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When an employee is laid off, fired, or voluntarily quits, they can apply for unemployment insurance to get assistance while looking for another job. However, not everyone who is out of work is entitled to unemployment benefits. There are different factors that dictate whether a former employee receives unemployment benefits, such as the circumstances of the employee’s departure and whether the employer contests the employee’s claim.

State unemployment offices ultimately decide if a former employee can receive unemployment benefits. However, employers have the option of contesting an employee’s application for unemployment benefits beforehand. Given that a higher percentage of former employees receiving unemployment benefits results in a higher tax rate for employers to pay, contesting unemployment benefits is in their best interest, provided they are unjustified.

Eligibility for Unemployment Benefits

There are different factors that employers should consider before contesting unemployment benefits, such as employees’ eligibility for unemployment insurance. While they are eligible only if they are out of work through no fault of their own, this rule works differently depending on whether the employee quit, was laid off or was fired.

An employee who loses a job through a layoff or reduction in the workforce is always eligible for unemployment benefits while fired employees can claim them if they were terminated because of financial cutbacks or because they were not a good fit for the job for which they were hired. They can also receive unemployment benefits if the employer had a good reason to fire them, but infractions made were minor, unintentional, or isolated.

In most states, an employee who is fired for proven misconduct will not receive unemployment benefits. Misconduct includes willfully doing something that substantially injures the company’s interests. Types of misconduct that render the employee ineligible to collect unemployment benefits can be instances of numerous unexcused absences, sexually harassing coworkers, chronic tardiness, extreme insubordination, or intoxication on the job. These instances must be proven by the employer with sufficient documentation, poor documentation is a big factor in employers losing these types of cases.

However, poor performance because of lack of skills, good-faith errors in judgment, inefficient work habits, an unpleasant personality, or poor relations with coworkers do not constitute misconduct. As a result, an employee fired for any of these reasons will usually be allowed to collect unemployment benefits.

An employee who quits or resigns from a job can be eligible for benefits only if they resigned for good cause. For example, if an employee leaves a job because of intolerable working conditions or the job poses a serious threat to the worker’s health or safety, most states allow them to collect unemployment benefits.

Accepting or Contesting Unemployment Benefits

Once a former employee files an unemployment claim with their state’s unemployment office, employers receive a notice requesting details on why the person is no longer employed. The employer will need to gather details such as why the employee left: if they were laid off, quit, or were fired, whether they refused employment, and if they are still receiving severance pay or other compensation. At this point, employers need to determine if they have grounds for contesting unemployment benefits. For example, if the employee was laid off due to lack of work, the employer could choose to accept the claim and let it move forward without contesting the benefits. If the notice contains inaccurate information or the employee quit or was fired with cause, employers should consider contesting unemployment benefits.

However, contesting a claim does not automatically mean that a former employee’s unemployment benefits will be denied. To ensure a successful outcome, employers must provide evidence and documentation to back up their case. In addition to this, employers may want to conduct research by contacting their state’s unemployment office for specific information about the law in their state and the effect a successful unemployment benefits claim can have on their company’s rates.

Factors to Consider When Contesting Unemployment Benefits

Employers typically contest unemployment claims because they are concerned that their unemployment insurance rates may increase. The cost of a single claim can have a significant effect on the employer’s experience rate and the bottom line, so employers may be motivated to contest an employee’s claim for payment.

Furthermore, unemployment insurance is created for legitimate claimants and abuse of the system could threaten the benefits for everyone. If employers are aware that an employee is not entitled to benefits, they are required to fight the claim as fraudulent claims can only be prevented with their active help.

Finally, contesting unemployment benefits can act as a deterrent or send a message to other workers. Winning the claim can demonstrate to employees that the company was acting for legitimate business reasons.

At the same time, contesting unemployment benefits may cost time, money, and become more complex if a former employee files a wrongful termination suit that otherwise could have been avoided. Sometimes, agreeing not to contest unemployment benefits in exchange for a settlement agreement with the employee, where the worker agrees not to pursue any other legal action, can be a more cost-effective outcome.

Keeping Unemployment Insurance Costs Under Control

Usually, the main reason employers are motivated to scrutinize every new claim and contest them is to avoid an increase in unemployment insurance tax rates. When contesting unemployment benefits, employers should provide documentation that shows why a former employee was terminated and be prepared to act swiftly.

However, before making this decision, employers should examine each case carefully to determine whether denying an unemployment claim is worth their company’s time. In certain circumstances, due to the high cost of time to process and contest unemployment benefits, not disputing the claim can be a better option.

Managing unemployment benefits can be complex and time-consuming, leaving employers exposed to additional costs. However, with proper unemployment claims software employers can streamline unemployment benefits handling and make sure all claims are contested in a timely manner while staying compliant with federal and state guidelines. Also, automated solutions make it easier for businesses to reach faster processing times, reduce errors, and lower tax rates while also freeing time for employees to work on higher-value tasks that encourage collaboration and innovation.


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