Voluntary Severance Package how it works with uc in pa (collect, file)

[JAS987]

My job offered a voluntary severance package of 70% to 10% of your salary depending on how many years of service that you did. They also said in the letter that they want to cut back their job force due to financial matters. Do I qualify for uc benefits. for example, my yearly salary was $63,000 my severance would be $44,000. Looking at the pa uc site, I am not sure , would it be zero , would it be $211.65 weekly. Since I feel if I did not take the buyout my job could be eliminated. As of now my last day could be August 31st 2016. Any advice would be appreciated. The severance would be a lump sum amount. Would i have to go to a uc hearing. On the letter from my job it said it is up to uc to decide. Should i apply for uc sept. 4th 2016.

Thanks to anyone who has advice on this subject.

JAS

[Ariadne22]

Originally Posted by JAS987

My job offered a voluntary severance package of 70% to 10% of your salary depending on how many years of service that you did. They also said in the letter that they want to cut back their job force due to financial matters.

1. Do I qualify for uc benefits. for example, my yearly salary was $63,000 my severance would be $44,000. The severance would be a lump sum amount.
2. Looking at the pa uc site, I am not sure , would it be zero , would it be $211.65 weekly? As of now my last day could be August 31st 2016.
3. Would i have to go to a uc hearing. On the letter from my job it said it is up to uc to decide.
4. Should i apply for uc sept. 4th 2016.

Because your severance is as high as it is, under PA law you will, at best, be eligible for a reduced award, and not until next summer.

I will answer your questions one at a time.

1. Yes, you qualify for benefits, but if you apply now you will not receive a dime. (see below)
2. Your weekly benefit rate would be $573 for 26 weeks for a total amount of $14,898, per this:

   http://www.uc.pa.gov/unemployment-benefits/Am-I-Eligible/financial-charts/Pages/Highest-Quarterly-Wage-$13738-or-more.aspx [paste this link into your browser]

3. No, you won't have to go to a hearing. PA will want information on the severance documents.
4. No, you should not apply on September 4, 2016. Severance over approximately $20,000 will be a direct offset to your claim, which means PA will offset 42 weeks of benefits ($573x42=$24,066) with $24,000 of severance and zero out the claim award, per below:

Severance Pay: Severance pay means one or more payments your employer makes to you because of your separation from your employer. Severance pay that exceeds 40% of Pennsylvania’s average annual wage is deducted from your benefits (unless your AB Date is prior to January 1, 2012, or the severance results from an agreement entered into before January 1, 2012). The deductible portion of yourseverance pay is allocated to the weeks immediately following your separation from employment, based on your full-time weekly wage.

EXAMPLE: You received severance pay of $20,000. For Benefit Years that begin in 2014, 40% of Pennsylvania’s average annual wage is $18,981. $20,000 - $18,981 = $1,019 in deductible severance pay. Your weekly wage is $500. Therefore, $500 will be attributed to each of the first two weeks following your separation, and $19 will be allocated to the third week.

http://www.uc.pa.gov/Documents/UCP%20Forms/ucp-1.pdf

Because, in PA, you will need at least two full quarters of earnings in your base period and at least 49.6% of your earnings outside your high quarter, you can apply no earlier than June 18, 2017 and not later than June 30, 2017, which will leave an earnings base year of January-December 2016 and will include eight months earnings through 8/31/2016. Forty-two weeks after August 31, 2016 occurs week ending June 17, 2017, if I'm calculating correctly. You should then be able to collect the entire 26 weeks @ $573.

[JAS987]

Thank you very much. What you stated makes a lot of sense.

[Chyvan]

Originally Posted by JAS987

Since I feel if I did not take the buyout my job could be eliminated.

This statement gives me great concern.

There is case law that if you didn't risk losing your job, then taking a voluntary severance could be a complete disqualification as a quit without good cause.

You better have more than a "feeling." If you your boss told you "you better take this or you'll walk out of here with nothing," that's one thing but if you had nothing concrete to give up your employment, you could have a problem.

If you told the UI people on your application that you "quit to take a severance."

If the employer challenges your UI award saying you "quit" will both trigger such an investigation, and you better not use the word "feel" when you describe how someone in a position to know your future employment status told you with clear words that you were not going to have a future there.

[Ariadne22]

Originally Posted by JAS987

Since I feel if I did not take the buyout my job could be eliminated.

Chyvan is correct. That said, the above statement could also be construed as a quit in lieu of discharge - and the offerance of severance is coercion and proof of that - but you may need to appeal to get PA to recognize this - all of which would be litigated next year when you apply for benefits. By all means, apply. If you run into issues at that time w/employer contesting saying it is a quit, come back here. Keep any and all paperwork and make notes NOW on who is saying what - w/dates, times, etc.

