What Is Forfeit of Unemployment?

Unemployment benefits are a class of benefits that are offered when a worker loses a job. Some types of unemployment are personal insurance paid for by a worker, but most are offered either by the government or a company, usually according to state regulations. These unemployment benefits follow strict laws and may be forfeited. They can lead to forfeit penalties if the benefits were used improperly.

Primary Meaning

Forfeit of unemployment refers primarily to unemployment benefits. An employee gives up the right to use the benefits. Typically, this means that the employee cannot collect payments if he quits or loses his job. If the employee already is collecting payments, a forfeit stops any current payments and all future funds that the employee would have received. In this second case, instead of giving up the benefits, benefits usually are taken from the employee.


Employees often forfeit rights to unemployment compensation through severance agreements and other contracts with employers. These contracts help companies save money and control how talented workers leave the company, allowing them to manage their human resources efficiently. State laws may protect unemployment no matter what contracts employees sign, so forfeiting all unemployment may not be possible based on local laws.

Forfeiting for Early Collection

When some employees lose their jobs, they may decide to use additional work benefits to receive extra funds. These benefits may include pension plans or even Social Security. However, most retirement plans include a specific retirement age that an employee must reach before collecting. If an employee starts drawing money from a pension account before this age, a certain amount of profit is lost for the move. This is referred to as forfeiting some of the benefit of the account.

Forfeit Penalty

Sometimes, employees attempt to collect unemployment improperly through fraud and misrepresentation. When this occurs, the employer or government starts a legal action to solve the problem and retrieve what essentially are stolen funds. Not only must the employee forfeit all benefits, but there typically is a forfeit penalty associated with the legal action, a fee that must be paid in addition to the funds.