Contesting Unemployment: Winning an Unemployment Claim

Let’s say you have a former employee who was previously fired for inappropriate workplace behavior. Today you received an initial notice from the state agency that they filed for unemployment benefits.

This article explains why you should contest your company's liability for the claim, even if you are short on time or the employee did not work for your company very long.

Introduction to Unemployment Insurance

Unemployment insurance is a crucial support system for workers who find themselves out of a job through no fault of their own. This government-backed program provides temporary financial assistance (known as unemployment benefits) to eligible individuals while they search for new employment. The unemployment insurance system is designed to help bridge the gap between jobs, ensuring that people can meet basic needs during periods of unemployment.

To qualify for unemployment benefits, a person typically must have worked consistently for the past 12-24 months. However, not everyone who is unemployed is eligible for unemployment insurance.

For example, employees who are terminated for misconduct or who voluntarily quit are generally disqualified from receiving benefits. When claimants are not truthful about the circumstances for their termination on the application and the employer chooses not to contest the claim, the individual will likely be awarded benefits — which the employer will end up paying for, just as someone receives increased rates after filing a claim on their auto or home insurance policy.

Understanding these rules is essential for both employers and employees, as it helps clarify who is eligible for unemployment benefits and under what circumstances, and why it's important to always maintain proper documentation and respond to claims.

Does everyone “deserve” unemployment insurance?

The Unemployment Insurance program (UI) was created to help individuals who are unemployed through no fault of their own. If a person were fired for inappropriate workplace behavior or for violating company policy, or they quit to accept another job, it is likely grounds to deny unemployment benefits.

When you contest the eligibility of workers from receiving unemployment benefits, that does not necessarily mean they are not eligible for UI; it means your company should not be culpable for unemployment insurance benefits paid to them. Additionally, if the former employee received severance pay, this may affect their eligibility to collect unemployment benefits.

Why would I receive an unemployment claim for somebody who is not eligible?

If a former employee quit their job with your company to work for another business that ended up laying them off, they may be eligible for UI benefits on behalf of that other company. But, depending on when the person files for unemployment, your company may receive notice of the claim. If you do not respond, your company may be impacted.

When someone files for unemployment benefits, the state has a look-back period to determine which employers may be impacted. In most states, that period is the previous five quarters from when the claim is filed. Any company for which someone worked during those first four of five quarters will receive notice of a former employee’s unemployment claim, with the opportunity to contest it.

For example, let’s say your former employee files an unemployment claim on May 18th. The previous 5 quarters would be Jan-Mar of this year (Quarter 5), Oct-Dec of the previous year (Quarter 4), Jul-Sep of the previous year (Quarter 3), Apr-Jun of the previous year (Quarter 2), and Jan-Mar of the previous year (Quarter 1). All organizations for whom they worked during those first 4 of 5 quarters would receive notification of the claim.

Eligibility requirements per unemployment insurance law, including the specific dollar amount of wages earned during the base period, can vary significantly by state. Although this former worker was fired for inappropriate workplace behavior at your company, they may still be eligible for weekly payments if they meet the state’s criteria.

If a claimant is denied benefits, they have the right to appeal the decision through administrative hearings and, if necessary, judicial review. However, you should always contest it when the individual was termed from your company for any reason beyond a genuine lack of work (layoff) to avoid culpability.

The Unemployment Claims Process

The process of filing for unemployment benefits begins when a former employee submits an initial unemployment claim to the state’s labor department. Once the claim is filed, the department reviews the application to determine if the individual meets the eligibility criteria for benefits. If approved, the former employee will start receiving weekly benefits to help support them while they look for new work.

However, not all claims are straightforward. When a claim is denied, the former employee has the right to file an appeal. As the employer, if you believe a former employee should not receive unemployment benefits, perhaps due to termination for good cause or voluntary quit, you also have the right to contest the claim.

In general, the way the process works is:

• Initial claim is filed
• Employer submits a response and a determination is made
• Either party can appeal
• Appeal hearing is held and a determination is made
• Either party can appeal
• The claim documents and hearing recording are sent to a board of judges who review and make a final determination.

