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HR Insights with Ali: Unemployment Claims - 3 Reasons Why Not Fighting Can be a Winning Move

Posted on 1/18/2017 by Ali Oromchian, Esq.
Every employer knows that parting ways with an employee can be an arduous process. Even if you have followed suggestions to document the termination process, you may be concerned that the employee will file a claim for unemployment benefits, and wondering how that claim may impact your practice financially. This is especially true when it comes to employees who have only been with your practice for a short time, such as 30-60 days. And while your concerns make sense, we want to share some information which may help to address those concerns and explain why you may be more worried than you should be.

  1. You may not even be responsible for the employee’s benefits.

  2. When it comes to short-term employees, the fact is that many times their unemployment benefits will end up being assigned to their prior employer, not to you. This determination is based upon a number of factors, including the employee’s prior filing history. But the bottom line is that you may, in fact, actually be concerned for no reason.

  3. Your practice does not pay unemployment benefits as direct expenses.

  4. For all of the concerns over unemployment claims, it may (or may not) surprise you to know that many employers do not fully understand how unemployment payments actually work. When someone is awarded unemployment benefits, those benefits are paid to the employee out of a pool of resources which are paid by employers when they pay their taxes. In other words, when your company pays its taxes, it is paying into a pool of funds which will be used to pay unemployment benefits (when such an award is deemed appropriate). This is what is known to businesses as a “soft cost,” because it is one which is not coming directly from your business upon an employee’s successful claim. You pay into a fund as part of your tax payments, and the employee is paid from that fund.

  5. Even a successful claim will not necessarily raise your unemployment tax rate.

  6. Of course, it would be unfair if businesses with scores of terminated employees filing unemployment benefit claims paid the same tax rate as a business with few claims. Therefore, it is possible that your business could pay a higher tax rate based upon a high number of ex-employees seeking benefits. However, if your practice is in its first five or seven years of business, your rates will not go up, regardless of how many unemployment claims are filed by your former employees.

Therefore, in all likelihood, not fighting the claim (as opposed to trying to challenge them simply for financial reasons) is usually your best approach. Most employers who challenge unemployment benefit awards do not succeed, and the delay caused to former employees can lead some to take legal action against their former employers (resulting in more expenses for your business). While every case is different, history has shown that your practice is less likely to suffer negative consequences from unemployment claims if you resist the urge to challenge them. But you don’t have to tackle these issues alone. Contact an HR expert or legal counsel regarding your unemployment claim concerns today!

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