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PATRICK J. MCMAHON v. COMMONWEALTH PENNSYLVANIA (05/28/86)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: May 28, 1986.

PATRICK J. MCMAHON, AND OTHER SIMILARLY SITUATED CLAIMANT EMPLOYEES OF MESTA MACHINE COMPANY, MEMBERS OF UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, LOCAL UNION NO. 7174, PETITIONERS
v.
COMMONWEALTH OF PENNSYLVANIA, UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, RESPONDENT

Appeal from the Order of the Unemployment Compensation Board of Review in the case of In Re: Claim of Token Claimant Patrick J. McMahon, Nos. B-233861 through B-234042, dated August 30, 1984.

COUNSEL

Richard E. Gordon, with him, Howard Grossinger, for petitioners.

Donna M. Stanek, Associate Counsel, with her, Charles G. Hasson, Acting Deputy Chief Counsel, for respondent.

President Judge Crumlish, Jr., and Judges Rogers, Craig, MacPhail, Barry, Colins and Palladino. Opinion by Judge Palladino.

Author: Palladino

[ 97 Pa. Commw. Page 481]

This is an appeal by Patrick J. McMahon (Claimant) and similarly situated employees of Mesta Machine Company (Mesta)*fn1 from an order of the Unemployment Compensation Board of Review (Board) affirming a referee's decision which held that a special initial payment made to Mesta employees pursuant to the provisions of the Mesta Employee Retirement Plan must offset unemployment compensation benefits pursuant to Section 404(d)(iii) of the Unemployment Compensation Law (Law).*fn2 We affirm in part and reverse in part.

[ 97 Pa. Commw. Page 482]

Claimant was last employed by Mesta on May 27, 1983. In February of 1983, Mesta instituted bankruptcy proceedings and, in May of 1983, Mesta advised eligible employees that if they applied for a "70/80" pension Mesta would pay each eligible employee three hundred dollars per month in addition to the regular monthly pension amount. The "70/80" pension plan provides for an initial lump sum payment to be made to retiring employees for the first thirteen weeks of retirement. The initial payment is calculated as follows:

The amount of special payment for a participant who was entitled to receive a vacation in the year of retirement or who would have been entitled to receive a vacation in the year of retirement except for such retirement shall be calculated as follows:

(1) The number of weeks of vacation to which the participant was or would have been entitled will be determined.

(2) The number determined in (1) above shall be subtracted from 13.

(3) The number determined in (1) above shall be multiplied by the participant's vacation pay.

[ 97 Pa. Commw. Page 483]

(4) The result determined in (2) above shall be multiplied by the participant's adjusted vacation pay.

(5) The amounts calculated in (3) and (4) above shall be added together and then reduced by all vacation pay the participant received in such year.

At the time of his retirement, Claimant was entitled to five weeks of vacation for calendar year 1983 and had not taken any vacation. Claimant received an initial lump sum payment in the amount of $4,545.84 which was based upon eight weeks of adjusted vacation pay ($2,264.64) and five weeks of regular vacation pay ($2,281.20).

Claimant applied for unemployment compensation benefits which were denied pursuant to Section 404(d)(iii) of the Law because the initial lump sum payment, when allocated over the first thirteen weeks of Claimant's retirement, exceeded Claimant's weekly benefit rate. This denial of benefits was affirmed by the Board.

Claimant now appeals to this Court asserting that the Board erred in construing the initial lump sum payment as a pension rather than severance pay or, in the alternative, that the $2,281.20 representing five weeks of vacation pay, which was included in the lump sum payment, is not subject to the reduction of benefits provisions of Section 404(d)(iii) but is specifically exempted from Section 404(d)(iii) by Section 404(d)(ii).*fn3

[ 97 Pa. Commw. Page 484]

The precise issues raised by Claimant in the case at bar were considered and decided by this Court in Pane v. Unemployment Compensation Board of Review, 95 Pa. Commonwealth Ct. 40, 504 A.2d 958 (1986), petition for allowance of appeal filed 116 W. D. Allocator Docket 1986, March 7, 1986. In Pane we held that money representing vacation pay, which was included in a special initial payment of retirement benefits under a plan identical to Mesta's, retains its character as vacation pay and is not to be used to reduce a claimant's weekly benefit rate. Id. at 44-45, 504 A.2d at 960-61. Pane also held that the special initial payment which did not represent vacation pay is a pension and not severance pay and, therefore, is subject to the provisions of Section 404(d)(iii). Id. at 43, 504 A.2d at 960.

The Board attempts to distinguish Pane from the instant case on the basis that the claimant in Pane was forced to retire because the employer closed its plant, while in the case at bar Claimant chose to retire on June 1, 1983 and Mesta sold the plant to another employer on June 15, 1983. The Board argues that Claimant's unemployment is therefore voluntary and benefits should be denied pursuant to Section 402(b) of the Law.*fn4 This argument, however, was not raised before the Office of Employment Security, the referee, or the Board and, as the Board well knows, this Court will not consider it initially on appeal.

Because we conclude that Pane is controlling upon the case at bar, the order of the Board is reversed insofar as it reduces Claimant's unemployment compensation benefits by the amount of five weeks of vacation pay and is affirmed in all other respects.

[ 97 Pa. Commw. Page 485]

Order

And Now, May 28, 1986, the order of the Unemployment Compensation Board of Review, at B-233861, dated August 30, 1984, is reversed insofar as it reduces the unemployment compensation benefits by the amount of the five weeks of regular vacation pay and is affirmed in all other respects.

Disposition

Affirmed in part and reversed in part.


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