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Archive for the tag “benefit”

NBI SEMINAR MATERIALS: Human Resource Law From A to Z: Unemployment Compensation

I  had the great opportunity to lead (perhaps “teach”) a continuing legal education seminar hosted by the National Business Institute.  The subject was “Human Resource Law From A to Z” and I had opportunity to speak on Unemployment Compensation.  I was joined by other capable attorneys who each had their own topics to present.

Although NBI published the materials, I retain the ownership of the portions I wrote, which I will post here in this blog.

Linked below are all the materials I wrote for this seminar.

Thanks!

__________

A Collection of Unemployment Compensation Law Writings by James W. Cushing, Esquire

Over the course of my career, I have written extensively on a wide variety of unemployment compensation law issues and legal principles.  These writings have been published in The Legal IntelligencerUpon Further Review, and The Pennsylvania Family Lawyer as well as posted onto my blog.  I have collected these articles and blog posts and have listed them below.  Thanks for reading!

Articles:

Blog Posts:

Unemployment Compensation Ruling Cannot be the Basis for Collateral Estoppel

Many cases sounding in employment law involve other related parallel matters like unemployment compensation. Applicants for unemployment compensation, and their employers, engage in a legal administrative process wherein they make allegations and, fairly frequently, have to testify on the record at a hearing before a referee which can be reviewed by the Unemployment Compensation Board of Review and Commonwealth Court of Pennsylvania. Based on the evidence presented, findings of facts and law are made during the unemployment compensation process relative to the applicant’s eligibility for unemployment compensation benefits.

The legal doctrine of collateral estoppel, sometimes called “issue preclusion,” serves to prevent a litigant from re-litigating issues which have been the subject of a finding of fact and/or law in a prior litigation. The recent case of Mathis v. Christian Heating and Air Conditioning, Inc. 91 F.Supp.3d 651 (U.S.E.D.PA 2015) addresses whether findings of fact and/or law during unemployment compensation litigation can serve as the basis for collateral estoppel in court.

In Mathis, the District Court finds itself ruling upon what is, in effect if not in name, a motion to reconsider its ruling granting a motion to dismiss. The Plaintiff in Mathis is a self-described atheist, while the Defendant, Christian Heating and Air Conditioning (“CHAC”), is a company owned and operated explicitly as a Christian company.

As part of its work rules, all employees of CHAC are obliged to wear an identification badge with CHAC’s mission statement which reads as follows: “This company is not only a business, it is a ministry. It is set on standards that are higher than man’s own. Our goal is to run this company in a way most pleasing to the lord [sic].” Plaintiff alleges that people from CHAC would regularly make comments to him about his lack of religious belief and insist he attend church. Further, as it conflicted with his atheistic beliefs, he covered the above-quoted mission statement on his identification badge with a piece of tape. According to Plaintiff, his superior at CHAC informed him that the mission statement cannot be covered and refusing to remove the tape would result in his termination. Plaintiff refused to remove the tape and was promptly terminated.

Plaintiff, upon termination, filed for unemployment compensation benefits. An employee who voluntarily quits his employment is ineligible for unemployment compensation benefits. During the unemployment compensation process, a finding of fact was made by Unemployment Compensation that CHAC told Plaintiff that he could remove the tape on his badge and continue his employment, or leave and terminate his employment relationship with CHAC. Plaintiff then chose to leave instead of removing the tape. As a result, it was found that, for purposes of unemployment compensation, Plaintiff’s termination from CHAC was the result of Plaintiff’s voluntary decision to quit his employment with CHAC.

Plaintiff also filed charges against CHAC with the Equal Employment Opportunity Commission and Pennsylvania Human Relations Commission on the basis of employment discrimination based on religion which resulted in Plaintiff receiving his right to file suit against CHAC in federal court, which he did, giving rise to the Mathis matter.

