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No business is immune from employee turnover. Losing an employee, whether the separation is voluntarily or not, can be costly in claims for unemployment insurance (UI) benefits. The financial impact may not be felt right away because an unemployment benefit is not money that an employer pays directly out of pocket (except for a non-profit organization). But rather, employers must pay both state and federal unemployment taxes that are deposited into the Unemployment Compensation Trust Fund from which benefits are awarded and those rates can be affected.
Unemployment compensation can be a big deal for companies with huge staffs or high turnover. There is no magic number to what goes into calculating unemployment tax rates. Each state uses “their” algorithm. It seems to derive from how much money is in the UI state fund, how much money is in the UI federal fund, the size of your business, the kind of business you run and how many people hit your UI the previous year. Obviously a lot of factors. An employee can capture a former employer if they worked for them during the last six full quarters – which can mean up to the last 2 years.
Employers have very bona fide reason to scrutinize unemployment benefit claims and contest them whenever there is a justified reason to do so. Regardless of reason for termination, the large majority of departing employees automatically file for unemployment compensation. Why not? Filing a claim doesn't cost them anything. Once a claim has been filed, the ball is in the employer's court. If the employer does nothing, unemployment compensation will likely be granted. And because State UI funds are low, they will often grant benefits to employees because they don’t really have an actual person reviewing claims.
Benefits are from unemployment insurance program, not public assistance, therefore like fraudulent Workers Compensation claims, you want to minimize costs to your business and make sure the system is working the way it was designed.
To make matters worse, Congress instituted several questions for each employer to answer before they can win a claim. These questions require an employer to make sure they are documenting process and employees are not taking advantage of the insurance benefit. If you can answer these in a way that show that the employee was terminated for good reason, you will win. If you can’t, they will get the benefit. These questions are:
Do you fight once benefits have been awarded?
As mentioned above, we are seeing State’s automatically grant benefits because most employers aren’t responding or haven’t done their due diligence. We’ve seen where someone was arrested in their workplace because of theft at the workplace and the former employee was granted benefits from jail! So what do you do? Employees are banking on their former employer to just let it go, but that can affect your future rate. But be sure to ask yourself these questions:
1. Why was the employee terminated? Challenge a claim if you discharged or fired an employee for misconduct or for a significant policy violation, such as excessive absenteeism, fighting, stealing, working under the influence of alcohol, or testing positive for drug use. If you fired the worker simply because he or she was not very good as the job, you may still contest the claim, although you are less likely to be successful.
2. What evidence do you have to support your decision to terminate the employee? If your action was motivated by absenteeism or drug use or another serious situation, make sure you have the appropriate documentation to prove it.
3. How likely is the employee to sue you? If the person threatens to file a wrongful termination claim, make sure you've gathered evidence that the termination was legitimate.
Decisions to award benefits, at this point, are often based upon conducting telephone interviews with claimants and employers and reviewing written statements. There are essentially two deciding factors. The first is whether or not the claimant is eligible for benefits, which generally boil down to if the individual is actively seeking full-time employment and is indeed unemployed (her or she is not secretly working elsewhere). The second is whether or not the individual may be disqualified from receiving benefits.
It used to be, individuals who lose their jobs through no fault of their own are entitled to collect unemployment compensation for the applicable benefit period or until they find a new job. The most common reasons for denial of unemployment benefits are voluntary resignation without good cause, and dismissal for cause or misconduct. These days, the burden falls to the employer to prove the employee was discharged due to their own actions.
Typically, an employee who quits a job does not qualify for unemployment benefits. However, there are exemptions to this. Some examples, when an employer creates an environment that makes continued employment difficult, then the (former) employee may qualify for unemployment benefits.
Take for instance, an individual who quit because child-care arrangements were terminated. An employee who leaves voluntarily for good cause or a "constructive discharge" is likely to be granted unemployment compensation. Quitting for good reason can be the result of sexual harassment, age discrimination, or hazardous working conditions. Reducing the pay and hours of the individual, making it impossible for that person to continue working for the company may also be viewed as good cause.
Challenge a claim that follows a normal resignation for another job, a move, or other personal reasons. But don't go overboard. It doesn't pay to fight legitimate claims. You don't want to challenge an unemployment claim that you can't win.
Contesting an Unemployment Claim: Appealing a Notice of Determination
After the state agency makes a decision, it will mail a Notice of Determination. Employers and claimants have the right to challenge the agency's decision if they disagree. An appeal will head to a hearing before an Administrative Law Judge.
Plan to participate even if you are not the appealing party. The Judge's decision is based only on what is presented at the hearing. Be prepared to present and defend your position. If you choose not to participate, the hearing will proceed without you, and the decision will be based on the employee's evidence. Also, do not assume that at a later date, new evidence or information can be added.
Keep track of all notices that you get from the state and reply in a timely fashion. Bear in mind, there's often a short time frame to respond to notices. After all, Unemployment Insurance Agencies are charged with moving quickly to pay people who are out of work.
Your appeal could be dismissed and the claimant could win just because you miss a deadline. Also, make sure you provide all information that is being requested. Don't overlook requests such as subpoenas for witnesses.
Contesting an Unemployment Claim: Preparing for a Hearing or Trial
You will receive a Notice of Hearing that will state the date, time, type of conversation (telephone or in-person), and location of your hearing. Many business owners represent their companies during a hearing. In most cases, the benefits amount is not large enough to enlist outside legal counsel. But if the hearing is going to be about more than unemployment compensation, say a wrongful termination, you should plan on hiring an attorney to defend your business.
A common mistake business owners make is not providing sufficient evidence and argument early on in the process. Know the issues involved for qualification or disqualification of benefits, gather performance records and other documents, line up witnesses supporting your side of the case. Review the employee's statement attached to the Protest Acceptance. Write a summary of the key points you intend to present.
Facts, not conclusions, are the basis of a good case. Be prepared to answer questions about who, what, when, where and why. And do not rely solely upon written statements of witnesses as part of your evidence presentation. If you have a statement concerning an employee's behavior, back it up with contemporaneous e-mail records, for example.
The best way to defend a claim is to build in safeguards when you hire a new worker, by putting him or her on notice as to your company's policies. Every new hire should be given a copy of the employee handbook, and asked to sign a form stating that he or she has read it and understands the consequences for failing to follow the rules. (Keep your handbook up to date.)
It also is important that you treat everyone the same. In other words, you can't let some employees break the rules and get away with it. For instance, policies about tardiness can't be enforced with one employee but not another.
Be diligent about keeping a paper trail regarding employee conduct, especially in disciplinary action. Even if it feels like overkill, you should file a police report if an employee threatens to assault a co-worker. If a worker claims harassment or that another employee is acting inappropriately, conduct a formal investigation, get statements from witnesses, and document your findings. Many undeserving individuals have received unemployment compensation simply because adequate records couldn't be produced. Don't let yourself become one of them.