Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

This post was written by John DiNome, Joel Barras and Valerie Eifert.

Effective January 1, 2012, a signature amendment to the Pennsylvania Unemployment Compensation Law will require that severance pay in excess of 40% of the average annual wage in Pennsylvania offset unemployment compensation benefits otherwise payable to separated employees.

Prior to Act 6 of 2011, the amount of unemployment compensation a qualified claimant would receive would be offset only by: (1) compensation received for employment services performed during the week in which the individual claimed benefits; and (2) vacation pay in excess of partial benefit credit, which did not apply to employees who had been permanently or indefinitely separated from employment. The most recent “poster child” benefiting from these limited offsets is the former Superintendent of the Philadelphia School District, who received $905,000.00 as part of a severance package and still qualified for unemployment compensation benefits.

The amendment adds a third offset to the weekly unemployment benefit to help avoid a Philadelphia School District anomaly by offsetting the benefit with any severance pay received. Severance pay is “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.” 43 P.S. § 804(d)(1).

Severance pay, however, is deductible from unemployment compensation benefits only to the extent it exceeds 40% of the average annual wage in Pennsylvania. That 40% threshold is currently $17,853.00. Only the excess over 40% will be an offset. 

Any severance pay offset is applied “to the day, days, week or weeks immediately following the employee’s separation” until used up. The severance pay offset applied to each day or week is equivalent to the regular full-time daily or weekly wage of the claimant. As an example, an individual who is entitled to receive $500 per week in unemployment benefits but is also entitled to $19,853 in severance pay ($2,000 more than the 40% average) would collect no unemployment benefits for the first four ($500 times four is $2000) weeks following her separation from employment and would begin to collect her $500 weekly benefit for and after the fifth week. 

If the amendment had been in effect at the time the former Philadelphia School District Superintendent received her severance package, the size of her severance payment would have offset her unemployment benefit for her entire 26 weeks of benefits eligibility. 

These changes apply to severance compensation payable by agreement or policy on and after the January 1, 2012 effective date of the amendment. 

Contact your Reed Smith attorney or an experience employment lawyer for added guidance.

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This post was written by Don A. Innamorato and Sherri A. Affrunti.

The NJ DOL has published the new mandatory notice that, by December 7, 2011, must be posted in a conspicuous location and distributed to all existing employees who work in New Jersey. In addition, ALL new employees hired in New Jersey on November 7, 2011 or after must be immediately provided with a copy of this notice. Accordingly, it is recommended to include this notice immediately in all new hire packets, and to post it immediately on all bulletin boards or other locations where you, as an employer, post similar notices. If you have an internet or intranet site for exclusive use by employees and to which all employees have access, electronic posting of the notice on the site will satisfy the conspicuous posting requirement. Similarly, you may provide the notice to employees by email to satisfy the requirement to provide each employee with a copy of the notice. You may access a copy of the notice by clicking here.

The notice summarizes the record-keeping requirements under the following New Jersey statutes: the Wage Payment Law, the Wage and Hour Law, the Unemployment Compensation Law, the Temporary Disability Benefits and Family Leave Insurance Law, the Workers' Compensation law, the Prevailing Wage Act, and the Gross Income Tax Act. It also includes contact information for New Jersey State representatives who are available to provide employees with information or to facilitate their filing of complaints regarding an employer's alleged failure to meet the requirements of these statutes.

Employers risk fines up to $1,000 for failing to comply with the notice and posting requirements, in addition to potential criminal penalties.

This notice follows on the heels of last year's new legislation imposing stricter penalties - including the loss of operating licenses - for New Jersey employers who repeatedly fail to comply with the State's wage, benefit and tax laws. This new law was summarized in an Alert published in June 2010 and can be accessed by clicking here.

If you have any questions concerning the attached posting, the corresponding law, how it will impact your business, or the risks of non-compliance, please contact the authors of this Alert or the Reed Smith attorney with whom you regularly work.

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This week, President Obama signed into law a $17.6 billion jobs creation package passed by Congress, H.R. 2847, the Hiring Incentives to Restore Employment Act (“HIRE Act”). This legislation includes tax incentives for businesses to hire and retain the unemployed; extension of infrastructure programs affecting surface transportation, energy, and school construction projects; and continuation of depreciation programs in effect for small businesses.

For more information about the HIRE Act, please read our client alert written by Christopher L. Rissetto, James A. Burns, Jr. and Robert Helland.

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