Many businesses today overlook processes or functions that have, what they believe, is a marginal impact on the company’s overall bottom line. But these marginal costs mount with time and can turn into a substantial expense if allowed to go unmanaged. Let’s take unemployment insurance as an example. Unemployment rates can range between 2.3% to 6.7% of your monthly payroll with an average of 4.1% nationally. Most companies consider Unemployment Tax a cost of doing business. But since it’s based on the number of payable claims, like any other type of insurance, your rate increases as more claims are paid. Consequently, in order to reduce your rate, you need to have fewer payable claims.
The Unemployment Claim
Unemployment benefits are designed for people who are laid off because the employer doesn’t have enough work for them, or who lose their jobs because of something the employer did wrong. If you layoff someone because your business is not doing well, don’t bother to contest the claim. Conversely, if you terminate an employee for cause or they quit without good reason, you should contest the award of benefits provided, and this is very important, you can provide proof (i.e. documentation or evidence) that supports your reason for contesting the claim.
Documenting employee issues should be timely, meaning you can’t start documenting issues the day you receive the Unemployment Claim. Incidents should be documented when they occur, so you have credibility and an accurate recall of the events(s). Documentation should be specific and above all factual, in that it does not express opinions or assumptions. For example, noting facts in a supervisor’s file might read:
8/27/10 Cheri was 20 minutes late for work. Start time is 8:00, Cheri arrived at 8:20.
10/16/15 Mark did not show up for work on 9/15 & 9/16.
These types of annotations are essential if you are forced to do some type of written or verbal warning and are also supportive documentation in unemployment hearing.
A word about warnings. Disciplinary actions can either be verbal or written, but even if it’s a verbal warning it should be documented. You should also meet with the employee when issuing any type of warning. A warning is pointless if the employee is not aware of it and will only serve to discredit you in a hearing. If you don’t have facts about the warning, the incident(s), and when it was issued; the ex-employee could win a challenge of its admittance in a hearing.
MAKE SURE THE WARNING IS DATED. Warnings should describe the facts surrounding the incident(s), the consequences if the behavior happens again, and the response of the employee. For example:
12/19/2016 Today, I spoke with John Doe concerning his repeated failure to wear personal protective equipment. John was observed not wearing eye protection while grinding on 11/2/2016 (keep accurate account any previous events). He was also observed smoking in a non-smoking area on 10/17/2016, and most recently, not wearing a life vest while on the lower deck of the boat on 11/3/2016. I informed John that any further safety violations would result in further disciplinary action up to and including discharge. John refused to sign the warning and stated, “it doesn’t matter”.
Any written or documented verbal warnings you have should be submitted with the initial response when the state agency sends the inquiry form. Often, simply presenting the documentation at the initial stage of the claim is enough to deny benefits.
Why it’s important to contest a claim.
There are a couple of reasons for contesting unemployment benefits. First, of course, is the tax that increases with the number of claims. Second, winning a contested claim may discourage a charge of discrimination or wrongful discharge. If you win, it can look more favorable should you face any type of charge.
Conversely, there may be times when it’s not in your best interest to contest a claim, even if you would probably win. The most common situation is where you may be facing some type of legal liability, or the worker is simply not a good fit for your organization. In these instances, you might offer a severance that includes you won’t contest the award of benefits.
How the Unemployment System Works
Most states require that the ex-employee has worked at least some part of two different calendar quarters within the past one and one-half years. Consequently, unless they have worked for you during the previous 18 months and have earnings for at least two quarters during this period, you aren’t chargeable for the claim. Meaning one of their previous employers will be chargeable. A large percentage of states also have a specific amount of wages that must have been earned. But even workers who are eligible for benefits can still be disqualified from receiving them, depending upon how and why they lost their jobs.
When someone files for unemployment, their previous employer gets an information request form from the state U.I. (Unemployment Insurance). You should fill out and return the form by the filing deadline stated on the form! These deadlines are rarely extended, even if you have a good excuse, so you should promptly complete and return it. Typically, the form will ask how long the employee worked for you, what were his/her earnings, did the worker quit voluntarily or were they dismissed, and the facts surrounding the termination. Don’t give just a one-word explanation, but don’t write a novel either! If you terminated someone because of excessive absences, don’t just write “discharged for absenteeism”. As previously illustrated, state when the absences occurred and when prior warnings were given. You also need to describe the final incident that lead to their dismissal. Again, provide all documentation relative to the ex-employee’s termination or resignation when you submit the form.
Once the form is submitted, an unemployment investigator will be assigned to review and investigate the claim. Based on the investigator’s findings they will either approve or deny benefits. The approval/denial decision is sent to the employer and the claimant who then have a set period to contest the decision. There will be instructions on how to contest the investigator’s decision. If you don’t respond, or respond too late, the ex-employee will automatically get benefits in most states. Some states will allow for a hearing if the request is received within a few days after the deadline but filling a contest late will be factored into the decision when and if they decide to approve the hearing.
Once the agency receives the contested investigators decision request, an unemployment hearing is scheduled. Most hearings are done via conference call however, some require you to appear before the unemployment referee. You should participate in all unemployment hearings, whether in person or via telephone. This is the only effective way to present your side and to respond to any false or incomplete statements your ex-employee might make. The supervisor who witnessed the misconduct or other actions that led to the worker’s separation should be present to testify.
The referee hears both sides of the issue and either affirms or reverses the investigator’s decision to award or deny benefits. Some states have an unemployment tribunal which allows for an appeal of the referee’s decision. If the employee is found eligible for benefits despite your objections, follow up with an appeal to the tribunal. The tribunal will only review the hearing transcript and render a decision, so you won’t have to appear or be involved in another hearing. If the tribunal affirms the UI referee’s decision, your final option is to litigate the decision in civil court. Attorney representation becomes a virtual necessity if you lose at the appeal level.
Even though a successful unemployment claim may raise your tax rates, don’t let the fear of a rate increase keep you from terminating an employee who is adversely affecting your business. One bad apple can destroy the morale of an entire workforce –or worse! If you’ve done a good job of documenting the issues, chances are pretty good that you could win a UI claim. Effectively managing your HR issues is key in several areas besides unemployment. But even this expense can be significantly reduced it you manage it correctly. If you have questions or need help, please call us at (270) 709 – 3135.