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Changes to Pennsylvania's Unemployment Compensation Law: How They May Affect You

March 21, 2012

Act 6 of 2011 was signed into law on June 17, 2011. The new law makes significant changes to Pennsylvania's Unemployment Compensation Law. Many of these changes may affect you if you are separated from your employment.

First, Act 6 ensures the continuation of a federally funded, 13-week extension of unemployment compensation benefits. This prevents approximately 45,000 unemployment compensation claimants in Pennsylvania from losing their eligibility to collect an additional 13 weeks of benefits as of June 11, 2011. It also enables an additional 90,000 claimants in Pennsylvania to remain eligible throughout the remainder of the calendar year to collect the additional 13 weeks of extended benefits.

Though the new law extends unemployment benefits in Pennsylvania for an additional 13 weeks, it also makes it more difficult for new claimants to qualify for such benefits and reduces the amount of benefits claimants may draw if they do so qualify.

Act 6 freezes the maximum weekly benefit rate at $573 per week until the end of 2012, and allows only marginal increases in the maximum weekly benefit rate until 2018, or until Pennsylvania’s Unemployment Compensation Fund is no longer in financial distress.

The new law also increases the minimum weekly qualifying benefit rate from $35 to $70, preventing claimants whose weekly benefit rate is less than $70 from drawing unemployment benefits. A claimant’s weekly benefit rate is calculated based on the wages s/he was paid in his/her base year.

In order to qualify for unemployment benefits, claimants also must have worked a sufficient number of “credit weeks” during the previous base year. Current law provides that a credit week is any week in which claimants had earnings of $50 or more. Act 6 requires that claimants earn at least $100 for every credit week until December 31, 2014, and at least 16 times the Pennsylvania minimum wage rate for every credit week after January 1, 2015. The new law doubles the minimum credit week requirement through 2014, and at a minimum, quadruples it in 2015, which will prevent many claimants who would currently qualify for unemployment benefits from qualifying for such benefits in the future. The new law also increases the number of credit weeks necessary to qualify for benefits from 16 to 18.

In addition, Act 6 requires that claimants now undertake an active work search for suitable employment in order to qualify for benefits. Currently, there is no job search requirement for the regular 26-week state unemployment compensation program. To meet the new active work search requirement, claimants must:

  1. Register for the employment search services offered by the Pennsylvania CareerLink system, or its successor agency, within 30 days of their initial application for benefits;

  2. Post a resume on the system's database, unless they are seeking work in an employment sector in which resumes are not commonly used; and

  3. Apply for positions that offer employment and wages similar to those they had prior to their unemployment and which are within a 45 minute commuting distance.

The work search requirements do not apply to claimants whose employers have laid the claimants off due to lack of work, and have advised the claimants of a date on which the claimants will return to work.

In addition to changes in the law’s eligibility provisions, Act 6 also includes a severance pay offset and provisions mandating automatic relief from charges for employers under certain circumstances. The Act delays the beginning of unemployment benefits until the exhaustion of severance pay exceeding 40 percent of the annual average wage. Current law does not address severance pay in the computation of benefits.

Under the Act, severance pay is defined as “one or more payments made by an employer to an employee 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.” Severance pay does not include payments for pension, retirement, or accrued leave, or payments of supplemental unemployment benefits.

The severance pay offset is calculated by subtracting 40 percent of the “average annual wage” from the total severance pay amount. Currently, 40 percent of the average annual wage is approximately $18,000. Therefore, claimants may receive up to $18,000 in total severance pay before their unemployment compensation benefits are affected. Claimants receiving more than $18,000, however, will not be permitted to draw unemployment benefits until they have exhausted the amount exceeding $18,000. The amount of severance pay attributed as an offset in any given week will equal the claimant's regular full-time daily or weekly wage, and will begin with the first week immediately following the claimant's separation from employment.

For example, let’s assume a claimant whose regular full-time weekly wage is $500 is separated from his/her employment and receives severance pay unrelated to pension, retirement, or accrued leave in the amount of $20,000. The amount exceeding 40 percent of the current average annual wage of $18,000 is $2,000. Therefore, the claimant will not be permitted to draw unemployment benefits until four weeks ($2,000 divided by the claimant’s regular full-time weekly wage of $500) after his/her separation from employment.

The effective date of the Act’s offset provision is January 1, 2012. Severance agreements reached between an employer and employee in 2011 should not impact the employee's unemployment compensation benefits, even if the severance pay continues into 2012.

In addition to allowing an employer to offset severance pay against its obligation to pay workers' unemployment benefits, Act 6 also allows employers automatic relief from charges for ineligible claims, without the need for filing a written request with the Department, where a claimant is ultimately determined to be ineligible for benefits.

Act 6 also establishes shared work program. The program allows employers to voluntarily avoid layoffs by reducing the number of hours worked by employees in a specifically defined unit, which, in turn, allows employees in the affected unit to receive partial unemployment benefits for the reduced hours. The Act provides, however, that if any employee in an affected unit is covered by a collective bargaining agreement, the shared-work plan for that unit must be approved in writing by the employee’s collective bargaining representative prior to its implementation.

Finally, Act 6 permits either party to an unemployment compensation benefit appeal hearing to testify (at the hearing) via telephone, without regard to the distance of the hearing location. Currently, the law provides that parties may request telephone testimony; that referees may or may not grant the request; and that the requesting party must reasonably demonstrate an inability to personally testify due to compelling employment, transportation or health issues.

Although the law generally makes it more difficult for claimants to qualify for unemployment, it could have been worse, and would have been if not for efforts by labor to protect the rights of claimants seeking unemployment benefits. Act 6, in its original form, included provisions to not only increase many of the law’s minimum eligibility requirements, but also to disqualify claimants who voluntarily quit for reasons not attributable to employment, or for ordinary misconduct or negligence, rather than willful misconduct as currently provided.

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