Pennsylvania now counts certain severance pay against unemployment benefits

Sunoco's South Philadelphia refinery. Those laid off from there with long years of service will be most affected by the new law.
Sunoco's South Philadelphia refinery. Those laid off from there with long years of service will be most affected by the new law. (MICHAEL BRYANT / Staff Photographer)
Posted: January 06, 2012

A revamped law governing Pennsylvania unemployment benefits may come as a surprise to the newly laid off - severance payments above about $18,000 will offset unemployment benefits until the severance is used up.

The law, which went into effect this year, will affect those being laid off this year, among them the hundreds of Sunoco Inc. employees who will lose their jobs when Sunoco mothballs its refineries in Marcus Hook and Philadelphia.

The changes to the law, signed by Gov. Corbett on June 17, are designed to shore up the state's unemployment-benefit trust fund, now nearly $3 billion in the hole.

The law aimed to cut unemployment spending by $140 million a year by curtailing eligibility, reducing the number of weeks of benefits, and making people use severances before they get benefits.

The severance provision "is not on a lot of people's radars," said Philadelphia lawyer Jonathan Segal, a Duane Morris L.L.P. partner who represents employers.

People can still receive all their unemployment benefits after the severance ends, but the idea is that they may find work before they have to draw from the fund.

The newly unemployed should check with the Pennsylvania Department of Labor and Industry for precise filing instructions.

Most of the new provisions have to do with eligibility, which affects low-wage workers who change jobs frequently. The severance provision, however, will affect middle- and upper-income employees.

Analyst Maurice Emsellem, who tracks unemployment for the National Employment Law Project, an advocacy group, said the provision hurts "those workers with the most seniority on the job."

"That includes lots of workers in manufacturing and other 'displaced' workers already hit very hard by this recession and having an especially hard time finding new work that pays anywhere near their prior pay," Emsellem said in an interview conducted in June, when the bill was coming up for a vote.

Among those likely to be affected is mechanic David Miller. president of the United Steel Workers Local 10-901, he expects to lose his job at Sunoco's Marcus Hook refinery by Feb. 29.

He said the refinery employs about 340 hourly workers and 300 in management.

The union's contract does not provide for severance, he said, but in a 2009 layoff, Sunoco gave two weeks' severance for each year of service. That would put Miller, a 25-year employee, well above the $18,000 threshold.

Miller, now in layoff bargaining on behalf of the union, said he thought the severance provision was unfair. He just learned about it a few weeks ago.

"I've been paying into unemployment," Miller said.

He had planned to use most of any severance to pay ahead on his mortgage, so his family could remain in their Delaware County home, even if it took him a long time to find work.

"My kids are doing well - in the honors program - so I don't want to upset that applecart," he said.

Nationally, the average length of unemployment is nearly 41 weeks.

Management lawyer Segal said that companies contemplating layoffs needed to let employees know about the new severance rules.

He said it would come up when employees and employers negotiated severance pay in return for the laid-off employees' promising not to file discrimination claims.

New Jersey does not count severance against unemployment benefits, but Delaware does. In Delaware, the entire severance, even if paid in a lump sum, is divided into weekly payments equal to the laid-off worker's salary. When those weekly periods end, benefits can begin.


Job Numbers

Thursday's employment news showed some improvement for the nation:

ADP payroll report: 325,000 new jobs.

Challenger, Gray & Christmas layoff report: 41,785 planned cuts, lowest since June 2011.

Unemployment claims:

New: 372,000,

down 15,000.

Four-week moving average: 373,250,

down 3,250.

Source: Automatic Data Processing Inc., U.S. Department of Labor, Challenger, Gray & Christmas Inc.


Contract staff writer Jane M. Von Bergen at 215-854-2769, jvonbergen@phillynews.com, or @JaneVonBergen on Twitter.

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