UI Claims Management

Contesting Unemployment Claims


Emptech's founder, Jeff Aleixo


Jeff Aleixo


The unemployment compensation system is a federal-state partnership, designed to provide a temporary income support for workers who lost their jobs through no fault of their own. In general, unemployment insurance payments are based on a percentage of an individual’s earnings over a recent 52-week period. They can be claimed for a limited period of time, typically six months after the person left the company, or until that person finds a new full-time job.

Unemployment Insurance Impact on Taxes

While general guidelines for unemployment insurance are established by the Federal Unemployment Tax Act (FUTA), each state has its own rules and regulations. States finance regular unemployment benefits through taxes levied on employers. How much employers need to pay in taxes is determined by their states. This amount is typically based on factors such as the size of a business and the number of former employees who have claimed unemployment benefits. Since these taxes are experience-rated, employers with a higher percentage of former employees receiving unemployment benefits pay a higher tax rate. Therefore, contesting unemployment claims is in their best interest, provided they are unjustified.

Deciding Whether to Contest a Claim

Minimizing the number of unemployment claims can be an effective way to reduce the tax rate. Although many employees are eligible to receive unemployment benefits upon losing their job, those who commit misconduct or quit voluntarily may be disqualified from receiving such benefits. Since not every former employee is entitled to receive unemployment benefits, it is up to the employer to fully evaluate whether to contest an unemployment claim or not.

It is important to always respond to an unemployment inquiry and provide all the facts surrounding the separation of employment. Understanding the circumstances surrounding an employee’s departure will ultimately help employers determine if contesting unemployment claims is the right decision for them.

Generally, employees have a legal right to receive unemployment benefits if they have lost work through no fault of their own, such as through a layoff, or their work hours have been restricted or reduced. In this case, it is advisable that employers avoid contesting unemployment claims.

On the other hand, employers should contest if employees were fired for misconduct connected with work. An employee who intentionally and deliberately engages in misconduct does not have a right to receive unemployment benefits. This can include situations such as willful violation of company policies, excessive absenteeism, extreme insubordination, or failing to meet normal standards of behavior. Furthermore, employers will have a better chance of contesting unemployment claims if they are able to prove that the employee was:

  • Aware of the misconduct,
  • Aware of company policies and procedures and given an opportunity to improve, or
  • Aware of the severity of their actions and given a final warning.

Apart from this, employers should contest unemployment claims in case of the voluntary resignation. An employee who quits voluntarily and without good cause does not have the right to receive unemployment benefits. Quitting because of job dissatisfaction or lack of career growth does not normally constitute as good cause. However, this does not include forced resignations, in which an employee is given the option to resign or be fired.

Use this comprehensive guide on unemployment insurance to make sure you are in compliance with current laws and regulations and your employment policies and procedures to minimize potential liabilities.

Preventing Unemployment Claims

In order to prevent unemployment claims from arising in the first place, and prepare in case they do happen, employers need to determine steps and procedures to follow. As a result, they can find themselves contesting unemployment claims less frequently and be more likely to win those claims they decide to contest.

Establishing Company Policies

It is necessary for every employer to set up company policies and specifically explain them in the form of an employee handbook. All new hires should go over the handbook as part of the onboarding process in order to be informed of these policies. This is a critical step in order to communicate expectations to employees and protect interests in case of an employee issue. In addition to this, employers need to review their employee handbook regularly because outdated handbooks may place unnecessary burdens on employers and make them more vulnerable to lawsuits.

Proper Documentation

If they ever find themselves contesting unemployment claims, the best asset employers can have is detailed and proper documentation. By having a record showing the terminated employee knew about and understood company policies, together with any warnings leading up to their termination, employers can prove the employee was aware that their behavior constituted misconduct.

Using Specific and Detailed Warnings and Discipline

If an employee requires corrective feedback or discipline about their behavior in the workplace, employers need to use specific and detailed language to explain what behavior necessitated discipline and what the possible consequences for such behavior may be.

Controlling Unemployment Insurance Costs

The number of unemployment claims a company has against it can significantly affect the tax rate they are required to pay for unemployment insurance. If employers find themselves in a situation to contest an unemployment claim, the most important thing for them to do is provide all the information and documentation immediately. By showing the steps they took to inform the employee of company policies, as well as any warnings given to them, employers provide arguments behind the decision to terminate the employee.

Even if an employee was fired for misconduct or quit without good cause, contesting an unemployment claim is a decision that requires careful consideration. Employers need to do some research by contacting state’s unemployment office to obtain specific information before making any decisions. Ultimately, it is up to a state to determine if the employee is eligible for unemployment benefits.

Unemployment claims process can be frustrating and time-consuming, leaving employers with overpayments and missed deadlines. However, with an unemployment claims software employers can streamline unemployment claims management and make sure all claims are contested in a timely manner while staying compliant with federal and state guidelines. In addition to this, automating unemployment claims management significantly reduces errors and labor costs by combining everything into one system that every company can customize to suit their individual needs.

Outsource your unemployment claims management to improve compliance and overall handling of UI claims in a cost-efficient manner.