Workplace Labor Update - Unemployment Compensation – July 1995

Under Maryland’s unemployment compensation law, an employee who loses his job through no fault of his own generally is entitled to unemployment compensation beginning on the date he becomes unemployed. Maryland’s intermediate appeals court recently held that several employees became “unemployed” for purposes of receiving unemployment compensation benefits where, after they were notified that they would be laid off in two months, they were not required to show up for work, but received their full salary. Westinghouse Electric Corp. v. Callahan, No. 845 (Md. Ct. Spec. App., March 31, 1995). On October 30, 1992, Westinghouse distributed to many of its professional and management employees “permanent separation notices” in connection with a workforce reduction. The notice informed employees that their last day of work would be December 30, 1992, and that for the next two months, they would remain on the active employee rolls. During the two month notice period, the employees were instructed to report to work or, alternatively, to the Company’s Resource Center which provided individual counseling, resume writing assistance, and employment listings. Employees also were required to keep their supervisors abreast of their whereabouts. Thirty-three employees filed claims for unemployment compensation benefits, alleging that their entitlement to benefits began on October 30, the date they were notified of their layoffs. Westinghouse argued that since the employees were employed until December 30, their unemployment compensation benefits did not begin until that date. The Unemployment Compensation Commission decided that the employees were unemployed as of October 30, 1992. Westinghouse appealed to Maryland’s intermediate appellate court. Explaining the statutory framework of Maryland’s unemployment compensation law, the court noted that a person is entitled to unemployment benefits only if he is actually “unemployed.” An individual is considered unemployed in any week for which he does not perform work for which wages are payable. Westinghouse argued that the employees were employed during the two month notice period because they performed services and received wages. As a result, Westinghouse maintained, they were not entitled to unemployment benefits during this notice period. The employees argued that the moneys paid to them did not constitute “wages” because they did not perform services for Westinghouse during this period. The court affirmed the grant of unemployment compensation benefits, reasoning that the payments the employees received during the two month notice period were “dismissal payments” not “wages.” The court also found that although the employees received their weekly paychecks, Westinghouse did not expect them to perform their jobs during the two month notification period. The court noted that in early December, Westinghouse required the employees to turn in their badges which authorized access to the premises and denied many employees access to the computer system. The fact that some supervisors told some employees that they did not want them to show up for work also supported the court’s decision. The court rejected Westinghouse’s argument that the employees’ use of the Resource Center constituted work performed for Westinghouse for which wages were payable. The court reasoned that the main purpose of the Resource Center was to help the employees find jobs, not to benefit Westinghouse. This case establishes that employees might be entitled to unemployment compensation benefits even though their employer considers them still employed. To avoid situations where employees receive full salary and benefits and unemployment compensation benefits during reductions in force, employers should, quite simply, require employees to show up for work and work during “notice” periods.