Handling Unemployment Insurance Claims*

At some point, every company with employees will need to deal with an unemployment insurance claim. Unemployment insurance is a state-operated insurance program designed to partially replace lost wages when an employee loses a job through no fault of their own. There are significant variations in how each state runs their respective unemployment insurance programs including when an employee qualifies to how much a terminated employee is entitled to receive in benefits. However, generally, each state program ensures that an eligible terminated employee will have some income for a period of time while they are looking for a job. Since even one claim can significantly increase a company's unemployment insurance contribution rate, it is important for employers to understand the process and to take steps, if applicable, to maximize the chances that a terminated employee will not qualify for unemployment insurance benefits, if circumstances warrant that such request for benefits be denied.

Generally, a resignation or voluntary departure from employment disqualifies a claimant from obtaining unemployment insurance benefits. However, what is truly voluntary is sometimes not clear. A voluntary departure from a position without good cause connected to the work normally disqualifies the claimant from receiving benefits. Therefore, the critical issue becomes whether the applicant left with or without good cause. A substantial reduction in hours or pay may justify a voluntary resignation and preserve a claimant's entitlement to benefits. Similarly, a hostile work environment may constitute good cause to resign from employment and shall entitle an employee to benefits. An employee’s voluntary departure for health reasons can also sometimes qualify the employee for benefits. In the end, while employees who resign are generally ineligible for benefits, it becomes a very fact specific inquiry as to the background circumstances of the resignation if they end up filing a claim for benefits.

An employee's termination as a result of misconduct, on the other hand, generally disqualifies the employee from unemployment insurance benefits. Misconduct is defined (at least in Illinois) as a willful and deliberate violation of a reasonable employer policy, provided that the violation harmed the employer. Usually, the burden is on the employer to establish misconduct. Employees terminated for poor performance or incompetence generally qualify for benefits since those situations generally do not rise to the level of misconduct.

An employee generally cannot commit misconduct unless the employee knows that a reasonable rule or policy is being violated. In this regard, it is crucial for employers to apprise their employees of work rules and policies and document instances of rule violations so that the employee's prior knowledge of the applicable rule violation leading to their termination is undisputed. These steps are important not only to successfully protest a claim for unemployment insurance benefits but also to avoid other employment-related lawsuits such as wrongful termination.

In the event a hearing is held regarding a claimant's right to unemployment insurance, it is important to have individuals with firsthand knowledge of the claimant's termination and the circumstances surrounding the termination. Almost all hearings where an employer fails to provide a witness with direct, firsthand knowledge results in a decision granting benefits to the claimant.

Next week, we will commence a series of Toolkit Topics on best practices to maintain a union-free workplace.

* This is one of a series of weekly articles containing helpful tips and “best practices” for employers to keep in mind when managing their workforce.? These articles are partially adapted from my book, Employment Law Toolkit for Employers.? If you would like a copy of my book, please reach out to me at 312-876-6676 or [email protected]. Nothing contained in this article shall be construed as legal advice and this article does not create an attorney-client relationship between Saul Ewing LLP and any reader.