CHAC argued that Plaintiff’s discrimination claims were all barred by collateral estoppel as these same allegations were made in the context of the unemployment compensation litigation which made specific findings of fact upon which a ruling was entered against Defendant. Specifically, CHAC filed a motion to dismiss Plaintiff’s claims on the basis that the unemployment litigation found he was not terminated due to religious discrimination but, rather, he voluntarily quit his job with CHAC. Based on the collateral estoppel argument, the Court granted CHAC’s Motion to Dismiss in part, ruling that Plaintiff was barred by collateral estoppel from re-litigating issues essential to his failure to accommodate his atheism claim. Plaintiff also made a retaliation claim (which is a separate issue from that described herein) against CHAC which survived the motion to dismiss.

After the Court’s ruling on the aforesaid motion to dismiss, Plaintiff discovered a Pennsylvania law which directly applied to his case as described above. As a result, Plaintiff filed what was, in essence (though not in name), a motion for reconsideration in light of the newly discovered law.

Plaintiff uncovered 43 P.S. Section 829 which reads as follows: “No finding of fact or law, judgment, conclusion or final order made with respect to a claim for unemployment compensation under this act may be deemed to be conclusive or binding in any separate or subsequent action or proceeding in another forum.”

To put it simply, the above-quoted law specifically states that any findings of fact or law in unemployment compensation litigation simply cannot be used as the basis for a collateral estoppel argument and/or defense.

In light of the clear terms of 43 P.S. Section 829, the Court reconsidered its granting of CHAC’s motion to dismiss by reversing its decision and denied it in toto to allow all of Plaintiff’s claims against CHAC to move forward.

Originally published on February 24, 2016 in Upon Further Review and can be found here.

The (Unemployment Compensation) Benefits of Not Minding One’s Own Business

The discernment of who is or who is not an independent contractor for the purposes of unemployment compensation has become more refined per the recent Commonwealth Court matter of Staffmore v. Unemployment Compensation Board of Review, 92 A.3d 844 (Pa.Cmwlth. 2014).

The Claimant for unemployment compensation benefits went through a series of appeals and reversals until he found himself before Commonwealth Court. The Claimant was found ineligible for benefits by the Unemployment Compensation Service Center, but that decision was reversed after an appeal to, and hearing before, an unemployment compensation Referee. The Employer appealed to the Unemployed Compensation Board of Review which reversed the Referee’s decision. The Claimant filed for reconsideration which resulted in reversal of the Board’s decision. That decision was reversed after the Employer filed for reconsideration. However, after reviewing the case again, the Board found in favor of the Claimant, which led to the Employer appealing to the Commonwealth Court.

The Employer is a staffing service which provides workers to agencies for the care of children. Claimant worked for the Employer as therapeutic support staff. He was free to accept or reject clients, he signed an independent contract agreement, he was supervised by a behavioral specialist, who was not an employee of Employer but developed a treatment plan Claimant was obliged to follow. Claimant only worked seven (7) hours per week providing services for a single client. Claimant worked in the education field while he also worked for the Employer. Eventually, Claimant’s client no longer needed further services and Claimant subsequently advised the Employer that he would not accept any further assignments from the Employer.

It was uncontested that Claimant was free from the Employer’s control. The only issue before the Court was whether Claimant was customarily engaged in an independently-established trade, occupation, profession and/or business. If he was, he would be ineligible for unemployment compensation benefits as he would be an independent contractor. Of course, the Court made it clear that unemployment compensation law is to be construed and applied liberally in order to ensure the broadest possible availability of benefits.

In its review of the case law, the Court noted that a worker is an independent contractor only if he is in business for himself. To that end, he must be customarily engaged in an independently established trade, occupation, profession, or business. The Court was clear that the Employer bears the burden to supply evidence of Claimant’s engagement in an independent business.

Although the Claimant was free from the control of the Employer, he testified that he was never, at any relevant time, customarily engaged in the business of providing therapeutic support. Claimant testified that his primary source of income, and indeed his chosen field, was working in education, not as therapeutic support staff, and never held himself out as being available for employment by anyone else other than Employer. Significantly, the Employer provided no evidence that Claimant provided comparable services to any other business or entity.

Based on the above, the Court found that the Employer simply did not provide sufficient evidence to prove that Claimant was engaged in an established business; however, the Court was concerned that Claimant testified that he appeared to have quit his position with the Employer. Consequently, the Court ruled that while Claimant may be eligible for benefits as he was not self-employed, he could be ineligible due to having voluntarily quit. As a result, the Court remanded the case back to the unemployment compensation referee to elicit more information on the circumstances of Claimant’s termination of his employment with the Employer.

