No Unemployment Benefits

if Severance Package Taken

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But Exceptions Matter:

Employer can Get Caught

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Claimant did not come up

with the RIF Evidence

             Juanita Childress was a buyer for the Chicago Park District and accepted a buy-out package in October 2008.  When she filed for unemployment benefits with the Illinois Department of Employment Security, the CPD objected, claiming that her acceptance of severance benefits was a voluntary act within Section 601(A) of the Illinois Unemployment Insurance Act, i.e., she left work voluntarily without “good cause attributable to the employer.”

             At an IDES phone hearing Childress stated that she took the package ($15,000) because the CPD was talking about lay-offs; these were not targeted at specific people but were “across the board.”  She testified that the announcement was in the papers.  She also testified that a second reason for taking the package was that management was altering her work after she completed it, and that she felt she “wasn’t needed.”

             The CPD human resources representative testified that various individuals received notification of a severance offer, but that she was unaware of any meetings with employees where a RIF was threatened, and that there were no layoffs of full-time staff.

             A hearings referee decided that Childress was ineligible since she was not in imminent danger of losing her job or having her job downgraded were she to refuse the package.  The IDES Board of Review upheld this decision, relying on the IDES regulation on buyout packages in the Illinois Administrative Code, at §2840.125.  Since the employer had not announced any specific layoffs in conjunction with its offer to Childress, and set no specific goals regarding the number of layoffs, her resignation in return for the severance benefits was voluntary.  The Board also found that she was not informed she would face a layoff if she refused the buyout.  Her dissatisfaction with her job was also weighed against her eligibility.

             Although a circuit judge on appeal from the Board of Review found for Childress, an Illinois appellate court reversed and upheld the agency.  Although “good cause” under Section 601(A) arises from a substantial pressure that would lead any reasonable person to terminate employment, her acceptance of the buyout made good cause non-existent.  These exceptions did not apply:  1) Childress knew or reasonably believed that she would get fired with less favorable terms if she turned down the package, 2) she knew or reasonably believed that her job would continue under less favorable terms if she turned down the package, or 3) she knew that layoffs would ensue if enough employees turned down the severance and Childress took the layoff to avoid that inevitable outcome.

             Instead, the appellate court, bound by the four corners of the administrative record, ruled that Childress had failed to prove coercion, specific layoff plans, specific layoffs targeted by the CPD, or any “take it or leave it” treatment.  The court stressed that she admitted that “she was never notified that she would face a layoff if she did not accept the buyout and none of the other employees in her position accepted the buyout.”  Furthermore there was no evidence that she “specifically sought assurances from her employer that, in the proximate future, her employment would not be terminated under terms less favorable than those of the offer.”

             It would have been nice if one judge on the appeals panel had dissented, to remind us that as a practical matter employers need not hit employees over the head with specific information about layoffs in order to pressure them to accept buyouts.  How was a buyer supposed to have access to the data about manpower management?  The third exception – the employer would surely resort to layoffs if an insufficient number of takers left no choice to balance the tightened budget – would seem to be an easy one to meet.  The resort to voluntary quits as the first phase of workforce reduction, then second to the involuntary reduction, is universally understood and judges can almost take judicial notice of the process.

             In any event, readers should be careful how to apply the rule that decided this case.  If you offer John Smith a buyout as an alternative to dismissal, Smith will be eligible for unemployment.  Or if Smith was aware of the likelihood of a RIF should the first step of manpower reduction – severance packages – be unsuccessful, then he would get unemployment benefits after taking the buyout.

             The case, Childress v. Illinois Dept. of Employment Security, may be found at
http://www.state.il.us/court/OPINIONS/AppellateCourt/2010/1stDistrict/December/1092733.pdf.

12/8/2010