Can One Recover Unemployment Compensation Benefits after the Worker's Compensation Case is Settled?

by Terence Sean McGraw, Esquire

The Commonwealth Court has addressed the issue of whether one can recover Unemployment Compensation Benefits after the worker's compensation case is settled.

In Lee v. UCBR, the Commonwealth Court ruled that a claimant who signs a written resignation as part of a workers' compensation settlement is thereafter ineligible for UC benefits because the claimant voluntarily quit. At the time that Lee compromised her WC claim and signed the resignation, she was actually working modified duty with the employer, a crucial fact under UC precedent. Although the result is correct according to the facts of Lee, the ruling appears to be expansive and apply to cases where written resignations should not bar a subsequent UC claim.

When one can no longer perform her job due to health reasons, the separation is a deemed a voluntary quit under UC law. If the claimant can do other work within established restrictions, and the employer does not have that work or make that work available, the quit is deemed to be for "necessitous and compelling" health reasons. A quit that is caused by "necessitous and compelling" reasons does not disqualify the claimant from the receipt of UC benefits. The claimant must demonstrate: 1) restrictions preventing performance of the customary job but allowing other work, 2) communication of the restrictions to the employer, and 3) the unavailability or failure of the employer to offer alternative work within the restrictions. The analysis is focused on the time of separation.

These conditions are often met in the context of a WC settlement. In such settlements, the injured workers are often individuals who suffer permanent injury that prevent them from performing their customary job and for whom no alternative work has been made available. In fact, such individuals could apply for and collect UC benefits while collecting WC benefits. They ordinarily do not because the UC benefit is a credit that reduces the claimant's WC benefits (and claimant's counsel's fee), adding no value to the claimant's cash flow.

Until Lee, knowledgeable claimant's attorneys have successfully obtained subsequent UC benefits for clients who sign a written resignation as part of a WC settlement. In order to establish financial eligibility, they have the client appeal the determination that they were not financially eligible and request application of the "alternate base year." (Rather than looking back over a "base year" determined from the date of the application, a period when the claimant ordinarily has no wages due to the immediate receipt of WC benefits, the UC service center looks back from the date of injury, over a period when wages were reported.) This alternate base year is a little known creation of the 1996 amendments to the WC Act and usually results in financial eligibility.

Then, counsel directed the UC Bureau's attention to the time of separation and established that the 3 elements of the claimant's burden of proof (above) had been met, often well before the execution of the written resignation in dispute. The subsequent written resignation became, then, an irrelevant action that was executed well after the legally qualifying separation. Such claimants have been routinely awarded subsequent UC benefits, sometimes to the surprise of employers and their counsel, who believed that the law was consistent with the expansive ruling in Lee.

In Lee, however, the employer actually made modified work available to the claimant. Apparently she had an ongoing loss of wages and was receiving a partial, because a WC settlement was negotiated. But when she resigned, the written resignation and the separation from employment were concurrent. Her quit was truly voluntary, rather than forced by health reasons. She could not establish the third item of proof set forth above - the unavailability of alternative work.

Unfortunately, rather than applying the legal analysis that was well established by its own precedents, and finding Lee ineligible because she could not meet her burden of proof, the Court cited two of its own previously unpublished opinions, and issued an expansive ruling that a claimant who executes a written resignation as part of settling a workers compensation case is ineligible for subsequent benefits because they voluntarily quit. As discussed above, when the proper analysis is employed, that should not always the result. But until the issue is decided by the Supreme Court, it now always appears to be the result.

In light of the apparently expansive application of Lee, claimant's counsel should now attempt to modify the resignation document to include language that the resignation is being tendered because of the claimant's injuries and because no alternative work was available from the employer. If the document includes language releasing employment claims, the prospective UC claim should be specifically excepted.

Routinely, such resignations/releases are not the subject of the discussions that occur when a workers compensation settlement is negotiated and are tossed in with the draft paperwork forwarded by employer's counsel. After Lee, claimant's counsel's reply should be, "Sorry, but that was not part of the deal."

In these difficult times, UC benefits are a significant financial asset that should be preserved to the benefit of the injured worker. They can easily represent as much as $25,000.00 of cash benefits that should not be blithely abandoned merely to effectuate a settlement of the WC claim.