Originally published on December 28, 2015 in Upon Further Review and can be found here.

Coordinating Unemployment Compensation With Severance Packages

When one applies for unemployment compensation, it is important to coordinate said application based on when one’s severance package expires and whether one is still within one’s base year, which is the length of time preceding an application for unemployment compensation.  The base year and one’s income earned over that period of time determines the calculations of the amount of one’s unemployment compensation benefits (see 43 P.S. §753(a)).  A credit week is a week within a base year where an employee (i.e.: a claimant for unemployment compensation benefits) has worked and earned above a specific threshold income (see 43 P.S. §753(g.1)).  In order to be eligible for benefits, one must receive employment income for a minimum of eighteen (18) credit weeks within a base year (see 43 P.S. §804(c)).

 

43 P.S. § 804(d)(1)(iii) states the following: “[n]otwithstanding any other provisions of this section each eligible employe who is unemployed with respect to any week ending subsequent to July 1, 1980 shall be paid with respect to such week, compensation in an amount equal to his weekly benefit rate less the total of … the amount of severance pay that is attributed to the week.”  In other words, when one applies for unemployment compensation benefits one must report the income received from a severance package and that income is deducted from the unemployment compensation benefits if they are collected simultaneously.

 

A severance package can be paid over time or in a lump sum.  If it is paid over time, usually in consecutive payroll periods, each week one receives a severance payment, said payment is considered income for a credit week which goes toward the unemployment compensation claimant’s base year, and this should be considered and accounted for before a claim for unemployment compensation benefits is made.  If the severance payment is received as a lump sum, the Court and the Department of Labor have tended to aggregate the severance on a pro-rata basis based on one’s typical earnings.  By example, if someone earns $1,000 per week, a $10,000 severance payment would be considered a ten (10) week severance.  (See: Ross v. Commonwealth of Pennsylvania, Unemployment Compensation Board of Review, 127 Pa.Cmwlth. 457 (1989)).

 

“Severance pay” is considered to be one or more payments made by a employer to an employee due to an employee’ separation from employment (without regard to whether the employer is contractually obligated to provide the pay).  Severance specifically does not include payments from a pension, retirement package, or accrued leave and/or supplemental unemployment benefits.  The law, pursuant to Section 43 P.S. §§ 804(e)(1)(2)(ii) and 804(d)(1) of the Unemployment Compensation law, lays out how severance packages are calculated and attributed for the purposes of benefits.

 

Based on the above, it would seem, in most cases, that the best time to apply for unemployment compensation benefits is after the expiration of one’s receipt of a severance package. As receipt of a severance package counts toward one’s base year, waiting until after the package is fully paid will not affect one’s eligibility for unemployment compensation benefits.  Furthermore, waiting until after one’s severance is paid avoids having one’s benefits deducted by the value of the severance package.  Instead, waiting until the severance package is fully paid before applying for benefits allows one to potentially receive the full severance package and a full complement of unemployment compensation benefits.  On the other hand, one ought not wait too long after the severance package expires before applying for benefits.  Regardless of the source or type of income one receives, one must always have at least eighteen (18) credit weeks within a base year to be eligible for benefits, and benefits always begin upon application for them not on one’s last day of work or receipt of the last severance payment.

Originally published in The Legal Intelligencer Blog on October 23, 2015 and can be found here.

Unemployment Compensation Isn’t Very Charitable

A typical unemployment compensation matter is rather straightforward. The employer pays the unemployment compensation tax for each employee and the employee, if separated from employment through no fault of his own and if he has worked sufficient benefit weeks, applies for and receives benefits. This fairly typical scenario is significantly different when the employer is a not-for-profit entity.

If the employer is not-for-profit, while it is, with exception for the below, obliged to contribute toward unemployment compensation taxes, it is not obliged to do so with regularity per employee as with a typical employer. Instead, a not-for-profit entity has two other options available to it in order to accommodate the fact that it does not make a profit and may not have many assets to contribute toward the tax.

