What Happens When You Lose a Job Through No Fault of Your Own?

In April 2023, the U.S. unemployment rate was just 3.4%, which is really low, historically speaking. But just because the jobless rate happens to be low doesn't mean people aren't losing jobs.

It's true that workers are more likely to find themselves out of a job during recessions and periods of economic decline. But even when the economy is strong and the labor market is solid, the loss of a job can happen. And sometimes, it can happen even if you didn't do a single thing wrong.

If you're let go from your job through no fault of your own, you may be wondering what benefits, if any, you're entitled to. Here's the scoop.

You'll generally be eligible for unemployment benefits

If your company lays off staff and your job lands on the chopping block, you'll generally be entitled to unemployment benefits. Those benefits apply when you lose a job through no fault of your own. But let's clarify what that means.

For one thing, it doesn't mean that you've quit your job. In that scenario, you're not eligible for unemployment benefits. Also, if you were let go from your job due to an issue like chronic lateness, that's not the same thing as being laid off through no fault of your own. Rather, to qualify for unemployment benefits, it has to be that you really did nothing to deserve your layoff, and that it was a matter of your company needing to conserve funds or make staffing changes to better align with its needs.

Keep in mind that each state has its own requirements for collecting unemployment benefits. You'll generally need to have been employed for a certain period of time to be eligible for benefits. Also, each state has a maximum weekly benefit it pays for unemployment claims. Depending on where you live and what you earn, your unemployment benefits might only replace a small portion of your former paycheck.

That's why it's so important to have an emergency fund in case you're affected by a layoff. You may have to pull money out of your savings account to cover bills your unemployment benefits can't.

What about severance?

In many cases, severance pay is not something employers are required to give. Some states have laws stating that employers have to offer severance pay in the event of a mass layoff, but that's not always the case. And if you're let go on a one-off basis, your employer may not be required to offer you severance unless that happens to be written into your contract.

Still, many companies do pay severance, the amount of which varies and can be calculated in different ways. If you quit a job or are fired for cause, severance generally won't come into play. But if you're laid off through no fault of your own, you may be entitled to a payout based on factors like how many years of service you put in.

You should know that you can still file for unemployment benefits even if you're receiving severance. However, you may not be able to get your first unemployment benefit check until your severance period is over. In other words, if you lose your job on June 1 but receive enough severance to cover your paychecks through July 15, you may not see any unemployment benefits hit your bank account until mid-July.

Losing a job through no fault of your own can be upsetting and stressful. It's important to understand what benefits you're entitled to in that scenario. You might even decide to speak to an employment lawyer just to make sure you're getting all of the benefits you're entitled to and that your rights haven't been violated in the course of your dismissal.