How to Contest an Unemployment Claim
If you feel a former worker is filing an unemployment benefits claim that you should not have to pay, there are steps you can take to contest it.
Every business experiences employee turnover. Losing an employee, whether it's voluntarily or forcibly, can be costly in claims for unemployment insurance 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.
Unemployment compensation can be a big deal for companies with huge staffs or high turnover. "As an employer you are taxed according to past claims," says Richard A. Hooker, a partner with the law firm Varnum Riddering Schmidt in Novi, Michigan. "The more former employees you have collecting unemployment benefits, the higher your taxes are going to be," he explains.
This is a bona fide reason why employers are well served 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.
"Unemployment insurance relies on employers to raise issues. It is part of the determination as to whether an individual qualifies to receive benefits and also whether that person should be paid on a week-by-week basis," says Douglas J. Holmes, president of UWC-Strategic Services on Unemployment & Workers Compensation, a Washington, D.C. trade group that represents employers on unemployment issues. "Employers should raise issues; this is an unemployment insurance program, not public assistance," he adds. "You want to minimize costs to your business and make sure the system is working the way it was designed."
(Editor's Note: This guide includes expert advice, but it should not be mistaken for legal advice. If you are in the process of contesting an unemployment benefits claim and have a particular question, consult an attorney.)
Contesting an Unemployment Claim: Responding to a Notice of Claim
An ex-employee seeking benefits will file a claim with the state unemployment agency. At that point, the employer receives a Notice of Unemployment Insurance Claim Filed. The first course of action is to respond accurately and thoroughly when filling out the separation and wage information section. There are essentially three types of separation: 1.) the layoff; 2.) the discharge; and 3.) and the voluntary quit.
"All you can do is contest the claim," says Elizabeth Milito, senior execute counsel with the National Federation of Independent Business Legal Center in Washington, D.C. "The ultimate grant of denial of benefits is up to the state agency."
However, this decision is 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.
Before contesting an unemployment compensation claim, look at the status of the individual and reasons behind the departure and assess your chances of winning, advises Milito. Three primary considerations:
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.
In most states, 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.
Typically, an employee who quits a job does not qualify for unemployment benefits.
But that's not always the case, says Holmes. "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, says Milito. "You don't want to challenge an unemployment claim that you can't win."
Dig Deeper: How to Write a Termination Notice