First, the not-for-profit entity can elect to use the “contributory method.” Under the contributory method, the employer must pay its unemployment compensation taxes quarterly and for the first $8,750 of each employee’s compensation, at a rate specified by the unemployment compensation law which can be found on the Pennsylvania Department of Labor’s website.

Second, the not-for-profit entity can elect to use the “reimbursable method”. Under the reimbursable method the employer must simply reimburse the Unemployment Compensation Fund, dollar-for-dollar, for the benefits outlaid. The reimbursement must be paid on a monthly or quarterly basis or else the not-for-profit employer will be switched to the contributory method.

Now, if the not-for-profit entity is a religious organization, it, pursuant to 43 Pa.C.A. Section 753(l)(4)(8)(a), is subject to a religious exemption and need not pay into the unemployment compensation fund at all but, as a result, none of the employees who work for that religious organization are able to collect unemployment compensation benefits regardless of the cause or reason for their termination and/or separation from employment. The aforesaid statute indicates that the religious organization exemption only applies to houses of worship, associations of the same, and/or entities which function and/or operate and/or are supported and/or controlled by the same which exist primarily for religious purposes. In applying this statute, cases such as Imani Christian Academy v. Unemployment Compensation Board of Review, 42 A.3d 1171 (Pa. Cmwlth. 2011) make it clear that an entity such as an even a religious school would likely not be eligible for the exemption as the a school’s primary purpose is education as opposed to religion. The law is clear that an entity’s primary focus must be religion in order to receive the exemption.

The rules and law for unemployment compensation are generally applicable to most employers, however if the employer at issue is a not-for-profit entity and/or a religious organization, it must be aware of the special rules and guidelines which apply specifically to them.

Originally published on May 14, 2014 in The Legal Intelligencer Blog and can be seen here.

Accepting Voluntary Layoff Is Now Involuntary Termination

Decades of Pennsylvania law concerning eligibility for unemployment compensation after accepting an early retirement package has been overturned in the recent landmark Pennsylvania Supreme Court case of Diehl v. Unemployment Compensation Board of Review, 57 A.3d 1209

In Diehl, the Plaintiff, a sixty-three (63) year old man with twenty-three (23) years’ seniority with his employer, was given a memorandum from his employer which included a list of twenty (20) employees who would be laid off pursuant to a reduction-in-force; but Plaintiff was not on the aforesaid list. The employer also offered employees over the age of sixty (60) an early retirement program, for which Plaintiff was eligible. Plaintiff accepted the early retirement program and effectively quit his position with employer as a result; he subsequently applied for unemployment compensation benefits.

Plaintiff was ruled to be ineligible for benefits at every level of the litigation of this matter, prior to the Supreme Court’s decision which is the subject of this article. The reasoning of the lower decision-makers’ was based on Plaintiff’s voluntarily accepting the early retirement program which effectively served as a voluntary termination of his employment without a necessitous and compelling reason to do so. Plaintiff was not on the above-mentioned list and he was not compelled to accept the early retirement package, and there was no threat of termination by his employer, if he didn’t accept it.

The Supreme Court’s legal analysis centered upon the Voluntary Layoff Option Provision portion of 43 P.S. Section 802(b) which states the following: “[p]rovided further, [t]hat no otherwise eligible claimant shall be denied benefits for any week in which his unemployment is due to exercising the option of accepting a layoff, from an available position pursuant to a labor-management contract agreement, or pursuant to an established employer plan, program or policy.”

As one would expect, the tribunals below the Supreme Court cited to multiple cases over the last three (3) decades which would lead to the necessary conclusion that Plaintiff is ineligible for benefits due to voluntarily terminating his employment without a necessitous and compelling reason. These cases tend to focus on a judicially created distinction between early retirement and a voluntary layoff, with only the former allowing eligibility for benefits. However, the Supreme Court pointed out that, despite the long history of reasonably consistent decisions, it was apparent that none of other courts and tribunals actually read the statute they were applying and upon which they ruled.

