The goal of almost every employer is to maximize profits by reducing operating costs whenever and wherever possible. The costs generated by excessive unemployment claims is an issue of particular concern for most employers. Challenging every unemployment claim would therefore seem to be a good business decision.

It can have a significant impact on the tax rate the employer must pay to help fund unemployment insurance. The fewer successful claims the employer has, the lower the tax rate. However, contesting every claim may not necessarily be the best strategy. There may be good reasons for not contesting some claims.  

Employers frequently complain that they have little control over the decision to award unemployment benefits to former employees. While it may at times appear that way, a company has significant power over whether or not a former worker will receive unemployment benefits. The state unemployment office will ultimately decide whether benefits are to be awarded or not. However, the employer decides whether to contest the former employee’s application for benefits.

In many states, failure to challenge an application for benefits can result in a presumption that no disqualifying conduct occurred. The granting of benefits becomes almost automatic. As with any other business decision, careful consideration must be given to the decision. 

When Not to Contest

There are a variety of situations where an employer may not have adequate grounds to contest an application for benefits and the effort made would very likely be in vain. Employees who are laid off for business reasons, such as a reduction in force (RIF) or downsizing provide no legitimate basis for challenging an application for benefits. A company may also voluntarily give up its right to contest unemployment benefits as part of a severance agreement made with the departing employee. It would be part of the “consideration” given in exchange for the employee giving up the right to contest the termination under any of the various state and federal laws that provide protection against discrimination or improper termination.

Some human resource professionals as well as some employment attorneys advise that employers carefully consider challenging the benefit applications of terminated employees. They argue that fired employees are very likely to be angry ex-employees. No matter the actual reason for their termination, the company will be viewed by them as acting unfairly. That angry former employee will have his/her anger stoked by the attempt to deny them unemployment benefits. They may seek out a lawyer for help. With the ever-growing number of lawyers and the litigious mentality that is so pervasive today, that former employee could easily find a lawyer willing to challenge the termination.

Claims of an unlawful discriminatory motive such as race, gender, age, disability or some other legally protected status are easy to file. All that is required is the filing of a charge with the Equal Employment Opportunity Commission (EEOC) or the equivalent state human rights agency. Many plaintiff lawyers promptly submit a request that the agency immediately issue a “right to sue” letter. Such a letter permits the filing of a lawsuit against the employer within 90 days. Today, it’s not uncommon for a manager and/or a supervisor to also be named as a defendant. Defending a lawsuit, even when successful, can be an expensive and time-consuming proposition.

It should also be noted that some employment professionals believe that even when an employer chooses not to contest an unemployment benefit claim, the former employee is just as likely to file a discrimination claim. Some suggest it’s even more likely since the employee may conclude that no challenge was filed because the employer knew that it could not defend the stated reason for firing.

Employment professionals also argue that by successfully challenging the application for benefits, the employer demonstrates that they are confident in their case against the employee, which may serve to discourage lawsuits.

Disqualification from Unemployment Benefits

Contrary to what some employers believe, even fired employees can successfully claim unemployment benefits in many circumstances. Where the termination was the result of the employee simply being unable to satisfactorily perform the job duties or had poor work habits, the likelihood is that benefits would be awarded. Also, termination for minor rule infractions such as attendance requirements would similarly not be grounds for the denial of benefits in most cases. Poor attendance is one of the most common issues that causes employee termination. Generally, unless there are other serious acts of misconduct or there are egregious circumstances, termination for poor attendance rarely disqualifies someone from receiving benefits.

In most states, it’s only when an employee is fired for misconduct that he/she is disqualified to receive unemployment benefits. Unfortunately, what constitutes as “misconduct” sufficient for disqualification has been substantially limited in most states. It requires willful conduct that harms the company. Such things as theft, fighting, engaging in workplace violence, and sexual harassment would almost always be grounds for denial of benefits. Obviously, employees who voluntarily quit their employment are generally ineligible for benefits. If there is an issue with regard to a voluntary quit, it usually revolves around whether the employee had just cause to quit.

Contesting a Claim    

As noted earlier, there may be circumstances where the company will decide not to contest a claim even though it may have adequate grounds to do so. Ultimately, an employer should contest a claim for benefits only if they have sufficient grounds that will likely result in disqualification. Termination for poor work performance, inability to learn new procedures or operate new equipment, and similar common reasons for employee termination provide no basis for contesting the award of benefits. Only those cases where serious misconduct has occurred are good candidates for a successful challenge.

Like other legal matters, challenges require substantial time and attention to detail. The rationale for the denial of benefits must be clear and convincing. In addition to a clear narrative that describes in detail the basis for termination, all applicable rules violated, documented oral warnings and all written warnings should be attached to the contest. The natural tendency of most state unemployment offices is to err on the side of granting benefits. Often their view is that the state-managed fund is there precisely to care for unemployed individuals. It’s seen as part of the social safety net intended to protect people in need. They tend to ignore the fact that the former employee only became unemployed as the result of their own serious misconduct.

Appealing an Award of Benefits

It is quite possible that benefits will be awarded even in circumstances where the “misconduct” appears evident. Overturning an award of benefits is difficult. If the decision is made to appeal the granting of benefits in a particular case, most states have a limited period for the filing of an appeal. It will be stated on the notice to the employer of the award of benefits and is usually 10 days.

Proving that there was sufficient “misconduct” to overturn a prior award requires substantial evidence. The employer must show that the employee’s conduct was intentional or in willful disregard of the employer’s interests. The employer may also be required to show that the employee intentionally disregarded his/her duties or obligations. Documentation is critical and should include all the documentation submitted at the content stage including any last-chance agreements or performance improvement plans provided to the employee. In addition, witnesses that can testify as to the critical events and why the termination decision was made are vital.

In cases when the appeal involves the granting of benefits to an employee who voluntarily quit, the burden is generally on the employee to prove they were eligible to receive benefits. Here the employee’s written resignation or some written confirmation of the voluntary quit would support the appeal. Even a saved voice message from the employee resigning or quitting should be sufficient. Having available a witness who spoke directly with the employee about quitting would be important evidence.          

Despite the appearance of a system that is stacked against the employer, with careful consideration and proper presentation of what is needed to prove your case against the granting of benefits or to overturn a prior award, an employer can exert at least some control over whether unemployment benefits should be awarded or not.