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To Fight Or Not to Fight, a PEO Perspective on Unemployment Claim Challenges


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Many business owners and managers have found themselves in a quandary over whether or not to fight an unemployment claim. Who is eligible? Who pays for a claim? How does this affect my business in the long run? Since it's your taxes that pay for unemployment benefits, it's in your best interest to become familiar with the how this program works. Here are some facts about unemployment that might just help to make the decision whether or not to fight a claim a little easier.

Who gets what? - Unemployment benefit payments are made to workers (claimants) who are temporarily unemployed through no fault of their own, and who are attempting to re-enter the labor force. As an employer, your unemployment taxes pay the entire cost of unemployment benefits paid. Unemployment taxes cannot be withheld from your employees’ wages.

Only wages paid during a 12-month period, called the base period, are used in establishing unemployment benefit amounts. The base period is the first four of the last five completed calendar quarters prior to the date the claimant files for benefits.

The highest amount of wages paid in a quarter of the worker's base period determines the weekly benefit amount. The minimum weekly amount is $60, the maximum is $240.

The claimant may collect up to 26 weeks of benefits, or 1/3 of his/her total base period wages, whichever is less, during a benefit year - a 52-week period. The maximum amount that may be collected is $6240.

Now eligibility will depend on the reason the claimant left their last job. Whether the last job was your business or not doesn't matter. If they worked for you during the based period you may still receive a claim.

Remember, a claimant is only eligible for benefits if they become unemployed through no fault of their own. So keep good documentation on performance issues as it will help you in the long run.

The last straw! - Many employers believe that as long as they have historical documentation, it will help them win an unemployment claim. This may not be so. The unemployment claims administrator in your state will look at the final incident that caused the termination. For instance, if Joe had repeated write-ups in his file for attendance issues but the reason for termination was insubordination, Joe may just win his claim for unemployment benefits. Typically the claims administrator is going to want to see progressive discipline that leads to no other choice but termination. If Joe is going to be terminated for insubordination, make sure your documentation shows that he has been warned about this behavior but continued until it left you no choice.

But they QUIT! - If the claimant was discharged for misconduct or quit without good cause in connection with the work, benefits will be denied for as long as he/she is currently unemployed.

But what happens when an employee voluntarily quit with good cause in connection with the work? For instance:

  • Sudden and complete change in work duties making it difficult to continue working
  • Sudden change of workplace making travel distance unreasonably longer
  • Unsafe work environment based on the employee's abilities
    Examples like these may be reasons allowed by the Unemployment Administrator for payment of unemployment benefits.

    Of course, many reasons may be subjective so it's a good idea to discuss possible changes to an employee's work environment or duties with your Human Resources Manager to discuss implications related to potential claims like unemployment.

    To help avoid unemployment claims from employees who ‘quit', have an accurate job description detailing current and even possible future duties. This will avoid surprises to the employee.

    Screen your potential new hires carefully to make sure they are up for the job and flexible enough to switch duties or even locations in the future if necessary.

    Now if your employee left work for a compelling personal reason not attributable to the employer, they may still be eligible but your account will not be charged.

    Who pays for unemployment benefits? - Simply put, employers. When you pay taxes to the State Unemployment Tax Administration (SUTA), this money is put into an account to pay for possible future claims. If it is determined that a former employee is in fact eligible for benefits, this money is then charged to your account. You will receive quarterly reports detailing all the claims paid and how much was paid to each individual.

    To Fight or not To Fight? - This is up to you. Our advice, FIGHT. Unemployment benefits were set up to assist individuals who found themselves unemployed through no fault of their own. In other words, if the employee was laid off due to a reduction in force, they had no control over the decision and would have probably continued providing satisfactory work for their employer if they had the chance. Furthermore, unemployment benefits were meant to assist these individuals to keep food on the table while they are ‘actively’ seeking other work. Benefits were not meant to be never ending or, to be a sole source of income.

    If your former employee was terminated for cause, you should fight or dispute the claim. Here's how to do it:

    1 - When you receive the claim, don't ignore it! You only have 10 days to respond so make this a priority.

    2 - The form will ask you to verify the reason the individual became unemployed. If you told your employee that you were ‘laying them off', you can not change your mind and list the reason as ‘terminated’. This is why it is important to be straight with your workforce especially during a termination. If you are firing them, be clear with them and tell them that they are fired. Hey, it works for Don Trump.

    3 - You will be asked to attach any supporting documentation. Here we go again with documentation. Attach write-ups and documentation of verbal warnings that will show progressive discipline leading to the termination. In other words, you will want to show the Unemployment Administrator that despite warnings and re-direction, your employee continued the unacceptable behavior leaving you no choice but to terminate them.

    4 - Run it by your HR department. Have your HR Department assist you with fighting unemployment claims. They've just about seen it all and know how to properly file a dispute and win.

    5 - Appeal? That's right, if you dispute a claim and benefits are denied to the individual, they may still appeal that decision. In that case, you will be invited to attend a hearing by phone or in person. Again, don't ignore it! You got this far, don't let a hearing scare you. Participate in the hearing and have your documentation and notes ready. Be honest and be specific. The hearing officer will then make a determination which becomes final. If benefits were paid to the individual and it is determined that they were not in fact eligible, they will be asked to pay that money back to your unemployment account.

    John Rico, Director of Human Resources, National PEO , LLC. Basically what you are doing when you respond to an unwarranted unemployment claim is defending yourself against the claim that your employee became unemployed through no fault of their own. If this in fact is not the case, the answer to fight or not to fight becomes simple. . . FIGHT! It starts with E-Verify , if you ensure you verify the eligibility of the employee to start with, you're on the right path to stand your position.

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