In the seven months since his election, Gov. Tom Corbett has unequivocally staked out his priorities in reducing the state’s debt. As Centre County voters now know, Corbett sought — and won — support for significant reductions to state university funding; layoffs for hundreds of public employees; tightened school district budgets; and tax credits to new industrial endeavors.
Along with these changes, however, Corbett has also pushed through relatively unpublicized changes to the state unemployment compensation law. According to a video posted on the Pennsylvania Chamber of Commerce website, these reforms will account for “nearly $133 million in annual savings,” an important inroad to paying down the almost $4 billion federal loan that supported Pennsylvania’s unemployment benefit system through the recent recession.
The changes under the new law, Act 6, are significant, which makes it surprising that so few media accounts have thus far addressed these changes. Indeed, not only are few people aware of the drastic changes ushered in by this new law, but they are surprisingly unaware that many of these changes are effective immediately.
For example, individuals currently obtain unemployment compensation benefits by, among other factors, searching for “suitable” replacement employment. Courts have toiled for many years over the meaning of “suitable” employment and, as a result, the term has come to accept many token job-search efforts.
Act 6 replaces this standard and requires many individuals to perform an “active search” for employment by developing and posting a resume on the unemployment compensation jobs database and applying for openings for comparable employment that fall within a specified 45-minute proximity to the individual’s home.
For many individuals, weekly benefit rates are also reduced. Under the former system, benefit rates generally related both to the number of “credit weeks” and the salary the individual received in the one-year period directly preceding unemployment. A “credit week” is a week in which the individual received more than $50 in compensation.
Under the new system, the $50 credit week threshold has been raised to $100. Benefits now also relate to the individual’s average salary over the three-year, rather than one-year, period prior to unemployment.
Perhaps most importantly, severance payments now offset unemployment compensation. Under the former law, severance payments ordinarily had no effect on benefits, meaning that employees could rely on severance payments and the unemployment compensation system at one time without any reduction in weekly benefit payments.
The fallbacks and benefits of Act 6 are in many ways obvious. For individuals, sizeable unemployment compensation is no longer a given, and maintaining such benefits requires much more than the nominal re-employment efforts that were previously required.
For employers, new limitations on unemployment benefits mean fewer costs when budgets are logically tight — when it becomes necessary to release employees. For everyone, a reduction in the debt associated with this system is beneficial and saves the state untold dollars.
However, larger issues such as what this change will ultimately mean for Pennsylvania and how to properly balance the necessity of taxpayer savings with the necessity of unemployment compensation has been lost in the paucity of news on this topic.
Perhaps these conversations can now begin.
David Gaines is a lawyer at the State College office of Miller, Kistler and Campbell. He can be reached at dgaines@mkclaw.com. This commentary is not legal advice and should not be acted upon until legal counsel has been consulted.
