News & Insights

Benefits and Benefits AdministrationOctober 22, 2020by Stanton LawResist the Tendency to Challenge Unemployment Claims

Fighting unemployment claims is rarely worth your time and talent

Employers often get worked up over unemployment claims, and, as a matter of principle, spend (read: waste) significant time and effort contesting them. Why? Employers may mistakenly believe an employee’s receiving unemployment (1) is going to cost the company a bunch of money and/or (2) is a declaration that the employee shouldn’t have been terminated.

With the increase in unemployment claims in 2020, perhaps it is worth a moment to explore these misconceptions and expose the truth about what an award of employee unemployment actually means to an organization’s bottom line.

Misconception #1: Unemployment claims will cost money and increase your rates

An unemployment award is not a dollar-for-dollar transfer like a severance payment. Instead, benefits are paid from an “insurance” account funded by employer payments based on a very small percentage of an employer’s overall payroll. In other words, you’ve already paid for the insurance used to fund the award, and your “premium” only goes up to the extent the fund pays out more to former employees than you’ve paid in (i.e. you have really high turnover). In that case, the state’s Department of Labor will eventually increase the contribution rate, to a slightly larger percentage, until the company’s “account” comes back to equilibrium. The amounts we’re talking about, especially over extended time periods, are typically not worth getting worked up over.
Note: If your turnover is so high that your unemployment payments are more than a blip on your expense ledger, perhaps we should examine your hiring and/or management practices and figure out why you’re hiring so many people you have to fire.

Misconception #2: Receipt of unemployment means the company did not correctly terminate the employee

An award of unemployment does not suggest that the employer shouldn’t have or didn’t have grounds to fire. The standard is really low for the award, and the benefits do not mean that either side was right or wrong. Instead, the program is a social safety net, in the form of insurance, designed to keep people from falling off a financial cliff. It’s not a judgment or damages or a lottery windfall. And, the employer has already paid the money into the fund for this very use.

Focus on What Matters

What is the real goal of termination? To have the to-be-separated employee go away while minimizing the operational disruption. Given the relatively small stakes involved with unemployment claims, especially when compared against the degree to which it raises the temperature in already shaky separations, it is difficult to justify the time or effort to contest them. Not only do we rarely advise fighting against the initial claim, but there is virtually never a circumstance – or at least none come to mind – in which it would be worthwhile for an employer to appeal an award of benefits.

Again, remember that unemployment payments are not a reward. The business is not giving former employees any sort of payment; you’re just not opposing that they receive them. Making the choice to spend time and effort on more worthwhile endeavors, like running your business and attending to your current employees, will help to keep the temperature low and increases the likelihood that everyone just moves on.

If you have questions about how to best address a particular unemployment claim or how to incorporate this information into your business practices, don’t hesitate to contact the Atlanta business law attorneys at Stanton Law. Visit us online or call 404-531-2341.