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Unemployment Compensation

Individuals who have lost their employment through no fault of their own may be entitled to collect unemployment compensation payments, as provided for by the Pennsylvania Unemployment Compensation Law. Unemployment compensation is a form of social insurance that provides eligible individuals who are unemployed through no fault of their own temporary income until new employment is secured.

In order to be eligible for unemployment compensation benefits, an individual must meet three basic standards.  These standards, and some other pertinent information, are discussed below.  To be found and stay eligible for benefits, an applicant for unemployment compensation benefits (called a “claimant”), must:  (1) be financially eligible, (2) be separated from employment for a qualifying reason, and (3) be able to work and available for work and do the things required under the unemployment law to maintain eligibility for benefits. 

(1)  Financial Eligibility:  In order to be financially eligible for benefits, the employee must have sufficient wages in covered employment in the “base year.”  The “base year” is the first four of the last five completed calendar quarters prior to the claim being filed.  An employee who applies for unemployment compensation benefits will receive a Notice of Financial Determination which states whether the employee is financially eligible and also states the amount of benefits the employee may receive.  If the Notice of Financial Eligibility is incorrect, the employee must follow the appeal instructions to challenge an incorrect determination. 

(2)  Separation for a Qualifying Reason:  In order to be eligible to receive unemployment benefits, in addition to being financially eligible, the employee must be unemployed as the result of a qualifying separation.  Qualifying separations involve determining whether employees are unemployed through no fault of their own.  For example, an employee who is separated because of a layoff, or because a business restructures, is unemployed through no fault of his or her own.  If an employee works diligently but the employer is dissatisfied with the employee’s work and decides to end the relationship, the employee will probably be found eligible for unemployment compensation.  If an employee has to quit a job for what are determined to be “necessitous and compelling” reasons, the employee may be found eligible for unemployment compensation. 

On the other hand, an employee who quits without a “necessitous and compelling” reason, or an employee fired for “willful misconduct” will be disqualified from receiving unemployment compensation.  Employers and employees facing questions about whether a quit is for a “necessitous and compelling” reason or whether a termination is for “willful misconduct” may choose to consult legal counsel. 

After the initial application for benefits is made, the unemployment compensation office will issue a Notice of Determination which states whether the employee is eligible based on the reason for separation and why.  If the employee or the employer disagrees with the Notice, the employee or employer must follow the appeal instructions to challenge the determination. 

Partial Unemployment Benefits:  It is not necessary for an employee to become completely unemployed to be eligible for benefits.  For example, an employee who has been reduced from full time to part time position may be eligible to receive partial unemployment compensation benefits (assuming the reduction is not for a disqualifying reason).  The amount of unemployment compensation to which the employee is entitled, if any, in this situation, depends on review of the number of hours worked and the amount of earnings. 

(3)  Able and Available for Work:  To qualify for unemployment compensation benefits, an employee must be “able and available” for work.  This basically means the employee is in the labor market looking for work.  Examples when an employee may be determined not to meet the “able and available” requirement include: (a) employees who are physically incapable of working, (2) employees who are travelling out of the country, and (3) employees who are incarcerated.  To maintain eligibility for benefits, employees must also register for employment search services within 30 days of applying for benefits and actively search for work and keep a record of their work search efforts. 

Self Employment

Employees who become unemployed must be particularly careful about considering placements as “independent contractors” or “consultants”.  If someone becomes unemployed and goes into business as a consultant or independent contractor or otherwise starts a business, that person becomes ineligible for unemployment upon taking steps to start the business.  A frequent source of overpayment liability happens when someone becomes unemployed, starts a business, and later derives income which is reported to unemployment.  As unemployment unravels the situation, the employee may be found ineligible for a period going back to when the business was started but had not yet produced any income, which can be months earlier, and the employee may owe money for an overpayment.  The exception to this rule is a “sideline” activity; an employee who has a business on the side while working as an employee, who then becomes unemployed from the work he or she did as an employee, may continue the sideline activity without becoming ineligible.  Issues involving self employment can be tricky and an employee is best served consulting with legal counsel. 

Severance

Employees who receive unemployment compensation must report income they receive to unemployment.  Severance payments that exceed 40% of Pennsylvania’s average annual wage are deducted from the employee’s unemployment compensation amounts, with the deductible portion of severance pay being allocated to the weeks immediately following the separation based on the claimant's full-time weekly wage.

Applying for Benefits; Appeals:  Individuals wishing to collect benefits must file with the state either through an online or paper application. Both forms of applications can be found online. After submitting an application, an administrative determination is made regarding whether the applicant qualifies for benefits.  The losing party may appeal to appear before an unemployment compensation appeals referee who will take testimony and review evidence before making a determination. Appeals must be submitted within 15 days of the mailing date of the original determination.  Employees and employers are allowed to represent themselves at unemployment compensation hearings, but have a right to be represented by legal counsel. 

The referee’s decision may be appealed to the Unemployment Compensation Board of Review.  Because the record (testimony and documents) considered by the Unemployment Compensation Board of Review is generally made in the hearing before the unemployment compensation appeals referee, parties considering whether to use legal counsel may be best served by hiring legal counsel for the referee’s hearing rather than trying to rely on an appeal to the Unemployment Compensation Board of Review to fix a disagreeable result. 

Favorable Determinations; Purging Disqualification:  Employees who apply for unemployment compensation who receive a favorable decision will be eligible to receive benefits every other week for a limited number of weeks.  Employees who are denied unemployment because of a quit or a firing for willful misconduct can re-qualify for benefits once they return to work and earn six times their weekly benefit rate. 

Relief from Charges

As indicated above, an employee may purge a disqualification, such as a discharge for willful misconduct, by earning six times his or her weekly benefit rate.  If that employee subsequently becomes unemployed and qualifies for benefits, the employer that separated the employee for willful misconduct may still have its account charged for the benefits.  To avoid this, the employer must follow procedures to request relief from charges.  The same procedure applies in the event an employee purges a disqualification for a voluntary quit. 

Click the following links for more information and FAQ’S on unemployment compensation law and employer services.

 

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