Unemployment Compensation: Case Update

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Should an employee who agrees to resign her employment as part of the settlement of her workers’ compensation claim be eligible to receive unemployment compensation benefits? According to a recent decision from the Commonwealth Court of Pennsylvania, the answer to this question is a firm “no.”

An employee who voluntarily quits her employment will not be eligible to receive unemployment compensation benefits unless she can establish that she had “necessitous and compelling” cause – in other words, good cause – to quit. In Lee v. Unemployment Compensation Board of Review, the plaintiff argued that she should be eligible for unemployment compensation benefits where she agreed to resign her employment in consideration for a workers’ compensation settlement agreement. The Court disagreed, rejecting Lee’s argument that she was under psychological pressure to settle the workers’ compensation claim and that her attorney advised her that the settlement would not happen without the resignation and release.

Notably, the Court also rejected Lee’s argument that the resignation and release was invalid under section 701 of Pennsylvania’s Unemployment Compensation Law, which states that “[n]o agreement by an employe to waive, release, or commute his rights to compensation, or any other rights under this act, shall be valid.” 43 P.S. § 861. Although the Court noted that a waiver of the right to unemployment benefits is invalid, it emphasized that this provision only becomes relevant once it is established that the claimant has the right to benefits under the Law. Lee failed to establish her right to benefits because her decision to terminate her employment in order to settle the workers’ compensation claim did not amount to good cause under the Law.

This is good news for employers. This decision provides good authority for any unemployment compensation case involving an employee who resigns pursuant to a workers’ compensation settlement agreement.