The Supreme Court began its analysis of the decisions below by identifying an underlying interpretive framework for unemployment compensation which requires viewing the unemployment compensation law as liberally as possible in order to provide the maximum benefits possible. Furthermore, the Supreme Court pointed out that when attempting to apply a statute, courts must abide by the letter of the law when the language of the statute is clear and free from ambiguity using the common and approved usage of the words. As a result, the Supreme Court concluded that benefits should only be denied if the statute has explicit language to that effect; indeed there is a presumption that an applicant for unemployment compensation is eligible for benefits and the burden to prove the contrary lies with the employer.

Using the guidelines described above, the Supreme Court indicated that the Plaintiff was denied benefits, and the many cases in support of his denial, was the result of chronic misinterpretation of the Voluntary Layoff Option Provision portion of 43 P.S. Section 802(b), apparently in an attempt to harmonize it with the law regarding ineligibility upon voluntary termination. Despite this, however, the Supreme Court ruled that the language quoted above, taken on its face, uses the term “layoff” without any other modifier, therefore the term layoff can refer to either temporary or permanent separations initiated by an employer. Indeed, the Supreme Court specifically indicated that the Voluntary Layoff Option Provision portion of 43 P.S. Section 802(b) specifically forbids the denial of unemployment compensation benefits due to accepting a voluntarily offered plan by an employer. The Supreme Court asserted that the language of the aforesaid statute is so unambiguous that the legislature’s intent to equate someone falling within the statute with an involuntarily unemployed claimant as opposed to someone who voluntarily terminated his own employment without a necessitous and compelling reason.

To put it simply, the Supreme Court found no language in the aforesaid statute to prevent interpreting it to allow claimants to be eligible for benefits upon accepting employer-initiated early retirement packages offered pursuant to a workforce reduction.

Originally published in The Legal Intelligencer Blog on January 27, 2014 and can be seen here.

Proving Willful Misconduct in UC Cases: Specificity Required!

In the recent matter of Lewis v. Unemployment Compensation Board of Review, 42 A.3d 375, the Commonwealth Court of Pennsylvania has reinforced the standard of proof necessary to render an unemployment compensation claimant ineligible for benefits.

 

The claimant in Lewis (hereinafter “Claimant”), allegedly got into an argument with a co-worker which became loud and each made claims of superior toughness to the other. Claimant was suspended for his behavior and later terminated. It is notable that despite the apparent loud nature of the argument described above, there were no customers present and the employer was closed for the night. Additionally, Claimant never made any threats or used profanity or offensive language, and testified to getting “loud” in retaliation to his co-worker’s raised voice.

 

The Unemployment Compensation Service Center, Referee, and Board of Review all found Claimant to have willfully violated the employer’s work rules to cause his own termination and, therefore, was found to be ineligible for benefits; the Commonwealth Court disagreed.

 

At the Referee’s Hearing, the employer brought only one witness who testified that the employer has rules and regulations and a harassment policy which Claimant allegedly violated which led to his termination. Claimant also provided testimony at the hearing to supplement the two written statements he made to his employer beforehand.

 

In reviewing the case, the Court noted that an employee’s willful misconduct is behavior which is a wanton and willful disregard for the employer’s interests, a deliberate violation of the employer’s rules and/or behavior the employer can reasonably expect, or behavior so negligent it manifests a certain culpability on the part of the employee. The burden to prove the above is on the employer, as well as the burden to prove that a claimant knew (or should have known) of the work rule at issue. If the employer can prove the above, a claimant must then prove a justifiable reason to have broken the rules in order to be eligible for benefits.

 

When comparing the evidence present at the Referee’s hearing (i.e.: the one employer witness and Claimant’s testimony and statements described above), the Court found that the employer never once identified any rule or policy actually broken by Claimant, or provided documentary evidence of the existence of the policy. Furthermore, there was no evidence, or even finding from the Board of Review, that Claimant even knew of the applicable (if any) rules of the employer.

 

Therefore, due to the complete absence of any evidence or proof that Claimant knew of a work rule, and subsequently willfully broke it, the employer simply did not meet its burden of proof, rendering Claimant eligible for benefits.

 

May this case serve as a reminder to employers: no matter how simple a case appears, or “informal” an unemployment compensation referee’s hearing seems, the burden of proving a claimant’s ineligibility lies on the employer, and it is a burden the Court takes seriously.

Originally published in Upon Further Review on February 28, 2013 which you can see here.

