The Unemployment Road Map, Part 4: Know Your Terms - Involuntary Terminations

Even the best employment relationships can end and sometimes, when they do, they result in the former employee filing for unemployment benefits. If you have received an unemployment benefits claim and are not experienced with the process, you will likely have some questions. This blog series, The Unemployment Road Map, is a resource that TriNet offers to provide you with guidance on this journey.

As discussed in the previous post of this series, the word “termination” can cause some confusion. In this post we will talk about involuntary termination, i.e. where an employer initiates the separation. Other terms that are commonly used for this type of separation are “discharge,” “dismissal” and the dreaded, “fired.”

Unlike voluntary terminations, there are different types of involuntary terminations. They include layoffs and terminations for misconduct or terminations for performance issues. We’ll discuss each of these types and their implications. We’ll also discuss special situations related to the reduction of employees’ hours and how that impacts an employer’s unemployment insurance (UI) account.

Layoffs
A layoff can happen when an employer cannot fund position(s), when no work is available for the employee or when positions are eliminated. For unemployment purposes, a layoff is considered involuntary and chargeable to an employer’s UI account. Laid off claimants are considered unemployed through no fault of their own and if they are ready, willing and available for work, they usually are eligible to collect benefits. The amount of benefit charges will vary based on the amount of wages a claimant has earned during their tenure, and the length of employment.

Layoffs and Reduction in Hours - Special Circumstances
The same may hold true for an employee whose hours are reduced by the employer. The only caveat here is that in most states, if the employee’s hours are reduced, but their earnings still exceed the amount of their weekly benefits, they may be deemed ineligible for unemployment benefits.

If an employee who has been laid off receives severance, some states will divide the severance pay by the employee’s average weekly wage and delay the employee’s benefits payment by that number of weeks. This could help an employer because if the benefits payment is delayed and the claimant finds other employment in the meantime, then it could significantly reduce the amount the employer has to pay on the claim. In other states, severance pay is not a determining factor in calculating or paying benefits. It is important to consult with your HR service provider when considering severance payments.

Terminations for misconduct
The process of responding to a claim for benefits involving a termination for misconduct (sometimes referred to as “for cause”) can be very involved. The burden to prove misconduct falls on the employer. To prepare for a potential claim, an employer should document the exact reason(s) for the termination. Defensible causes for termination can include repeated policy violation, insubordination, attendance and punctuality issues and refusal to perform job duties.

An employer can better defend against a claim with proper documentation of the events that justified separation – the straw that broke the camel’s back, if you will. States will focus heavily on the final incident. They often demand a detailed description of the event, including dates, times, witness statements, emails, text messages, video evidence and any other documentation that proves the employer had good cause to terminate. They require documentation of the involuntary termination at the initial claim level. This kind of documentation is even more vital for offenses that result in immediate termination such as theft, violent action or blatant harassment witnessed by others.

When an employer can prove that there was good cause to terminate a claimant’s employment for misconduct, the claim can end in one of two ways. The claimant will either be deemed ineligible for benefits, or the claimant will be deemed eligible and the employer’s account will be non-charged – meaning the claimant will receive benefits, but the state will not charge the employer’s account.

Again, proper documentation of past non-compliant behavior can strengthen an employer’s argument. If there has been clear communication about the position and employment policies, a signed acknowledgment from the employee and any documented warnings given to the employee, an employer has a great foundation to prove that there was misconduct, supporting the decision to terminate employment.

Terminations for performance issues
In most states, it is difficult for employers to prove terminations based on performance issues. If a claimant adequately shows that they did the work to the best of their ability, but not up to the employer’s standards, the state will likely grant the claimant unemployment benefits. This is why documenting any skill gaps and working with the employee during the introductory period is so important.

If an employer can show that steps were taken to improve the employee’s performance, the state may consider the employee’s non-performance a refusal to perform job duties, and deny benefits. A state may also deny benefits if a claimant shows that they could perform the work (usually proven by positive reviews and merit pay raises), but the employer shows the claimant consistently failed to perform. However, a state may still grant benefits if the claimant demonstrates mitigating circumstances.  

Ineffective protests
There are several ways that employers unintentionally can weaken their protests against claims. We have included several examples below, but this list is not all-inclusive:

• If an employer terminates for violation of company policy, but the policy is not written and there is no written acknowledgement of the policy by the employee.
• If an employer terminates for violation of a written policy, but they have accepted that behavior before. This is called inconsistent application. For example, if the policy states that an employee must call in for an absence or tardiness and cannot text their supervisor, but the supervisor has accepted text messages in the past.
• If an employer terminates for reporting to work under the influence of drugs and/or alcohol but does not send the employee for testing.
• If an employer fails to document the employee’s discipline and performance issues. For example, if a supervisor lets an employee get away with bad behavior and then terminates them for that behavior, but has never documented the behavior.
• If an employer terminates for poor attendance but cannot produce the employee’s attendance records.
• If an employer terminates an employee for cause but then pays severance. Many states view severance as a goodwill gesture on the part of the employer. 

Involuntary termination can be quite complex, but proper documentation of employment issues is invaluable to effectively protesting claims and keeping unemployment insurance rates low. As with many HR issues, preparation and documentation are vital to success. The next post will discuss state and federal compliance and employers’ responses to unemployment claims. 

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.