[DupontCoalKracker]

PA's severance offset is indexed to 40% of the statewide median wage, so it goes up some every year. For 2016 I believe it's about $19,800. So the first thing you do is take the gross amount of your severance and subtract the $19,800. It does not matter under what payment scheme you receive the severance, lump sum, biweekly, whatever. However lump sum severance payments can cause other headaches. So $44,000 minus $19,800 = $24,200. You then divide the deductible portion of the severance ($24,200) by your "average weekly wage". PA UC will calculate your average weekly wage using the 4 quarters in your base year. You can estimate it fairly closely if you don't have peak season overtime or a quarter where you get a large bonus. $63k a year works out to about $1,210 a week. $24,200/$1,210= 20 week delay in receiving UC benefits.

When you perform that calculation and the final answer is less than or equal to 26, I would not suggest delaying filing your UC claim immediately after your separation. Your UC claim is valid for 52-weeks, but it's monetary value is only 26x your weekly benefit amount. If you have a 20 week severance delay, you have 32 weeks to collect 26 weeks worth of benefits, assuming you collect your full weekly benefit for each week. Meaning you don't have partial benefits due to part time work, or a pension/retirement plan offset on your benefits.

With regard to the voluntary employer separation package issue possibly being construed as a voluntary quit if you can't prove your job was going to be eliminated is no longer an issue in Pennsylvania. For 30-years the case law precedent on what is called the "voluntary layoff proviso" in the PA unemployment law allowed claimants to accept a temporary voluntary layoff, but not a permanent voluntary layoff, and accepting an employer incentive or early retirement package when the claimant could not prove their job would be eliminated if the did not accept that package was usually a kiss of death. That interpretation of that section of the law was overturned by a PA Supreme Court case Diehl v. Unemployment Compensation Board of Review (Pa. December 28, 2012)

[Rabrrita]

But in Diehl, wasn't the key element that the employer provided (from the start) a written statement that the layoff was due to deteriorating business and it is a workforce reduction. So, the claimant entered into the UI process with the employer going on record fully supporting that this was a legitimate lay off and the early retirement was just means of preserving the employees retirement benefit. In this case, the "letter" accompanying the offer has to meet the same standard as Diehl that this is an actual layoff not just a maybe but you can leave if you want and take benefits with you. I would think the OP has to be told they are going to be part of the lay off, not a maybe, but an actual you will be. I guess we need to be told the exact wording?

[Ariadne22]

Originally Posted by DupontCoalKracker

PA's severance offset is indexed to 40% of the statewide median wage, so it goes up some every year. For 2016 I believe it's about $19,800. So the first thing you do is take the gross amount of your severance and subtract the $19,800. It does not matter under what payment scheme you receive the severance, lump sum, biweekly, whatever. However lump sum severance payments can cause other headaches. So $44,000 minus $19,800 = $24,200. You then divide the deductible portion of the severance ($24,200) by your "average weekly wage". PA UC will calculate your average weekly wage using the 4 quarters in your base year. You can estimate it fairly closely if you don't have peak season overtime or a quarter where you get a large bonus. $63k a year works out to about $1,210 a week. $24,200/$1,210= 20 week delay in receiving UC benefits.

When you perform that calculation and the final answer is less than or equal to 26, I would not suggest delaying filing your UC claim immediately after your separation. Your UC claim is valid for 52-weeks, but it's monetary value is only 26x your weekly benefit amount. If you have a 20 week severance delay, you have 32 weeks to collect 26 weeks worth of benefits, assuming you collect your full weekly benefit for each week. Meaning you don't have partial benefits due to part time work, or a pension/retirement plan offset on your benefits.

Are you sure that the severance doesn't zero out benefits for each of those 20 weeks and reduce overall monetary award of the claim beginning with date filed? In other words, the claimant could lose 20 weeks of benefits. As I recall, this was a big issue with other PA claimants a few years ago. Wouldn't the safer course be to delay filing until January 16, 2017, after the 20 weeks have elapsed??

PA says:

Severance Pay: Severance pay means one or more payments your employer makes to you because of your separation from your employer. Severance pay that exceeds 40% of Pennsylvania’s average annual wage is deducted from your benefits (unless your AB Date is prior to January 1, 2012, or the severance results from an agreement entered into before January 1, 2012). The deductible portion of your severance pay is allocated to the weeks immediately following your separation from employment, based on your full-time weekly wage.

NYS actually reduces the monetary award of the claim if severance payments begin either in lump sum or weekly before 31 days after termination. Similarly, a few (southern) states won't pay benefits at all and deduct dollar for dollar from the monetary award of the claim regardless if severance is lump sum or weekly. The only way around it is to delay filing until severance weeks are exhausted.

[DupontCoalKracker]

The Commonwealth Court precedent that was overturned in Diehl was that PA had consistently denied benefits to any claimant that received an employer incentive, whether severance pay or an early retirement incentive. Some employment law attorney discussion on the subject can be found here: Unemployment Compensation Case Update: Employees Who Accept Voluntary Early Retirement Incentive Offers Are Eligible for Benefits - Pennsylvania Labor & Employment Blog

In practice, Diehl forced a plain language interpretation of the voluntary layoff wording of section 402(b) of the PA UC law which basically says that a claimant will not be denied for accepting a layoff that is part of an employer plan or program or codified in a collective bargaining agreement. I would advise the OP to be prepared to provide a copy of his separation agreement and any other documentation outlining the employer's offer. There has been more recent cases since Diehl where the employer fought the award of benefits and lost in Commonwealth Court. Google up First National Community Bank v. PA UC Board of Review and Naval Surface Warfare Center v. PA UC Board of Review.