The Effect of Retiring on Workers’ Compensation Benefits

The matter of Krushauskas v. Workers’ Compensation Appeal Board, 56 A.3d 64 (Pa.Cmwlth. 2012), involved a claimant who suffered a work-related injury while working as a stock picker for General Motors. Claimant Thomas Krushauskas filed a penalty petition against GM alleging it unilaterally suspended his benefits without any additional agreement or order. Simultaneously, Krushauskas voluntarily entered GM’s attrition plan and accepted early retirement. The court noted that no one was forced into the attrition plan and, in fact, Krushauskas had 45 days to revoke the decision to enter it. Krushauskas argued that he did not intend to retire and was simply taking advantage of the plan offered.

The court ruled that GM violated the Workers’ Compensation Act when it unilaterally – without agreement or court order as a result of Krushauskas’s retirement – suspended Krushauskas’ benefits because of him retiring per his entrance into the attrition plan. Generally, an employer is supposed to file a petition specifically requesting the relief sought. Despite this, the court noted that it has never required unreasonable strictness in workers’ compensation pleadings. Unfortunately for Krushauskas, because the court also ruled that he did, indeed, retire, the unilateral suspension did not cause any loss in workers’ compensation benefits owed to him.

The court’s ruling that Krushauskas did retire, contrary to his argument that he did not actually intend to do so, was based on a credibility determination of Krushauskas’ testimony. As stated above, Krushauskas’ representations in the documentation for the attrition plan indicated retirement and the court found those representations likely to be true.

Perhaps the most significant aspect of the court’s ruling is that it clarified and consolidated previous rulings that a workers’ compensation judge has the authority to suspend/terminate a claimant’s benefits without a formal petition from the employer as long as doing so would not be prejudicial to the claimant. A claimant having an opportunity to defend him or herself, and/or having adequate notice, would tend toward the matter lacking prejudice against the claimant even if the workers’ compensation procedures were not followed with precision.

The court noted, based on the facts presented, that Krushauskas certainly had sufficient notice and knew a suspension of benefits was possible. Indeed, the court drew significance from the fact that when GM argued that Krushauskas voluntarily retired, he objected on the basis of relevance, and not surprise, which would have been the objection if he did not have sufficient notice. Furthermore, Krushauskas never attempted to submit additional evidence to oppose the argument that he voluntarily retired.

The court further indicated that where someone accepts a retirement pension, as Krushauskas did here, then the employer is entitled to a suspension of benefits. Benefits will be suspended unless the claimant can show that he is seeking employment or he was forced into retirement because of a work-related injury. In the instant case, Krushauskas clearly accepted a retirement pension and never testified to seeking new or continued employment.

When collecting workers’ compensation, be sure to consider all implications before accepting a retirement plan or pension, as the workers’ compensation benefits may be terminated long before expected.

Originally published on February 1, 2013 in The Legal Intelligencer Blog and can be found here.

Trouble on the Horizon – Severance Agreements and Recent Modifications to the Pennsylvania Unemployment Compensation Law

On June 17, 2011Pennsylvania Governor Tom Corbett signed into law the Legislature’s latest modifications to Pennsylvania Unemployment Compensation Law.  The changes described below will take effect on January 1, 2012. Though presumably designed as a cost-cutting measure with regard to the Commonwealth’s budget issues, the modifications may have some unexpected consequences for attorneys and their clients when negotiating severance packages, and lawyers who practice in this area of the law should expect some interesting, and probably confusing, issues to arise in the future.

 

Generally speaking, the Pennsylvania Legislature revised 43 P.S. Section 804 to require Claimants to account for severance packages when applying for Unemployment Compensation Benefits.  While it does not appear that the changes to Section 804(d) will require a potential Claimant to hold off on filing for unemployment benefits until after he has collected all of his severance payment, it does appear that they will adversely affect potential claimants’ eligibility for benefits.  Although the new provisions may reduce eligibility for potential claimants, it seems likely that they could dramatically increase litigation as they appear to generate more questions than issues they allegedly resolve.  Examples of the types of issues that may arise follow.

