Important new changes to Pennsylvania unemployment compensation law will take effect January 1, 2012. Perhaps the most significant change affects persons who are terminated and receive severance pay. Currently, severance pay is not taken into consideration in eligibility decisions for unemployment benefits. This has resulted in some individuals receiving more overall compensation while unemployed than when they were working. The most infamous example was the recent award of unemployment benefits to Arlene Ackerman after she received a $900,000.00 severance from the City of Philadelphia. Under the new law, however, severance pay will be offset against unemployment benefits to the extent it exceeds 40% of the state average annual wage. Consequently, persons with generous severance packages may be precluded from receiving any unemployment benefits unless they are still unemployed when the severance pay runs out.
The change in the unemployment law regarding severance pay will also have the unfortunate effect of making it more difficult to resolve employment disputes. Plaintiffs were willing to accept less cash from employers and employers were willing to include a promise not to contest unemployment eligibility in a settlement agreement knowing that government money was a part of the package providing economic security for the harmed employee. Now employees will have to get their full pound of flesh from the employer. The expense to employers for settling will be higher and settlements in employment lawsuits are likely to decrease as a result of the change in unemployment law.
Another important change requires benefit recipients to actively search for new employment and provide an accounting of their efforts to the unemployment office. A failure to actively search for work may result in a termination of benefits. Anyone intending to take an extended vacation until their benefits run out will now do so at their own risk.
Other changes include expanded availability of testifying by telephone for appeal hearings and the creation of a “shared work program.” The shared work program will allow employers to apply to the Department of Labor for approval of a shared work plan. Under an approved plan, the employer can reduce the hours of all employees in a unit or department instead of laying off some workers. Each affected employee would then be entitled to receive “shared work benefits” from unemployment compensation for the percentage of their weekly benefit rate equal to the percentage by which their hours have been reduced.
Did you know Pennsylvania has been unable to pay back loans to the federal government to cover unemployment benefits to its residents? Because of the irresponsibility of our state government, PA employers will now pay three percent (3%) more in unemployment taxes as a penalty for the State’s failure to make good on the loans.