemployment fraud unit in your state if you have received full unemployment benefits for the entire 52 weeks of the year. Then you'd explain that this money was the result of a lawsuit pay out. They'd say, Okay,thanks. They'd consider it then, and make a decision as to whether or not there has been an overpayment.

    Incidentally, this overpayment situation you found to look at is in Minnesota. Do not even try to apply Minnesota's statutes to Florida. Not knowing the specifics of the nature of this repayment or back payment or cash settlement or whatever it is going to be, I could not even venture a guess about how it is going to be looked at when and if it comes to a decision in Florida under their statutes.

    But what you had better do is get this lawsuit going, stop worrying about this unemployment issue that you cannot control at this point in any way anyhow. What do you mean, "(we have not filed yet)"? And if and when you win a cash settlement, let them cut you a check any way your attorney and tax advisors suggest you ask them to. I'd worry more about the income tax situation with those wages or backpay or whatever it is going to be than the unemployment situation. Because whether they give you a 1099 or W-2 or a simple receipt or no receipt, that won't have a thing to do with the wage information received by the unemployment system.

    The unemployment system does not get your W-2's and 1099's, has nothing to do with how you report wages on your federal income tax. Wage information is obtained by the unemployment system through the quarterly tax reports made by every covered employer in the state. They have not been reporting your wages on their quarterly wage records since you were terminated,because obviously, you haven't been working.

    If they do report it as wages they've paid out, which would affect their tax rate and I bet they won't want to do, they'll report it in one lump sum on whatever tax report they are filing at the time. This will not likely trigger an audit by the fraud detection system, but if it does, it does, and you'll have to talk to them and tell them exactly what the situation is and get a decision. The only relationship between Unemployment insurance and federal income tax (aside from your having to report unemployment benefits you've drawn and pay taxes on them, of course), is that the state unemployment system is supposedly set up so that it cross matches with the whole income tax filing, about a year or two down the road.

    But dancing around trying to figure out a way to keep them from finding out about it? Forget that! They will find out about it, and when they do, the system in Florida will have to make a decision on it, and you'll have to deal with it. If you try to play tricky and not divulge that you got it, you're not only going to have to pay it back (if you would have had to anyhow) you'd be liable for fraud prosecution and penalties. If it comes down to it, and you were to have to repay it, think of the unemployment insurance you received as a very nice low interest loan that came along just when you needed it to survive long enough to win your lawsuit. I really do not think you have to worry about paying it back, certainly not yet. Stop overthinking this issue. Just exactly what do you mean "(we have not filed yet)"?
    Last edited by commentator; 01-19-2012 at 02:05 PM.
  15. #15
    Proseguru is offline Member
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    Quote Originally Posted by commentator View Post
    The unemployment system does not get your W-2's and 1099's, has nothing to do with your income tax. The only thing is, it cross matches with the whole income tax filing, about a year or two down the road.
    Another good point, kinda drifting off here but good point to make...if you get a W-2 for the settlement then the employer pays their share of FICA taxes (like 7.5%) ... with a 1099 you would have to pay the entire employee + employer portion, losing 7.5%.

    It may be that the settlement agreement in the linked case was to written to narrowly in its scope (like I mentioned most have you relinquish any and all claims towards the employer & possibly the employer's employees--making a cut and dry, this is back wages conclusion far less tenable -- so the settlement covers much more than just back wages).

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