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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.

More Work for Unemployment Compensation Lawyers in the Near Future?

When one applies for unemployment compensation benefits, there are generally two potential opponents: the claimant’s previous employer and/or the Department of Labor itself. Obviously, an employer can oppose claims for unemployment compensation benefits on bases such as the claimant voluntarily quitting or being fired for willful misconduct. However, even if an employer takes no action to oppose a claimant, the Department of Labor can. For example, the Department of Labor can oppose a claim if, upon its review of a claimant’s application for benefits, it appears that the claimant would be ineligible under the law based on the claimant’s own representations on the application. Unfortunately for claimants, it appears that the Department of Labor will be scrutinizing their applications closer than ever in the foreseeable future.

According to a recent article in The Philadelphia Inquirer, Pennsylvania’s unemployment compensation fund was in the red by approximately $300 million in 2011. Although currently trying to borrow money to meet the current demand for benefits, legislators in Harrisburg are now searching for ways to close the gap, and due to the current political climate, raising taxes does not seem to be among the options being considered. Instead, one of the solutions that is gaining some traction is to withhold benefits from claimants who are not very “attached” to the economy. In other words, earning the bulk of one’s income over a very short period of time may cause issues with one’s eligibility, as there may be a preference for more evenly compensated employment over a longer period of time. Of course, this potential change would likely affect the underemployed more than others, as they tend to work shorter-term jobs.

Regardless of how the Pennsylvania Legislature resolves the unemployment compensation fund’s solvency problems, its desired result is to reduce the number of eligible claimants by 10 percent, or approximately 50,000 people. This will potentially affect unemployment compensation practitioners, as each denied claimant will have the right to appeal his or her denial to a hearing before a referee and beyond. Of course, claimants can be represented by an attorney to help them through such appeals and/or hearing appearances. Therefore, these new changes could also potentially increase the unemployment compensation practitioners’ caseload by up to 10 percent as more claimants may retain them to litigate the increasing number of adverse decisions against them by the Department of Labor.

Originally published on June 8, 2012 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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