Is a Subcontractor Eligible for Unemployment?

by Laurie Reeves

Employers pay state and federal unemployment insurance taxes, known as SUI and FUI on employees' incomes up to set limits each year. Once the employee makes a certain amount of money, the employer no longer pays unemployment insurance for the remainder of that year. The state in which you live manages the unemployment program in the event that you lose your job, which means qualification requirements for unemployment vary by individual state under the auspices of the federal government. As an employee you are eligible for unemployment, but as a self-employed subcontractor you generally are not. But as in most things in life, exceptions exist for every rule.

Unemployment Insurance

Eligibility for unemployment varies by state, but if you were employed within the last year before becoming a subcontractor, and lost your job without cause, you might be eligible -- if your employer paid SUI or FUI taxes. Because eligibility is based on the date you last worked and a specific qualifying period, make certain you have the names and addresses of the employers you worked for in the last 12 to 18 months, the dates of employment, the amount of money you earned and your pay dates. You will also need to know the phone number and address of the employer whom you worked for the longest during the qualifying period. As a subcontractor, you usually do not participate in the unemployment insurance program, nor pay unemployment taxes.

Subcontractor Status

If you own your own subcontracting firm, but the company is legally incorporated, or you are paid as an employee of the company and don't take an owner's draw, you could be eligible for unemployment benefits. Check with your payroll department to find out if it paid state unemployment or federal unemployment insurance taxes on your behalf. If so, you may qualify for unemployment benefits, if your subcontracting business failed or closed and you no longer have work. You still need to meet the state's qualifications for benefits.

Disaster Declared Area

In the event of a disaster, the amended Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1974 allows for payment of unemployment benefits to people who lose their jobs because of a major disaster, such as a hurricane, tornado or other such event. Managed by the Federal Emergency Management Agency, payments are made to state unemployment departments. Unemployment assistance applies to both employees and self-employed individuals who are in a declared disaster area by the President. When you cannot reach your place of work, cannot work because of an injury sustained in the disaster, no longer have a place of work because of the disaster or your place of work was damaged in the disaster, you may qualify for benefits. Disaster assistance payments begin, after you qualify, the first day of the week following the date the area experienced the President-declared disaster.

Employment Status

Unemployment benefits hinge on your employment status. If you have been self-employed during the qualifying period for unemployment benefits, and did not pay SUI or FUI taxes, you do not qualify for unemployment benefits. But in the event you are not really a subcontractor, and other taxes are taken from your salary or income, such as federal, Social Security and Medicare taxes, then more than likely your employment status as a subcontractor is incorrect. In that event, you may qualify.

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