With regard to PA's treatment of severance pay, it can cause a delay in receipt of benefits, but does not reduce the monetary value of the claim. If you scroll down the example PA shows here: Severance Pension Pay Deductions FAQS
The key wording is the claimant "would not receive any benefits during this 10-week period".

In PA when a claimant files their initial claim and reports they will receive a severance that exceeds the threshold, they will be adjudicated and a severance determination issued which tells them exactly how long their benefits would be delayed. If the severance delay would be greater than 26-weeks, I advise waiting one week for each week over the 26 before filing the initial claim. PA must treat the weeks the claimant waited to open the claim towards the severance delay. So if claimants rough calculation shows they would have a 30-week delay, and they wait 4-weeks after their separation to file the claim, those 4 weeks must be counted and the actual delay would reduced to 26 weeks.

PA also allows a claimant to cancel a claim and file again later, so long as they have not claimed benefits on the original claim. A signed letter is required, but you can fax it in to the UC Service Center. So if a claimant was not aware of the severance regulations and receives a severance determination that their severance delay is going to be 50 weeks, leaving them two weeks before the claim year would expire, along with the 25 weeks worth of money in that claim, they can wisely cancel that claim. Seasonal construction workers in PA use this tactic. If they work a partial week(s) due to weather or other factors, they open a claim, get their financial determination and decide the partial benefits are not worth being stuck with a low weekly benefit rate through their winter layoff, if they know they have higher earnings that will be considered in their base year if they wait.

The OP could delay opening his claim until he/she has waited the number of weeks they calculated for their severance delay, and that's not a bad idea if A.) they are trying to bridge to retirement or B.) they anticipate a prolonged job search based on regional labor market conditions. If they choose to not to receive benefits when they would otherwise be eligible and they land a new job, that's money they left on the table.

The OP mentioned lump sum severance. In PA you need to be careful waiting to open the claim if you received a lump sum payment. If they wait long enough that the quarter that they received the lump sum is going to be considered in their "base year", PA has the eligibility rule that you must have earned 49.5% of your total base year earnings outside of your highest earning quarter. If you worked the majority of that quarter, received a lump sum severance, plus payout for unused paid time off, you can run into problems. if you are receiving bi-weekly or even weekly severance payments, this is not an issue. PA counts severance that is taxed as normal wages to be "earnings" to constitute base year wages. While severance is countable as base year earnings, severance or salary continuation cannot be used to satisfy PA's requirement for earning 6X your weekly benefit amount to qualify for a subsequent or back to back UC claims.

[Chyvan]

DCK, I want to believe you because that's how my state works. Ariadne22, however, has been around a long time. She says it was a complaint that people got cheated. I don't want to tell her she's wrong.

On the flip side, you've got so much correct (unbalanced quarters, no second year claim) so I know you have some clue what you're talking about unlike the claimants that might have come here complaining about how their severance pay outs caused them to be cheated. Who's to say that they got it all wrong because a lot of claimants are first-time filers and just don't have a clue.

If you're right, it might make her reassess what she told a guy in MI. He had a large severance (52 weeks), I'd suggested that he wait until his claim would have 20 weeks on the back end. He would lose some wages from aged out quarters, but Ariadne22 was so sure that the MI wording was like PA's that I'm starting to think we gave him the wrong ( not the best or optimum) date to apply for benefits.

Ariadne22, is there the remotest chance that the claimants that had trouble caused you to draw the wrong conclusion and come up with a pattern that really wasn't there?

Thanks for the Diehl information. I wasn't sure about PA specifically, but I had read cases from other states where if the claimant was told that their job was going to disappear then talking the severance and UI was Ok (however, I'd want an email, memo, or something to back that up), but if there was no sure thing on a job loss and the severance was taken because it was convenient, then the UI was an iffy proposition at best.

I read the additional posted cases. While Diehl on the surface might make people think that their job still has to be on the chopping block, the new cases read so very liberally in favor of the claimant. If the employer offers money to leave, I think the new paradigm will be forever that they are going to get benefits in PA until something radical happens to disturb that.

Here's another one you can add to your list https://scholar.google.com/scholar_c...39&as_ylo=2012

I love it when someone like Diehl with too much time on his hands completely upsets the system. One can see with the denials and reversals in these cases that there are people in the UC Center and tribunal judges don't have a clue. The BOR seems to be getting it right, and the Commonwealth Court has gotten the message also. It also shows why I don't like the lower level decisions, they are inconsistent. Rather than getting a consistent decision based on case law, they just do what they want on those ignorant of UI precedent just take it because they can't possibly know any better.