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The Pennsylvania Supreme Court holds that a furlough allowance is not a severance benefit and, therefore, the employer is not entitled to a credit for it against workers' compensation payments under section 204 (a) of the Workers' Compensation Act.

July 1, 2010
Gary Kelly v. WCAB (US Airways Group, Inc.); 50 W.A.P. 2008; decided April 9, 2010; by Justice Baer

The claimant, a member of the passenger service employees' union, sustained a work injury to his right knee. The claimant filed a claim petition seeking partial disability benefits for a limited period of time and total disability benefits thereafter. For reasons unrelated to the claimant's injury, the employer had furloughed the claimant pursuant to a collective bargaining agreement ("CBA") between the employer and its passenger service employees. As a result of the furlough, the claimant began receiving a furlough allowance based on accumulated years of service. Under the terms of the CBA, the claimant had the right to be recalled to a position with the employer within four years, with seniority intact. In fact, the claimant was eventually recalled to a part-time position. In the underlying litigation, the only issue in dispute was whether the employer was entitled to a credit for the period of time that the claimant received workers' compensation payments and the furlough allowance. The employer took the position that it was entitled to the credit under §204(a) of the Act. According to the employer, the furlough allowance was a "severance benefit," which entitled it to the credit. The claimant, however, argued that the furlough allowance was not a severance benefit due to the employer's ability to recall the claimant to work. The workers' compensation judge and the Workers' Compensation Appeal Board awarded the employer the credit; however, the Commonwealth Court reversed. The Pennsylvania Supreme Court affirmed the decision of the Commonwealth Court, finding that severance benefits are payable only when a worker's employment has been completely and permanently terminated. The Court noted that the furloughed employee is not dismissed from employment but, rather, maintains an employment relationship with the employer that is held in abeyance due to an employer's lack of work or funds. The Court said that to hold otherwise would result in an expansion of the scope of §204(a) and provide a credit for a type of benefit that does not fall within the ordinary definition of severance benefits. The Court also noted that the CBA demonstrated that the furlough allowance was created as an accrued benefit, similar to sick leave or vacation leave. The furlough allowance was something the claimant would have been entitled to regardless of whether he had been injured, and an employer cannot force the employee to bear the costs of his work-related injury by exhausting his accrued furlough allowance. It is the employer, not the claimant, which is liable for compensation for a claimant's work-related injury.

Case Law Alert, 3rd Qtr 2010

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Francis X. Wickersham
(610) 354-8263
G. Jay Habas
Managing Attorney, Erie, PA Office
(814) 480-7802

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