Know your rights and the rights of your former employee before fighting a claim for unemployment benefits

If your business terminates an employee, that person may be entitled to unemployment benefits. Each state has its own program and rules, but generally, if you let someone go because of cutbacks or because he or she isn’t a good fit, he or she will qualify for benefits.

If you fire someone for serious misconduct – stealing or selling drugs in the workplace, for example – he or she won’t qualify for unemployment payments. The same goes for an employee who quits without a good cause.

It’s not always easy to apply these rules to a particular termination. Suppose you and an employee get into an argument, and the employee leaves shortly afterward. If the employee has quit, benefits aren’t legally due. But if the employee was fired, he or she is entitled to unemployment benefits in the absence of truly bad conduct.

Unemployment benefits are paid from a state-operated fund to which employers contribute. Normally, the amount you pay into the fund is based on the size of your payroll, and the amount paid from your account. If the state fund pays few or no claims to your ex-employees, your required contributions will be lower over time.


Should you fight?

To keep your costs down, you might be inclined to contest all questionable claims. That’s not always wise. The unemployment laws favor the employee, so your chances of defeating a claim are less than ideal. The laws are written to give unemployed workers a transitional source of income and to keep them off welfare. Unless the employee engaged in extreme conduct, he or she will usually win in a claims contest.

Even more important, fighting an unemployment claim will guarantee an angry former employee who will be far more likely to file a lawsuit for wrongful discharge, or try to harm your business in some other way. This might happen anyway, of course, but challenging the person’s right to unemployment can be the irritant that tips the balance.


How it works

Now let’s assume you’ve decided to proceed with a challenge because you feel you have a strong position. How does the process work? Here are the key steps:

Filing the claim. The former employee files a claim with the state unemployment program. You receive written notice of the claim and can file a written objection, usually within seven to 10 days.

Determining eligibility. The state agency makes an initial determination of whether the person is eligible to get benefits. Usually there is no hearing at this stage.

Referee’s hearing. You or the former employee can appeal the initial eligibility decision by requesting a hearing before a referee. The hearing is the most important step. You and the employee will each have your say. You can have a lawyer there and can present witnesses and records, such as employee evaluations or warning letters.

Before the hearing, ask to see the agency’s complete file on the claim. This will help you prepare to refute inaccurate statements. Bring all pertinent employment records to the hearing. Also, line up witnesses who can give first-hand testimony about the former employee’s misconduct, or other reasons why he or she is ineligible for benefits.

Administrative appeal. Either side can appeal the referee’s decision to an administrative agency, sometimes called a board of review. In most states, this appeal is based solely on the testimony and documents presented at the referee’s hearing. In a few states, the review board can hear additional evidence.

Going to court. Either side can appeal to the state court system, but this is rare. Typically, a court will overturn the agency’s decision only if the decision is contrary to law or isn’t supported by substantial evidence.


Avoid mistakes

Fighting an unemployment claim is always hard. Don’t make it even harder by making some common mistakes. For example, don’t terminate an employee in the heat of an argument. It’s better, if possible, to warn an employee in advance that his or her conduct won’t be tolerated in the future. Of course, in some cases, such as when an employee has assaulted a co-worker, an on-the-spot firing is appropriate.

After a claim is filed, comply with required deadlines. Respond to the claim notice on time. If you don’t, you may lose your right to challenge the claim. And be consistent in stating the reason for the termination. You’ll have problems winning if you give one explanation in your written response and a different explanation at the hearing. That will hurt your credibility.

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