Arizona Legislature

Arizona State Senators assemble, Thursday, May 16, 2013, at the Capitol in Phoenix.

Associated Press

A House panel voted Monday to make some people wait longer to start collecting jobless benefits.

HB 2115 says any money someone gets when they're laid off counts as if it were income. More to the point, it says that unemployment payments cannot start until that amount is essentially spent by the laid-off worker.

The 7-1 vote by the House Ways and Means Committee sends the measure to the full House.

Unemployment benefits are available to those who have lost their jobs through no fault of their own. Former workers are entitled to half their salary, though the cap on payments is $240 a week.

Lump sum severance payments generally are considered salary. So if someone who was making $500 a week got a $5,000 severance package, that person would be ineligible for benefits for the first 10 weeks – essentially how long that $5,000 would last had it been paid out week by week.

But in a ruling last month, the Arizona Court of Appeals said that money paid to an ousted employee to release the company of all claims – essentially money paid to the worker to keep him or her from suing – does not count. So that ruling, unless overturned, allows Mark Wynn, who had been a vice president at beer distributor Hensley & Co., to get benefits despite getting the equivalent of 50 weeks of pay.

Garrick Taylor, lobbyist for the Arizona Chamber of Commerce, told lawmakers that's not fair.

“Unemployment insurance is designed to cushion the blow from lost income,” he said. Taylor said any money that former workers get, regardless of the reason.

Rep. Karen Fann, R-Prescott, said the change is necessary to maintain the solvency of the state's unemployment trust fund. That fund is financed solely by a tax employers pay on the first $7,000 of each worker's salary. But the length and depth of the recession resulted not only in the fund going broke but Arizona having to borrow money from the federal government.

Fann said HB 2115 restores unemployment insurance to its original intent.

Attorney Ellen Katz of the William E. Morris Institute for Justice said the issue is not as simple as the business community suggests. On one hand, she said, is a company that is downsizing is paying someone to leave. Katz said if workers are being paid a set amount to leave, such as four weeks of pay, she has no problem with having that count against unemployment benefits.

But Katz said that in some cases, “it's not that simple.”

“What is of value to the employer is the release of claims,” Katz said, with the worker giving a guarantee to the employer that he or she will not come back at some future point and claim there was an improper discharge or that a contact was breached. “And an employer can't ask you to release claims unless you're paid some consideration.”

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