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I was recently laid off. A severance package was offered to me, contingent on me signing a contract. The contract has terms that require me to tell anyone who asks that I was not, in fact, laid off, but instead that I voluntarily resigned from the company.

I could maybe understand a "keep quiet about it" provision, but a "lie about it" provision seems wrong. Is such a thing enforceable in contract law?

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    The question would benefit from having the exact language of the contract quoted.
    – blues
    Commented Aug 30, 2022 at 13:40
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    If you sign the statement, then I'm afraid that the statement stops being a lie, and becomes the truth. You say you were recently laid off, but administratively you're probably still in the process of leaving the company. If you sign a paper stating that you are resigning of your own will, then effectively everything will be as if you have resigned of your own will.
    – Stef
    Commented Aug 30, 2022 at 14:06
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    @sf02 this is a fair question, and depends on my state laws etc. OTOH, if this provision isn't enforceable, then I can sign the severance AND get unemployment, and there's nothing they can do about it. This is the essence of my question - even if I sign a paper saying that I will lie about this, can I still tell the truth about it to (anyone, certain parties, nobody)?
    – Him
    Commented Aug 30, 2022 at 17:35
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    The actual language would be helpful. You say "The contract has terms that require me to tell anyone who asks that I was not, in fact, laid off". That would not preclude you from telling anyone that you were laid off, or creating a facebook page telling people you were laid off, or talking to the media and telling them you were laid off. As long as if someone actually asked why you left you told them the lie. Maybe they made a mistake by laying you off and are trying to cover their butts so they made some quick changes to an existing severance contract... Commented Aug 30, 2022 at 18:49
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    If you insist on asking for legal advice on stack exchange instead of consulting a lawyer, at least consider asking at law.stackexchange.com instead of (or maybe in addition to) here. Commented Aug 31, 2022 at 2:41

7 Answers 7

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As others have done a good job at explaining, asking someone to resign in lieu of termination is generally legal. In your particular case, though, it's more tricky than that. Down in the comments, you said:

no, I'm already laid off. The paychecks have stopped and the insurance is gone

Since the separation event has already happened, an attempt to change the reason for it retroactively might not hold water. This gets into some tricky and possibly locale-specific legal details, so it's probably best to consult an employment lawyer.

Also in the comments, you clarify:

there exist no paper saying that I am resigning of my own free will. The document only states that I must tell anyone who asks that I resigned. I realize that this seems like a weird distinction, but this is the language in the document.

This changes the situation quite a bit. They're not changing the reason for your separation, they're simply asking you to respond to questions about your separation in a particular way. This sort of thing is legal in general (it's a bit like an NDA), but there's an important factor to keep in mind. You do not have to abide by this agreement in any situation where lying about your reason for separation would be illegal. Falsifying information on an application for unemployment benefits would be criminal fraud, which their contract cannot require you to commit. Similarly, if you are questioned by a government agent investigating the company or are subpoenaed to testify in a lawsuit, lying would be illegal and the contract cannot force you to do so. Lying when questioned during a job interview is tricky because the contract could be enforceable here, but lying in an interview is usually cause for termination should the truth be discovered.

This is important to keep in mind, because there are several things to be aware of here. A federal law called the WARN Act places requirements on any employer who closes a plant or lays off more than a certain number of people. Several states have their own layoff notice laws as well. If your employer didn't comply with these rules, they could be trying to avoid trouble by making enough terminations look like resignations such that they fall below the threshold. That could be illegal in and of itself. Also, the Civil Rights Act, the Americans With Disabilities Act, the Age Discrimination In Employment Act, and others protect workers from layoffs as a form of discrimination. If your employer received a loan under the Paycheck Protection Plan of 2020, they have certain obligations towards laid-off employees (but not those who resigned) that could impact how much of the loan they have to pay back. The severance contract cannot prohibit you from cooperating with an investigation into a violation of any of these types of laws. The clause requiring you to lie about the reason for leaving does not in and of itself prevent you from filing a complaint with the Department of Labor if you believe that the company violated one of these laws. Some (not all) severance contracts include an agreement not to bring a civil suit against the company for such violations. A contract cannot, however, bar you from making a good-faith report of a criminal violation of law to the appropriate authorities.

In my mind, doing this after the fact makes it look like the company realized they messed up and are trying to CYA. They would have to be offering me a exponentially better severance package before I'd even consider helping them out after they laid me off. If you have any reason to believe they might be doing this to cover up any level of wrongdoing, I strongly recommend that you file a (normally anonymous) complaint with the Department of Labor.

