judicialsupport

Legal Writing for Legal Reading!

Archive for the tag “retirement”

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.

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.

Divorce, Dead Men, and ERISA

Last month Upon Further Review published an article I submitted called “Till Death Does Your Stuff Part” (which can be found here) regarding the latest development in the law regarding the interaction between divorce litigation, estate litigation, and the death of a litigant. I am now following up that article with the instant one because within a few days of publication, I received some pretty interesting and clever responses to the aforesaid article, and I would like to address them here as I think the issues they raise are food for attorneys’ thought.

One of the responses inquired about the application of the Dead Man’s Act to a divorce matter where one party dies after divorce grounds have been established. The Dead Man’s Act (42 Pa.C.S.A. § 5930) deals with the admissibility of evidence against a decedent by the parties to a contract in which the decedent was also a party. The Act serves to restrict the surviving members of a contract from presenting testimonial evidence against the decedent, also a member of the same contract, of anything that occurred before his death. The precise interpretation of the Act by the Court is complex, storied, and beyond the scope of this article. Suffice it to say here, however, that the Act does pose an interesting question vis-à-vis divorce. Generally speaking, Pennsylvania views marriage as a contract and if marriage is a contract, and one of the spouses (i.e.: parties to the marriage contract) dies, can the other party to that contract (i.e.: the surviving spouse) present any evidence against the decedent spouse under the Act? The cases in Pennsylvania on the subject are rather unclear, generally very old, and largely irrelevant as they do not account for the change in Pennsylvania law (i.e.: 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2)) as described in my previous article mentioned above. The cases, for the most part, involve a spouse trying to provide testimony regarding the other spouse in an attempt to elect against the decedent spouse’s estate. The cases regarding a surviving spouse’s testimony provided to attempt to elect against a decedent’s estate are nearly universal in their opinions that the testimony is inadmissible under the Act (or something similar thereto). Despite this, the cases also seem to tend toward allowing a surviving spouse to provide testimony as the existence of the marriage relationship. Under 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. 2106(a)(2), if divorce grounds are established, the only avenue for the surviving spouse for a decedent’s spouse’s property is through equitable distribution, therefore there is a question as to whether these cases still apply.

At present, the cases do not shed light as to what sort of testimony will be permitted to be provided at an equitable distribution hearing involving a decedent spouse. A strict reading of the Dead Man’s Act would seem to imply that testimony regarding the decedent spouse by the surviving spouse is inadmissible; however, logically speaking, this seems to be obviously contrary to what would appear to be the intent of the legislature in passing 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). Further, pursuant to 42 Pa.C.S.A. § 5927, in actions brought by one spouse against another to recover separate property, the testimony of one spouse is deemed “fully competent.” As above, how this interplays with the Dead Man’s Act and equitable distribution is not clear, but it would seem to lean toward allowing the surviving spouse to provide testimony.

In my opinion, I do not think it makes much sense to specifically take a divorce matter involving a decedent spouse out of estate litigation (where testimony is specifically prohibited by case law) and place it into equitable distribution only to have the testimony of the surviving spouse deemed inadmissible under the Dead Man’s Act; indeed, cui bono? It seems logical to me to discern from the legislature’s decision regarding the placement of a case into equitable distribution that it also intended testimony regarding the decedent spouse and the marriage contract by the surviving spouse to be admissible and, perhaps, to expand 42 Pa.C.D.A. § 5927 to cover all property at issue in a divorce. Otherwise, 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2) are simply exercises in academic futility. Please note that what I have provided above is simply my opinion; I do not know exactly how this will all pan out. It will be interesting to see how the Court resolves this seeming conflict between the 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2) and the Dead Man’s Act.

Before I move to the next issue, I would note that despite the 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2), the Dead Man’s Act appears to remain applicable regarding testimony by a surviving spouse about a decedent spouse and a Pre and/or Post Nuptial Agreement.

The next issue presented to me by the readers of Upon Further Review is the application of ERISA to 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). This matter seems much more straight forward than the Dead Man’s Act. ERISA, as a Federal law, preempts Pennsylvania divorce law; there is no dispute about that. Under ERISA, once a spouse dies the terms of the insurance policy and/or pension become “locked in” as it were. Therefore, even if a party is in the midst of a divorce and the decedent spouse intended to remove the surviving spouse as a beneficiary of his/her pension and/or insurance policy but does not due to his/her death, the surviving spouse remains as beneficiary regardless of the intent. At this point, of course, the surviving spouse can attempt to receive whatever survivor’s benefits s/he may be entitled to receive. Therefore, the appropriate response by the estate of the decedent spouse is to file for an injunction against the surviving spouse to prevent him/her from receiving the benefits. It should be remembered that the estate of the decedent spouse takes the place of the decedent spouse in the divorce litigation if divorce grounds are established (if no grounds are established, the divorce litigation may no longer proceed regardless). The estate, as a result, may proceed through equitable distribution as if the decedent spouse were so doing. Consequently, through equitable distribution it would seem that the estate of the decedent spouse may still secure a Qualified Domestic Relations Order regarding the insurance policy and/or pension covered by ERISA.

The final issue raised to me was the application of Pennsylvania’s hearsay rules to equitable distribution hearings regarding a decedent spouse. Under Pa.R.E. 804(a)(4), death, perhaps obviously, is considered one of the ways a witness can be “unavailable” for testimony. Under this Rule, if a witness is unavailable, hearsay testimony of the statements made by the unavailable witness may be admissible under certain circumstances. Under Pa.R.E. 804(b)(3), a statement made by a decedent against his/her own interest may be admissible as evidence. Further, under Pa.R.E. 804(b)(4), the testimony of a dead (i.e.: unavailable) witness is admissible with regard to various issues of his/her own family history. Of course, the weight and credibility of this testimony is still to be weighed by the fact finder, but it seems that the mere death of one of the divorcing spouses is insufficient on its face for an objection based on hearsay to be sustained. However, it does seem that eliciting such testimony may be problematic; it will be interesting to see how the Court elects to rule in these sorts of cases.

I hope the above sheds some additional light on the application of 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). I greatly appreciate those readers who took the time to contact me regarding these issues and I hope, through our mutual efforts, we can make the practice of Pennsylvania law clearer and more effective.

This article also appeared in the Philadelphia Bar Association’s Upon Further Review on July 11, 2011 and can be found on my website here.  This article was reprinted in Volume 33 Issue No. 3 (September 2011) of Pennsylvania Family Lawyer.

Post Navigation