Tuesday, May 18, 2010

What Business Owners Need to Know about Unemployment Benefits

Many of my business clients ask me questions about how unemployment benefits work; so I thought I would give an overview.

Unemployment benefits provide payments for workers who have lost their job through no fault of their own.  The unemployment program is funded by employers who pay taxes on wages paid to employees. The tax works like any other insurance premium. It is determined in part by amounts of unemployment insurance benefits paid to former employees of the taxpaying employer.  Therefore, employers have an incentive to block former employees from making successful unemployment insurance claims.

California sets eligibility requirements that limits who is able to collect unemployment. In order to be eligible a worker:

• Must be completely unemployed or working less than full time
• Must be physically able to work, looking for work, and willing to accept a suitable job
• Must have worked in last 18 months and
• Must have lost employment through no fault of their own.

The last factor is of particular importance to employers seeking to contest a claim by a former employee.  The reason an employee is out of work affects the individual’s eligibility for benefits. For instance, a worker that is laid off due to lack of work or a reduction in hours will generally not be found to be at fault. When deciding if a former employee is at fault it is presumed that an individual has been discharged for reasons other than misconduct in connection with work performance and not to have voluntarily quit without good cause unless the employer has given written notice to the contrary.  This presumption can be overcome by a showing of misconduct connected with work performance. Under these circumstances benefits are determined on a case by case basis.  Misconduct includes, among other things, destroying or stealing company property, neglecting work duties due to intoxication, and physically assaulting a co-worker.

On the flip side, if an employee quits or resigns they are not likely eligible for unemployment benefits. If an employee can show they quit for a good cause such as intolerable or unsafe working conditions they might be able to prevail. Additionally, workers who quit for valid medical reasons or to relocate with their spouses might be considered to have quit for good cause.