Voluntary Retirement and Unemployment Compensation - COTW #127

The Pennsylvania Supreme Court recently reversed existing unemployment compensation precedent in Diehl v. UCBR. The employer planned a reduction in force, including layoffs of 20 employees. The employee in this case was not one of them.

However, the employer offered incentives to senior employees to retire and save the jobs of more junior employees. The incentives included a few years of health insurance and a buyout of unused vacation time. The 63-year-old employee in this case accepted the voluntary retirement option.

Pennsylvania unemployment compensation law includes a voluntary layoff option (VLO) provision:

[A] claimant shall not be denied unemployment compensation benefits for “accepting a layoff, from an available position, pursuant to a labor-management contract agreement, or pursuant to an established employer plan, program or policy.”

Long-standing precedent had applied this provision narrowly so as to exclude permanent separation in exchange for consideration from the employer.

Well, kiss that precedent goodbye. In a 5-3 decision (Justice Orie Melvin did not participate), the Pennsylvania Supreme Court held:

[W]e overrule the longstanding interpretation of the Commonwealth Court precluding employees who accept their employer's early retirement packages from receiving unemployment compensation benefits. We instead conclude that the VLO Proviso of Section 402(b) of the Unemployment Compensation Law, 43 P.S. § 802(b), applies to an “otherwise eligible claimant” who accepts an early retirement plan offered pursuant to an employer-initiated workforce reduction. See 43 P.S. § 801.

The case was remanded - I assume to determine whether the employee was "otherwise eligible."