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Employment Development Department
Employment Development Department

Total and Partial Unemployment TPU 460.3

Damages or Other Award

This minor category deals with the problem of damage payments and other types of awards. These types of payments and other types of awards. These types of payments are generally made when the claimant is not performing any type of active service for the employer.

The most common type of damage payment is a back-pay award, made in accordance with a type of grievance settlement. (For complete discussion on back-pay award see TPU 80.05.)

Sometimes when back-pay is awarded, a "penalty" payment is also awarded to the claimant. The "penalty" payments are usually awarded because of the employer’s failure to pay the claimant’s wages within the prescribed time limitation and are not "wages" and do not affect the claimant’s eligibility for benefits.

Only if the damage payments received are for personal services are they wages within the meaning of Section 1252 of the Code. For example, Chrysler Corporation protested the payment of benefits to its employees who had received "wage damage" payments from Western Union. In this case, Chrysler Corporation notified its employees by Western Union to report for work. Western Union failed to notify the employees and paid them damages because of this. The amounts paid by Western Union to the claimants, although measured by loss of earnings, were not for personal services and therefore, do not fall within any of the definitions of wages for unemployment insurance purposes. Therefore, they would not render the claimants ineligible for unemployment insurance benefits. Those payments, in effect, are merely indemnification for losses due to Western Union’s negligence.

Liquidated damages also are not "wages" because they are not paid as remuneration for personal services. For example, an individual worked as an independent contractor under the terms of an oral contract at the rate of $350 per month plus a percentage of net earnings. The contract was entered into on July 15 for a term of eight months. On or about October 7, the principal desired to terminate the contract and the claimant agreed to do so with the understanding that payment would be made in the amount of $350. This payment was made on October 10. This $350 payment was not "wages" since it was not paid for personal services, but was liquidated damages.

Another example of liquidated damages is the settlement received because of a cancellation of a television contract. An individual may enter into a contract which guarantees a minimum number of shows, at a payment of so much per show. Then for some reason not the claimant’s fault, the shows are cancelled before the stated number has been presented. The claimant would then normally receive a settlement for the shows that were never done. Such a settlement would not be considered as wages under Section 1279 of the Code.