Severance Packages and Unemployment Benefits
Employer and employees alike are often unclear on the impact that paying or accepting severance has on the right to receive unemployment compensation. A recent Commonwealth Court decision in Pennsylvania tries to shed some light on this illusive topic.
In Beddis v. Unemployment Compensation Board of Review, 2010 Pa. Commw. LEXIS 555 (2010), the Commonwealth Court wrestled with a situation where the employee agreed to accept her employer's offer to take a voluntary severance payment but then applied for unemployment benefits claiming that there was a "necessitous and compelling" reason for her voluntary quit. Mrs. Beddis attempted to collect unemployment under a section of the Unemployment Compensation Law known as the Voluntary Layoff Provision (VLO).
The Court determined that there was no evidence to conclude that Mrs. Beddis' employer was going to hire her back and that the termination appeared to be permanent and not temporary. As such, the Court held that the VLO provision was not applicable and therefore not helpful to the claimant. The Court explained that the VLO provision has been limited through previous rulings to situations where the employee has an expectation of reemployment as the Court described the seminal case of W.R Grace & Co. v. Unemployment Compensation Board of Review, 455 A.t 729 (Pa. Cmwlth. 1983).
Since the Unemployment Referee and the Board of Review already properly examined the facts and found that Mrs. Beddis did not have a necessitous and compelling reason to quit (i.e. there was no evidence that her job was not in immediate jeopardy), they affirmed, denying unemployment benefits. It is worth noting that Mrs. Beddis went to her unemployment compensation hearing without counsel and may have hurt herself by not getting in the evidence that she needed to win.
The case brings home the fact that there needs to be some attention paid on both sides to properly characterize a termination. The question of whether it is temporary or permanent and the reason for it can be addressed in a separation agreement. If you are an employer considering laying off employees or an employee worried about losing your job, give us a call or drop us a line to talk about your rights.