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    "Lying when questioned during a job interview" - about that. Can you both tell the truth and obey the agreement if you answer, quote: "I am legally obliged to say, that I resigned myself"?
    – Spook
    Commented Sep 1, 2022 at 10:57
  • "This sort of thing is legal in general (it's a bit like an NDA)" - NDA is always signed willingly (you CAN not sign NDA, though this may - for example - cause you not to be employed), but in this case it sounds like OP did not sign the document he's citing. How come such document binds you legally if you did not sign it? They could as well require you to sell your soul to the devil and it would be enforceable?
    – Spook
    Commented Sep 1, 2022 at 11:00
  • @Spook Nothing in the answer seems to imply that it would be binding before OP signs Commented Sep 1, 2022 at 11:56
  • @JacobRaihle So then it seems like this is "You will get some benefits if you resign willfully" scenario. But then I'm curious, why would company require to have such weird entries, since if OP said that he was laid off, it would be easy to undermine, given the specific nature of the agreement.
    – Spook
    Commented Sep 1, 2022 at 12:07
  • @Spook - Sure. I've even heard people decline to answer the question at all and cite a legal agreement with their former company. Legal settlements and severance agreements can contain a "non-disparagement" clause that prevents you and the company from talking badly about each other. Interviewers should know that any question that deals with a former employer has a chance of being legally unanswerable due to things like this, NDAs, laws governing trade secrets, etc. Just don't lie about a legal restriction that doesn't actually exist.
    – bta
    Commented Sep 1, 2022 at 19:25
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Do NOT sign! Ask for a few days to think about it, then consult with an attorney specializing in employment law in your state.

While a clause like that is almost certainly unenforceable, signing something like this could jeopardize your ability to get unemployment payments and/or other benefits.

Good luck!

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    But he gets severance package, so isn't that a tradeoff between social benefits and the financial package in this case? Commented Aug 30, 2022 at 13:50
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    @PiotrGolacki if the OP signs a document which says that he resigned and is then unable to collect unemployment benefits, he will suffer a financial loss. If he files for unemployment benefits, the claim may be denied since his former employer has a document which states that he left the company of his own free will. My suspicion is that the company is trying to avoid triggering any employment laws related to reductions in force, mass layoffs, or both. Commented Aug 30, 2022 at 15:58
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    @Sharpenologist It depends. If the OP feels confident in finding a new job right away (or if, e.g., the OP decides to retire or do something else instead of finding a new job) then it's plausible the OP would get more in taking voluntary severance than in unemployment. Commented Aug 30, 2022 at 17:00
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    @Sharpenologist the unemployment benefits have an expected value and the severance package has an expected value. I doubt that you are able to usefully predict either from OP's post.
    – fectin
    Commented Aug 31, 2022 at 3:59
  • @user3067860 The severance is also sure money, whereas unemployment requires time to process and may be denied or reduced. Commented Aug 31, 2022 at 17:26
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You say that, if anyone asks, you are to tell them that you resigned. So if we are to take your word for it, the following exchange might take place:

Unemployment office clerk: Did you resign?
You: Yes. May I speak to your manager?
...
Manager: Yes, what's the problem?
You: I was not allowed to tell the clerk that I was laid off, because they explicitly asked me, so my severance contract forbids me to tell them the truth. But I can tell you that I was laid off, because you didn't ask me. And yes, I was laid off.

Obviously this is ridiculous. But it explains why we have to know the exact wording of your contract before we can have an opinion on it. You might even be able to get away with the above scenario!

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    This actually does seem to be technically allowed. >D
    – Him
    Commented Aug 30, 2022 at 20:52
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    @YanickSalzmann It’s a legal difference in the US. In the US, the are qualifications for unemployment beyond being unemployed. You must not have quit or been fired from your previous job. If you resign from a job (or are fired for cause), you cannot claim unemployment benefits in the US. Commented Aug 31, 2022 at 2:33
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    @Him : yet it won't do you any good, because qualifications for unemployment will be defined by what is in the system, what paperwork did the company provide, instead of what you orally claim.
    – Val
    Commented Aug 31, 2022 at 4:34
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    To raise the absurdity, do you have to get another person at all? "I was not laid off. I am required to say that by contract. Please disregard my last statement. I was laid off." Commented Aug 31, 2022 at 7:44
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    In the US, the unemployment office will contact your former employer to confirm whether you were laid off. The employer has the opportunity to contest your claim that you were laid off and it's in their interest to do so if you left voluntarily or were fired, as unemployment claims can impact the employer's unemployment insurance costs. A signed document of the type described could likely be used as evidence of a voluntary resignation.
    – Dan Bryant
    Commented Aug 31, 2022 at 15:54
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Sharpenologist is correct. You can't collect unemployment insurance if you quit your job. The contract could be enforceable in the law (the company could sue for breach). On the other hand your state might have laws that declare that employers trying to get around paying unemployment insurance is an unlawful act, and that would render such a contract as void. A court can't enforce a contract to do something that's against the law.

(I'm not an attorney)

The whole situation is fishy. Chances are VERY VERY high that when they present such a contract to you, it's going to have a clause in it that says you've waiving any rights to unemployment insurance and other related benefits. Of course, they won't be looking to give you time to have it reviewed by proper counsel, or expect you to not know any better.

