Earlier we covered the basics of unemployment insurance at the federal and state level. Here, we will discuss what causes a claim for unemployment benefits to be denied or approved. Then we will take a look at what processes employers can put in place to positively impact their state unemployment tax rate, so they can minimize their unemployment tax paid.
Like the rules about the rates and amount of unemployment benefits, the rules governing eligibility for benefits vary from state to state. However there are many similarities as well.
When is an employee eligible for unemployment benefits?
In general, employees are eligible for unemployment insurance if they are out of work through no fault of their own. For example, if an employee loses her job through a layoff or reduction in force, she is eligible for unemployment benefits. Even if the employer had good reason to fire her, such as for poor performance due to lack the job skills, inability to get along with co-workers or honest errors in judgment, she may still be eligible to receive benefits. Relatively minor, unintentional infractions do not rise to the level of the “misconduct” that would prevent her from receiving benefits.
A worker may also be eligible for unemployment benefits if she quits or resigns from her job for “good cause.” While the definition of “good cause” varies, it includes situations like:
- Intolerable working conditions, such as being sexually harassed or facing discrimination
- Health or safety concerns unrelated to the job
- Large pay reduction, typically over 20%
- Loss of ability to get to work, through their own or public transportation
- Illness or injury that the employer fails to accommodate
- Change in job duties not specified in the employment contract
In order to show “good cause,” an employee must show that she tried to work with her employer to resolve the issue before resorting to quitting the job.
When is an employee ineligible for unemployment benefits?
An employee may be ineligible for benefits for simple reasons like their tenure—most states require employment for a year before benefits accrue—or the fact that they’re a contract or freelance worker. Independent contractors are technically self-employed and therefore ineligible. (You can learn more about the classification of Independent Contractors vs. employees here and here.)
If an employee quits without “good cause,” they are ineligible for benefits. Simple job dissatisfaction is not considered good cause. Going to school, getting married or moving out of the area do not fall under the classification either.
If their own misconduct led to termination, they are ineligible as well. Misconduct includes actions that are illegal or willfully violate company policy such as:
- Sexually harassing coworkers
- Revealing trade secrets
- Coming to work intoxicated
- Lying
- Stealing from a coworker
- Destroying company property
- Chronic tardiness or unexcused absences
Misconduct is also a matter of interpretation and degree. An off-color comment may be meant as a joke and the employee who made the comment can be counseled and/or reprimanded. Conversely, intentional, ongoing harassment might be considered disqualifying misconduct.
What next?
Given the justifiable opportunities for former employees to claim unemployment benefits, and the gray area that defines “misconduct” in denying unemployment claims, employers should be sure to thoroughly document the reasons an employee is terminated. If an employee files an unemployment claim, and the employer wishes to contest it, to help protect their unemployment rate, there are steps to take. We’ll cover that in our next post.
For more information on unemployment claims and processes, see the HR Support Center.
