Appeal from the Order of the Commonwealth Court entered October 26, 2007 at No. 2199 CD 2006 reversing the Order of the Workers' Compensation Appeal Board entered October 31, 2006 at No. A05-2857.
The opinion of the court was delivered by: Mr. Justice Baer
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.
US Airways Group, Inc. (Employer) appeals from the Commonwealth Court's holding that Employer is not entitled to a credit against the workers' compensation benefits paid to its employee, Gary Kelly, (Claimant), for the amount of the furlough allowance concurrently paid to Claimant, because the furlough allowance is not a "severance benefit" under Section 204(a) of the Workers' Compensation Act (Act), 77 P.S. § 71. After careful consideration, we agree with the Commonwealth Court that a furlough allowance is not a severance benefit, and, therefore, affirm its conclusion that Employer is not entitled to credit against the workers' compensation payments for the furlough allowance it simultaneously paid to Claimant.
The facts are not in dispute. On September 20, 2004, Claimant, who is a member of the passenger service employees' union, injured his right knee in the scope and course of employment with Employer when he slipped on the back of a catering truck while preparing to load an aircraft. On November 8, 2004, Claimant filed a claim petition seeking partial disability benefits from September 20, 2004 through November 7, 2004, and total disability benefits thereafter. Also on November 8, 2004, for reasons unrelated to Claimant's injury, Employer furloughed Claimant pursuant to a collective bargaining agreement (CBA) between Employer and its passenger service employees. As a result of the furlough, in accord with the CBA, Claimant began receiving a "furlough allowance," which was based on accumulated years of service.*fn1 R.R. 95a. Also in accord with the CBA, Claimant had the right to be recalled to a position with Employer within four years.*fn2 In fact, Claimant was recalled effective March 21, 2005, to a part-time catering position.
The parties entered into an agreement recognizing the work-related injury and acknowledging the payment of partial disability benefits for the period of September 20, 2004 through November 16, 2004, and a suspension of benefits as of November 17, 2004, when Claimant was released to return to full duty work. It is undisputed that from November 8 through November 16, 2004, Claimant received a furlough allowance from Employer in addition to workers' compensation payments. At a hearing before the workers' compensation judge (WCJ) on May 17, 2005, Employer asserted that it was entitled to a credit against the workers' compensation payments for the furlough allowance, pursuant to Section 204(a) of the Workers' Compensation Act, 77 P.S. § 71(a), which provides, in relevant part, as follows:
(a) ... if the employe receives unemployment compensation benefits, such amount or amounts so received shall be credited as against the amount of the award made under the provisions of sections 108 and 306, except for benefits payable under section 306(c) or 307. Fifty per centum of the benefits commonly characterized as "old age" benefits under the Social Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.) shall also be credited against the amount of the payments made under sections 108 and 306, except for benefits payable under section 306(c): Provided, however, That the Social Security offset shall not apply if old age Social Security benefits were received prior to the compensable injury. The severance benefits paid by the employer directly liable for the payment of compensation and the benefits from a pension plan to the extent funded by the employer directly liable for the payment of compensation which are received by an employe shall also be credited against the amount of the award made under sections 108 and 306, except for benefits payable under section 306(c).
77 P.S. § 71(a) (emphasis added).
As is relevant to this case, under Section 204(a), an employer is entitled to credit against workers' compensation benefits for any amount paid to the employee as a severance benefit. Although the Act does not define "severance benefit," the Department of Labor and Industry's (Department) regulation does, and provides as follows:
Severance benefit -- A benefit which is taxable to the employe and paid as a result of the employe's separation from employment by the employer liable for the payment of workers' compensation, including benefits in the form of tangible property. The term does not include payments received by the employe based on unused vacation or sick leave or otherwise earned income.
34 Pa. Code § 123.2. The crux of Employer's argument before the WCJ was that the furlough allowance it paid to Claimant was a "severance benefit" for which Employer was entitled to credit against the amount of the workers' compensation payments. To prove this point before the WCJ, Employer offered the testimony of a labor and employment law attorney, who stated that within the labor and employment law setting, severance benefits generally include any wage loss benefits paid because of a separation from employment for any reason, including termination, reduction in force, layoffs, or plant closings, regardless of whether the separation is temporary or permanent. Claimant denied that Employer was entitled to credit, and argued that the furlough allowance could not be considered a severance benefit because, due to the Employer's ability to recall the Claimant to work, Claimant's separation from employment was not permanent.
Pursuant to its interpretation of Section 204(a) and the regulatory definition of severance benefit at 34 Pa. Code § 123.2, the WCJ found that Claimant's furlough allowance was a severance benefit, and granted Employer a credit for the week during which Claimant received both workers' compensation benefits and a furlough allowance. The WCJ concluded that neither the statute nor the regulation required that the separation from employment be permanent in order for a payment resulting from that separation to qualify as a severance benefit. According to the WCJ, the only pertinent inquiry was that directed by the regulatory definition of severance benefit, 34 Pa. Code § 123.2: whether the benefit was taxable to the employee and paid as a result of the employee's separation from employment. Because the furlough allowance was taxable to the Claimant and paid by Employer as a result of Claimant's separation from Employer, the WCJ concluded that the furlough allowance was a severance benefit and granted Employer credit for the furlough allowance. The WCJ found that there was no legal or contractual difference between the terms "furlough" and "severance" for purposes of the Act's credit provision.
Claimant appealed to the Workers' Compensation Appeal Board (WCAB), which affirmed. The WCAB agreed with the analysis of the WCJ and rejected Claimant's argument that "severance benefits," are only payable upon permanent separation.
On appeal, the Commonwealth Court reversed. Kelly v. W.C.A.B. (U.S. Airways), 935 A.2d 68 (Pa. Cmwlth. 2007). The court agreed with Claimant that because the furlough allowance was paid during a non-permanent separation from employment, it was not a severance benefit under Section 204(a) of the Act. According to the court, a furloughed employee maintains an employment relationship with the employer, but that relationship is held in abeyance due to an employer's lack of work or financial resources. The court continued that, distinct from a severance, an employee who is furloughed retains the prospect of returning to work with the employer, and, importantly, furlough does not affect his seniority.
Judge Leavitt dissented, reasoning that there was no authority to read a requirement of permanence into the term "severance benefit." Further, the dissent believed that the majority's interpretation permitted double recovery for a single wage loss, contrary to Kramer v. W.C.A.B. (Rite Aid Corp.), 883 A.2d 518, 535 (Pa. 2005) ("The worker experiences only one loss of earnings at a time . the employer can avoid paying duplicate benefits for the same loss of earnings by using the offset."). Judge Leavitt opined that Claimant experienced only ...