National Clothesline

Some of my clients never contest unemployment claims. Others fight them tooth and nail. Consequently, the experience ratings for my clients range from very low to very high.

If you are one of those employers who likes to keep your experience rating low, saving money in the process, you need to understand how the system works. Otherwise, you can waste a lot of time contesting claims you have absolutely no chance of winning.

The unemployment insurance scheme in this country involves states administering a program with a large federal component. As a result, there is relative uniformity across the country. Whatever gets you unemployment in Missouri probably gets you unemployment in Kansas.

Because it is a form of “insurance,” it is up to the state acting like a claims adjuster to determine if an employee is eligible for benefits. Not all employees who lose their jobs are entitled to receive those benefits. In some cases, they may receive benefits, but only after a waiting period. The state, again acting like an insurance company, can raise your “premium” if you have a lot of claims where benefits are paid out.

So, what kinds of situations will result in a terminated employee not receiving benefits? Let me begin by stating that “unsatisfactory work performance” is not one of them. If an employee is fired for incompetence, that will not usually disqualify him from receiving benefits.

Employers typically must show that the employee was fired for misconduct or gross misconduct. What’s the difference? In the case of ordinary misconduct, the disqualification is normally only for a short period of time, like four to ten weeks. Gross misconduct normally results in disqualification, period.

The difference in terms of actual conduct is not clearly delineated. Theft is gross misconduct, while recurring cash register shortages may be ordinary misconduct. Then again, cash register shortages may be incompetence that does not cause benefits to be denied. Chronic lateness or absenteeism would be ordinary misconduct.

To prove misconduct, gross or otherwise, it helps for the employer to have a set of rules that makes it clear to the employee that the behavior is, in fact, misconduct. It also helps to have prior disciplinary warnings to the employee that further misconduct will result in termination.

If the employee has resigned, that is a basis for denying benefits, but even employees who have voluntarily resigned can get benefits. For example, if the employee can show he resigned “with good cause,” benefits will be awarded.

An employee who quits because of sexual harassment, the denial of a raise he was promised, or some other “misconduct” by the employer can get benefits.

If an employee says he resigned at the employer’s request, that will be treated just like a discharge. Then, the state will have to decide if the employee engaged in disqualifying misconduct.

Finally, most states will disqualify an employee from receiving benefits during any period in which the employee is receiving severance pay. This becomes an issue frequently in negotiating a severance agreement and release with a terminated employee. Plus, the employee has to show he is seeking other employment, though that is pretty easy to do. In most states, employees on strike do not get unemployment benefits.

Even in the best of circumstances, however, employees who do not deserve benefits will receive them. Employers should be prepared to explain, in some detail, why an employee was fired to have any chance of winning one of these claims. It is also good practice if the employee later files a charge of discrimination or a lawsuit for wrongful termination.