Can I Be Denied Unemployment Benefits After a Separation Agreement in Pennsylvania?

The Pennsylvania Unemployment Compensation Law establishes the eligibility requirements for unemployed and partially unemployed workers who file for unemployment benefits. The commonwealth’s unemployment law requires that workers be unemployed or partially unemployed through no fault of their own. The Department of Labor and Industry administers the Unemployment Compensation Law and limits eligibility to employees who are unemployed after accepting monetary settlement offers in exchange for their voluntary resignations.

Unemployment Compensation Overview

The commonwealth’s unemployment law requires most employers to pay unemployment taxes for their employees. Eligible claimants can receive benefits for up to 26 weeks, and they may qualify for additional extensions when they exhaust their regular benefits. To qualify, applicants must be unemployed or underemployed without fault and for a lack of available work from their employers. Additionally, they must have a sufficient amount of past employment earnings, look for other work and remain physically and mentally available to work.

Read More: Ways to Collect Unemployment

Separation Agreements

Employer separation agreements, or “buyouts,” are commonly used by employers, and although Pennsylvania is an at-will employment state in which employers can terminate their employees without notice or reason, they often offer these agreements to employees with employment contracts or collective bargaining agreements. Unemployment agencies often consider these employees to have voluntarily resigned without valid cause and may deny them unemployment benefits.

Pennsylvania Law

When employees voluntarily resign, Pennsylvania law views this as a reason to deny them unemployment benefits unless they can prove they had good cause or a valid reason for voluntarily resigning. An employee who doesn't sign a separation agreement but instead receives severance payments is eligible to receive unemployment benefits, and the department doesn't reduce their unemployment benefits. According to Pennsylvania law, severance pay isn't remuneration for past or future services and, therefore, not considered “work.” However, pension pay, vacation pay and any other payments may reduce a claimant’s unemployment benefits.

Buyout Overview

An employee who accepts a voluntary separation agreement or buyout is subject to a fact-sensitive review of the circumstances surrounding his separation or buyout agreement. The department conducts a case-by-case analysis of his buyout offer after first determining that he's monetarily eligible for benefits. If the employee had a choice to continue working if he accepts the buyout, the commonwealth considers this a voluntary quit. However, if he didn't have a viable opportunity to continue working, and the facts of his case indicate that his employer would have discharged him for a lack of available work, then he generally qualifies for unemployment benefits.


Because state laws can frequently change, don't use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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