When responding to or appealing a claim, you should submit evidence and documentation, such as written warnings, records of disciplinary actions, or proof of policy violations. During the review, which is typically done remotely, an employer’s representative may be called upon to present the case before an administrative law judge or hearing officer, who will evaluate the evidence and make a determination.

How do I contest a frivolous unemployment claim?

To determine your company’s liability for unemployment benefits, there are three main focal points:

1. Culpability (claimant’s actions were intentional, willful, or reckless, and harmful to the company)
2. Knowledge (claimant knew their behavior was unacceptable)
3. Control (claimant had the ability to avoid their unacceptable behavior)

In employer appeals (typically done remotely), the employer has the burden to prove misconduct. You must show that the former employee hurt the company with their actions; they had knowledge that their behavior might lead to termination; and that they could have controlled the outcome.

Building a strong case includes gathering all relevant documents, such as:

• signed company policies;
• employment records;
• written warnings;
• emails; and
• employment contracts.

These written forms of evidence are crucial for winning an appeal on misconduct claims.

1. Clear and Consistent Company Policies

Your company needs to prove it had clear policies in place, that the individual was aware of these policies, and that your company has always been consistent with following those policies in every situation. If any policies are ever updated, you need proof of having communicated those changes to all staff.

Your employee handbook should outline its corrective action process and may even identify behaviors that may warrant immediate termination. Having a copy of the individual's signed acknowledgment page of the employee handbook and a clean track record of always following the outlined policies will significantly help your case.

2. Thorough Documentation

The burden of proof is on you, the employer, whenever a former employee makes a claim. Always maintain documentation for any employment action to protect your company and avoid the “he-said, she-said” arguments. Documentation may include text messages, photos, emails, copies of warnings, and so on.

If a verbal warning is the first step in your corrective action process, be sure to document it afterwards. Go one step further and have the employee sign the documented verbal warning. Following your corrective action process and documenting every step along the way provides a strong case that the employee had knowledge and control over the situation.

Appeals Process

If an unemployment claim is denied, the appeals process offers both the former employee and the employer an opportunity to challenge the decision. Either party can file an appeal with the state’s labor department, prompting a review by an administrative law judge. The appeals process typically involves a formal hearing, where both sides can present evidence, call witnesses, and make their case.

During the hearing, the administrative law judge will consider all the information provided, including documentation, testimony, and any other relevant evidence. After the hearing, the judge will issue a written decision outlining the findings and the outcome of the appeal. If either party disagrees with the judge’s decision, there may be further opportunities for fighting unemployment claims to a higher authority, such as an appeal board.

It’s important to be well-prepared for the appeals process, as the outcome can affect not only whether the former employee receives benefits but also the employer’s tax rate and potential exposure to legal claims.

Tax Implications

Unemployment benefits have direct tax implications for employers. The unemployment insurance system is funded primarily through employer taxes, and the amount of benefits paid out to former employees can influence an employer’s tax rate. When a former employee is approved for unemployment benefits, the employer’s tax rate may increase, resulting in higher costs for the business.

Successfully contesting unjustified unemployment benefits claims can help employers avoid unnecessary increases in their tax rate. This requires consistently following company policies, documenting employment actions, and coming prepared with records of applicable policies and employment actions to unemployment hearings.

How long should I keep records of former employees?

No matter how many employees you manage, it's hard to remember every situation over the past five days, let alone the previous five quarters. This is why keeping records is critical.

Follow your outlined company policies and document the process of every employment action taken. If you have a Human Capital Management System, be sure to accurately indicate the reason for termination and upload all documentation for future reference.

Maintaining records of former employees is not just good business practice; there are laws that govern how long you must legally maintain employment records by document type. Purging these records prematurely may lead to employer penalties, particularly in the event of a labor dispute or audit.

Where Can I Get More Information?

For more information on navigating a tricky employment situation or documenting employment decisions, please contact your certified HR expert. Not a current Stratus HR client? Book a consultation and our team will contact you shortly.