 

First Example: Very often the issues surrounding an employee’s Unemployment Compensation Benefits are handled within the context of a larger and more comprehensive employment matter between the employer and former employee.  When the aforesaid employment matter is resolved in some way, it is not unusual for part of the settlement funds to be issued directly to the employee, with the remaining about issued directly to the employee’s attorney.  It is not clear from the new Unemployment Compensation law whether the funds issued directly to the employee’s attorney would be considered as part of the employee’s severance.

 

Second Example: Sometimes an employer refuses to issue two (2) separate checks to the employee and his attorney.  In this case, it is typical for the attorney to receive all of the funds, deduct any outstanding fees and costs, and issue a check for the difference to the employee.  Although receiving an amount reduced by attorney fees and costs, the employer will generally issue the employee a 1099 or W-2 for the full amount.  As above, it is not clear whether, in the context of Unemployment Compensation, the full amount, or the amount actually received by the employee would be considered as part of the employee’s severance.

 

Third Example: Sometimes an employer issues funds directly to the employee’s attorney in the same amount as the retainer already paid by the employee.  The employer issues the attorney a 1099 for the funds remitted.  The attorney, in turn, issues the employee a refund of the retainer paid.  Would this refund be considered part of an employee’s severance package?

 

Fourth Example: Some employees’ settlements with employers include both a payment to an employee as severance and a sum for what is essentially punitive damages.  The payment remitted for severance results in a W-2 issued to the employee by the employer while the payment remitted for “punitive damages” results in a 1099 from the employer, and is generally not subject to the standard taxes attached to salaries.  In the alternative, some employers provide a lump sum without holding any amount for taxes and issue a 1099 for the lump sum.  It is unclear how the Pennsylvania Department of Labor would deal with these situations.  Would it consider the entire pre-tax-withholding amount to be an offset in terms of the employee’s severance package?  If not, and it just considers the net amount paid, it could be to the detriment to the employee who got the lump sum as it would appear that the employee who got a pre-tax severance package got a larger amount and the Department of Labor may offset the larger amount.

 

As seen above, while the new additions toPennsylvania’s Unemployment Compensation could reduce potential claimant’s eligibility for benefits, they appear to raise more questions than the issues they resolve.  It will be interesting to see how the issues raised above, and others like them, are dealt with by the Department of Labor and the Courts.

 

For the readers’ convenience, the additions to Pennsylvania Unemployment Compensation Law are as follows: 43 P.S. Section 804 of Pennsylvania’s Unemployment Compensation Law has been modified with an amendment to Subsection (4)(1) which now reads: “benefits shall be paid to each eligible employe who is unemployed with respect to such week, compensation in an amount equal to his weekly benefit rate less the total of (i) the remuneration, if any, paid or payable to him with respect to such weeks for services performed which is in excess of his partial benefit credit, and (ii) vacation pay, if any, which is in excess of his partial benefit credit, except when paid to an employe who is permanently or indefinitely separated from his employment and (iii) the amount of severance pay that is attributed to the week.”

 

43 P.S. Section 804(d)(1.1) has been added to the law and reads: “(i) ‘Severance pay’ means one or more payments made by an employer to an employe on account of separation from the service of the employer, regardless of whether the employer is legally bound by contract, statute or otherwise to make such payments. The term does not include payments for pension, retirement or accrued leave or payments of supplemental unemployment benefits. (ii) The amount of severance pay attributed pursuant to subclause (iii) shall be an amount not less than zero (0) determined by subtracting forty per centum (40%) of the average annual wage as calculated under subsection (e) as of June 30 immediately preceding the calendar year in which the claimant’s benefit year begins from the total amount of severance pay paid or payable to the claimant by the employer. (iii) Severance pay is attributed as follows: (A) Severance pay is attributed to the day, days, week or weeks immediately following the employe’s separation. (B) The number of days or weeks to which severance pay is attributed is determined by dividing the total amount of severance pay by the regular full-time daily or weekly wage of the claimant.  (C) The amount of severance pay attributed to each day or week equals the regular full-time daily or weekly wage of the claimant.  (D) When the attribution of severance pay is made on the basis of the number of days, the pay shall be attributed to the customary working days in the calendar week.”

Originally published on November 18, 2011 in The Legal Intelligencer and can be found here.

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