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Early Retirement Incentives

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Pennsylvania Supreme Court Decision: Acceptance of early retirement incentives no longer precludes receiving Unemployment Compensation Benefits

On December 28, 2012, the Supreme Court of Pennsylvania in Diehl, Jr. v. UCBR, No. 51 MAP 2011, overturned 30 years of Commonwealth Court precedent. The Court held that the voluntary layoff provision of unemployment compensation law allows employees to accept early retirement incentives from their employers without forfeiting their rights to unemployment benefits.

Diehl v. UCBR Opinion.

In a series of decisions referred to as the Renda line of cases, Pennsylvania courts had consistently refused to apply the voluntary layoff provision of the state unemployment compensation law to employees who had accepted early retirement incentives.

Harold Diehl was 63 years old and had spent 23 years working as a shipping clerk for ESAB Welding & Cutting Products. In December 2008, due to financial conditions, the company announced a reduction in work force. Diehl accepted the early retirement incentive package offered to high seniority employees.

The early retirement incentives included payment of unused vacation time, payment of three years of health insurance premiums, and partial payment of insurance for two years.

After accepting the early retirement incentives package, Diehl also filed for unemployment compensation benefits. Diehl’s claim was denied because he had voluntarily quit his job “without a necessitous and compelling reason.”

In issuing its December 2012 Opinion, the Supreme Court of Pennsylvania reversed the denial of benefits. The opinion stated that Pennsylvania state unemployment compensation law did not allow the denial of benefits to an employee because they had accepted a voluntary employer-initiated workforce reduction.

The Court argued that, if the legislature had intended to exclude those who accepted early retirement incentive packages from receiving benefits, it would have made this intent clear. The Court concluded that early retirement incentives fit the definition of “layoff.”

The Diehl decision overturned a long held precedent in Pennsylvania. The Opinion clearly stated that “such programs are merely a different way to accomplish the workforce reduction of a layoff.”

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