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Unemployment Compensation Claims: Employers Can Sometimes Say No

December 1, 2012

Many employers believe that no matter what the reason for termination, the ex-employee will always be given unemployment benefits. Employers can take several steps to ensure that only valid claims are charged to their account, however. This requires employers to:

  • Have a good understanding of the unemployment compensation system in their state;
  • Control the procedure for termination;
  • Maintain documentation and respond promptly and in detail to notices of claims filed; and
  • Appeal filed claims, whenever there are appropriate grounds.

Claims Management Affects Employer Tax Rates

Unemployment compensation claims are administered by state agencies. States have similar laws, but an employer must be familiar with the law in each state in which the company operates. The specific formula for calculating employer tax rates is complex; the heaviest weight typically is given to the individual benefit ratio, which means the company can impact its tax rate primarily by managing claims.

Claims management requires having a controlled termination process, promptly and completely responding to the Notice of Unemployment Insurance Claim Filed, and understanding and using the appeal process. Claims management also is about diligently documenting and preparing.

Playing Field Is Not Level

Employers must understand that the playing field is not really level. Most states will have a provision similar to that in the Florida Statutes, 443.031, “Rule of liberal construction,” stating that “[t]his chapter shall be liberally construed in favor of a claimant of unemployment benefits who is unemployed through no fault of his or her own.”

From a practical standpoint, this means the employer will always bear the burden of proving its contention that the claimant should be disqualified. If the employer does not do so conclusively, the claimant will be found eligible for benefits. The information provided to the state must be clear, specific and well documented. An employer simply will not prevail in an initial claim response or in an appeal by making vague or unsubstantiated statements. If the employer says “X” and the claimant says “Y” and neither party has supportive evidence and both parties are reasonably believable, the claimant will not be disqualified.

A claimant may not be eligible for unemployment benefits for numerous reasons. Two primary reasons for disqualification are: the claimant resigned without good cause attributable to the employer or the claimant was discharged for misconduct in connection with his or her work. In general, these are the only two factors over which the employer has any control and, therefore, they are the ones to which most effort should be directed.

Documentation of Reasons for Termination Is Critical

To disqualify a claimant for benefits, the employer will usually have to provide evidence that the former employee quit of his or her own choice or was fired for misconduct. If a controlled and documented separation process is lacking, in many instances, the employer will not know whether the employee quit or was fired.

Consider a common circumstance of an employee no-call, no-show. Is he or she fired for attendance violation or did he or she quit? What about the employee who gives notice and the employer says, “Go ahead and leave today.”? The employer must know and document the accurate reasons for all terminations.

Initial Claim Notice Must Be Taken Seriously

Most unemployment compensation claims are “won” or “lost” at the time of termination and with the response to the Notice of Unemployment Insurance Claim Filed. For example, a supervisor may be terminating an employee for poor attendance. If the supervisor tells the employee, “I am terminating your employment because you violated our attendance policy,” then the employee is likely to tell the claims adjudicator that this was the reason for termination and his or her statement will match the employer’s response, probably resulting in disqualification. On the other hand, if the supervisor says something like, “I’m tired of your being out, we don’t need you here anymore,” then that could be interpreted as a layoff, probably resulting in a need for an appeal.

Further, in responding to the claim notice, the employer should be as specific as possible. For example, “violation of work rule” is probably insufficient unless the claimant has been unusually candid with the claims adjudicator. Employers should use additional space or send along a detailed statement, if necessary. They also need to use terms that make the facts clear. For example, “discharged for violating written company policy against personal use of company credit card” is better than “violated credit card policy.”

Not All Claims Should Be Fought

Success in managing unemployment compensation claims also depends on knowing which ones to contest and which ones to allow. If the real reason for termination is poor job performance or reduction in force, the claimant will not be disqualified and the employer should not attempt to falsely characterize the termination as a discharge for misconduct.

Claims Can Be Appealed

An employer’s former employee may or may not be eligible for unemployment compensation, depending on the circumstances under which he or she left the company and whether he or she is available for and seeking work. At the time the employee files a claim, the claims adjudicator makes a determination (i.e., decides on eligibility) based on information the claimant and the employer provide. All comments from the claimant and employer are taken at face value and are assumed by the adjudicator to be true. If there is no material conflict in the facts, or if the employer fails to respond in the required time, the adjudicator makes a decision on whether the claimant is eligible to receive unemployment benefits and whether the employer’s account will be charged. Either party, if dissatisfied with the determination, can file an appeal within 20 days. A hearing will then be scheduled.

The most frequent reasons why the employer needs to appeal are:

  • Failure by the employer to respond in time;
  • Insufficient information provided to show claimant should be disqualified;
  • Insufficient documentation for reason(s) for termination provided;
  • Misleading information provided, or incorrect reason for termination provided; and
  • Ruling favors claimant, owing to unlevel playing field.

At an appeals hearing, the employer is not necessarily arguing whether the claimant should be receiving benefits, because that is also based on other factors (e.g., being able and available for work), but whether the claimant should be disqualified from receiving benefits based on the separation from the company. Also at issue is whether the company’s account should be charged for any benefits received.

F&H Solutions Group can help companies develop and execute sound and explicit policies with regard to the handling of terminations and unemployment compensation claims and appeals. Our firm can also educate human resources personnel and supervisors to ensure that these matters are handled appropriately and that adequate documentation is available to support the employer’s interest during the claims and appeals processes. For more information, contact Joe Godwin.