PAULA J REINERIO, Claimant

An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

The claimant worked for about nine years as an insurance agent/employee for All-State Insurance Co., in Wisconsin Rapids. Her last day of work was on June 30, 2000.

According to department records, the claimant initiated an unemployment benefit claim beginning July 2, 2000 (week 28). The base period for that claim was the Second Quarter of 1999 through the First Quarter of 2000. She filed for and was paid benefits until she exhausted her benefits in week 8 of 2001 for the benefit year ending week 27 of 2001.

Under an agreement the claimant signed with All-State she received severance pay amounting to less than her last year's pay, payable over a period of 24 monthly installments, with no lump sum payment option. In exchange for payment, she was required to waive certain legal rights, the waiver of which, in subsequent litigation, has been legally questioned. She also agreed to a non-competition agreement for two years. The claimant was not allowed to solicit the purchase of products or services in competition with the employer's from an office or business site one mile of the agency sales location maintained at the time the claimant's employment terminated, for one year following the termination. In addition, the claimant was not to solicit the purchase of products or services in competition with the employer with respect to any person, company or organization that she sold insurance or other products to on behalf of the employer and who is a customer at the time of the termination agreement. In addition, she could not sell products in competition with the employer to any customer of the employer at the time of termination whose identity she discovered because she was an employee of the company. Failure to comply subjected her to a stoppage of the severance pay and legal action by the employer against her or a competing company she may be working for.

In paying benefits, the department treated monthly payments in the amount of $2,846.44 by the employer as deductible wages in the week paid or received, which rendered her ineligible in each of those weeks.

Again, according to department records, on July 1, 2001 (week 27) the claimant filed a new initial claim, as a result of which the department issued the determination in question.

The claimant contends that her monthly payments from All-State should be treated for purposes of Wis. Stat. § 108.04(4)(c) as paid in return performance of services. Since, under her theory, she earned wages for those services equal to at least 8 times her latest weekly benefit rate of $313, she should be eligible to begin a new benefit year.

The issue is whether, for purposes of Wis. Stat. § 108.04(4)(c) the payments from All-State to the claimant were wages for which the claimant has performed services for that employer.

In Lillian R. Thorson v. Thorson Inc. (Commission Decision June 19, 2001), the commission addressed whether a non-compete agreement was in fact an earning of compensation by the claimant. The commission noted that:

"observance by former claimant of a covenant not to compete may constitute wages for UI purposes. However, here the claimant had not performed the type of expert or management services usually associated from such covenants. It is clear that the corporation received no benefit for its payment to the claimant after mid-1995 at the latest, when the marital settlement was extended for an additional two years. After that time, the claimant permanently moved away from the employer's trade area."

The Thorson holding suggests that if a former employee is actually being paid not to compete the payments should be wages. The claimant in the present case was not being paid severance pay alone; the payments were contingent on her adhering to a noncompete agreement. The agreement, however, simply forbids the claimant from using the employer's customer list and other information at a competing job. The agreement does not prohibit the claimant from providing competing services. It does have a "noncompete" component, as for a year following termination the claimant may not solicit the purchase of products or services in competition with the employer's from an office or business site one mile of the agency sales location maintained at the time the claimant's employment terminated. This is a minimal requirement, and not sufficient to constitute services rendered for pay.

The ALJ also cites Kurtis J. Uffelmann, Hearing No. 98002791MD (LIRC February 16, 1999). In that case, the commission determined in the case of a drywaller whose base period consisted only of temporary total disability and vocational rehabilitation payments that the claimant had to perform services for pay. It does not, in the commission's opinion, preclude the use of severance pay as wages to establish a new benefit year where services were performed by the claimant.

The commission therefore finds that, subsequent to the start of the claimant's most recent benefit year in which benefits were to be paid to her, she did not perform services and earn wages for those services equal to at least 8 times her latest weekly benefit rate under Wis. Stat. § 108.05(1), that was payable to her in her most recent benefit year in employment or other work covered by the unemployment compensation law of any state or the federal government, within the meaning of Wis. Stat. § 108.04(4)(c).

The decision of the administrative law judge is modified and as modified is affirmed. Accordingly, the claimant is ineligible to start a new benefit year beginning in week 27 of 2001

Dated and mailed November 21, 2001
reinepa . urr : 145 : 1   UW 977

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

The commission did not discuss witness credibility and demeanor with the ALJ who held the hearing. The commission did not disagree with the ALJ's findings of fact nor did it disagree with his credibility determination. Rather, the commission reached a different legal conclusion when applying the law to the facts found by the ALJ.

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uploaded 2001/11/26