The real question is, "what's the real advantage for this company doing things this way?"

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    How is this "trying to get around paying unemployment insurance"? They don't pay the benefits, they pay unemployment tax while you're employed, then the state pays the benefits.
    – Barmar
    Commented Aug 30, 2022 at 15:30
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    It seems more like they're trying to hide the information that they're downsizing, either for PR reasons or to avoid impacting their stock price (if they're a public company). I can't think of other reasons they would care what the ex-employee says.
    – Barmar
    Commented Aug 30, 2022 at 15:36
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    @Barmar I guess the US might not have anything like this, but in many EU countries there is a whole bunch of extra legal obligations for employers that kick in if they lay off more than X employees in some time frame (X can be very low). Things like having to get mass layoffs pre-approved by the authorities, or mandatory severance packages, or the unions getting involved, … So at least over here, you do occasionally come across businesses trying to pretend 20% of their workforce just decided to resign all of a sudden.
    – TooTea
    Commented Aug 30, 2022 at 18:40
  • @TooTea That may exist here, too. And if the employees are unionized, there could be union contract issues.
    – Barmar
    Commented Aug 30, 2022 at 19:37
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    In the US there are also disincentives. I don't understand 100% how this works, but I believe letting people go typically causes the company's unemployment insurance premiums to increase (at least that's how I've heard it presented). So, for example, an employee being terminated "for cause" will frequently be offered an opportunity to resign -- the ex-employee doesn't have to explain why they were fired, and the company doesn't have to pay the higher insurance premiums.
    – David
    Commented Aug 30, 2022 at 19:42
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The contract you're about to sign most likely doesn't have an actual "lie about it" clause, which would indeed be illegal. Resigning voluntarily in exchange for a severance package, on the other hand, is legal in many jurisdictions, and this is most probably how the contract is drafted. If you sign it, you will in fact not be laid off anymore, instead you'll agree to quit.

If you have the next job on the horizon, getting the extra money could be worth it, but you indeed should calculate how much money you'd lose in various benefits if you accepted that money. This calculation can be quite complex, it's not necessarily only about unemployment benefits. E.g. I've seen mortgage insurance contracts where being laid off is an insured case (but quitting obviously isn't) and employment contracts which require your former employer to pay your health insurance fees for a certain time (but again, only if they let you go, not if you quit).

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    The contract also has language about not discussing the contract, so I'd prefer to not quote any lengthy passages here. I assure you, though, that the document does NOT say that I agree to resign. It DOES say that if anyone asks, I "will" tell them that I resigned. @blues
    – Him
    Commented Aug 30, 2022 at 13:46
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    Presumably contract language about not discussing the contract would only become enforceable once you've signed the contract? I can imagine that quoting it too precisely might reveal your identity, but you aren't bound by a contract you haven't signed, and who in their right mind would sign a contract they're not allowed to get advice about??
    – Tiercelet
    Commented Aug 30, 2022 at 16:29
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    It may not feel right, but if you know you're being laid off tomorrow, and you quit today (with or without a severance package), I'm pretty sure that would likely be considered voluntary departure (ie. quitting) by unemployment law. Commented Aug 31, 2022 at 0:07
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    @Him If you haven’t yet signed the contract then you are not yet barred from discussing it. Commented Aug 31, 2022 at 2:38
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    @Him Sorry if my answer sounds like I didn't trust you. I obviously underestimated how poorly a contract could be written. In fact, you could probably get away with getting the package and still applying for whatever unemployment benefits you are otherwise entitled to. Not that I recommend doing this of course, you should always act in good faith. Commented Aug 31, 2022 at 9:36
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DO NOT SIGN THIS

without consulting a lawyer first.

There are significant legal differences between being laid off and resigning voluntarily in the US. Trying to conceal the real reason for termination may be fraudulent or illegal. You do NOT want to be complicit in this. It would also most likely prevent you from getting unemployment benefits.

It looks like the company is doing something highly questionable. You may be able to use this to your advantage. You can ask them to drop the clause from the contract and hint that you otherwise be inclined to have the authorities have a look at it. This needs to be done very delicately, so a lawyer can help with the right wording and approach as well. Something like "I was really surprised to find this clause in the contract since I thought there are considerable legal differences between being laid off and resigning. Do you mind if I have this reviewed by the unemployment office, just to make sure this is ok for me to sign?"

The contract is most likely unenforceable but you also don't want to be the center of attention of the investigators in case this all blows up.

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    It's not obviously illegal as written, "resignation in lieu of termination" can be a normal, legal thing. (There could be other circumstances that make this illegal, of course, but there don't seem to be any specified in the question.) Commented Aug 31, 2022 at 20:13
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I would literally respond with "I have been instructed in the wording of my separation contract, and in order to get my severance pay, that I should dishonestly answer 'that I quit voluntarily'. It is your right to assume that I was actually laid off."

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