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Unemployment Benefits Claims and Contesting

October 25, 2021
Former employee fills out unemployment benefits application for compensation.

In today’s economic climate, companies are working hard to strengthen their bottom line and financial standing. One potential necessary and costly area of business to consider is unemployment claims.

The U.S. unemployment insurance system has been in place since the 1930s. Federal Unemployment Tax Act (FUTA) taxes and State Unemployment Tax Act (SUTA) taxes paid by businesses help fund the system.1 Weekly unemployment benefits payments may be awarded to support workers who lost their jobs not due to their own fault. The system is intended to stimulate a stable economy, even in times of increased unemployment2.

To be eligible to file for unemployment benefits in their state, former employees must have worked for a certain period of time and, in some cases, also earned a certain amount of wages determined by their state.2   A layoff, loss of seasonal work, furlough1 or reduction in hours4 may qualify for compensation. In most states, workers who are laid off may be granted 26 weeks of unemployment benefits in addition to a portion of their average annual pay.1

In general, those who are fired with cause are not permitted to put in a claim for benefits1, and those who left voluntarily or were terminated because of willful misconduct are not allowed to receive benefits4.

Contesting Claims

As an employer, you have the options to accept, contest or appeal claims brought forth by your former workers. If it goes in your favor, you can save significant costs for your business.

If you receive a notification from the state unemployment commission about a claim that you verify and feel is incorrect or unwarranted4, you can contest it within a given timeframe, most likely within 10 days.3 If you disagree with a claim after you attend a hearing about the facts of the claim, you will attend another hearing with an unemployment officer to answer questions. After that, you will receive a determination about the claim from the commission and have the right to appeal if you disagree.4

Costs of Contesting Claims

One major reason you might want to contest or appeal a claim is to possibly save on SUTA taxes. Your employee count, unemployment insurance paid in, and count of former employee claims for unemployment benefits all weigh into the amount of taxes you must pay to your state.3 These taxes are typically paid quarterly, and your rate will rise if your unemployment claims’ experience rating changes due to an increase in claims.4

Another main reason you may want to contest a claim is to potentially save on legal fees. Wrongful termination lawsuits may be discouraged and avoided from former employees if you dispute claims.2

Reasons you may want to contest a claim or payout of benefits are when former workers are not complying with the unemployment system. This may mean they are working other jobs, not replying to government notices, not following the processes of the unemployment office, and not maintaining good health to get back to work2.

Encouraging Employees to Return to Work

During the COVID-19 pandemic, there has been a growing number of claims for unemployment compensation from furloughed workers who are not willing to go back to work. Transportation and child care are top issues expressed for not going back to their jobs.5

You may act to decrease these claims as you open back up and call them back to work. A first step is to document your reopening and send a written request for employees to return to them. Another step is to adhere to COVID-19 guidelines and requirements from the government to create safe workspaces. Additionally, you may offer pay and benefits at competitive rates as incentives.5

State of Unemployment Insurance is Changing

According to the Department of Labor’s Unemployment Insurance Weekly Claims, initial claims have dropped to 290,000 in the week ending Oct. 16, 2021, a decline of 6,000 from the previous week. This level is the lowest since the 256,000 initial claim back on March 14, 2020.6

Nine million people had their expanded pandemic unemployment benefits expire on Sept. 6, 2021, according to the National Employment Law Project (NELP). Unemployment insurance especially has helped support disadvantaged populations during the pandemic, reported NELP. Their new brief examining U.S. Census data found that unemployment benefits helped 4.7 million people (adults and children) stay out of poverty in 2020. Nearly half were estimated to be Black people (1.1 million) and Latinx people (1.2 million) 7.

More changes to the unemployment system are on the horizon as a result of the shortage of workers during the pandemic. For example, Iowa leadership announced several requirements for the start of the new year, according to a news report. They plan to increase weekly work searches for people collecting benefits, as well as add case managers and leverage technology to assist with placing people in jobs.8

Unemployment claims are a necessary part of business that can significantly impact your finances. Be sure to evaluate your claims and monitor unemployment insurance changes at the state and federal levels.

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Sources

  1. https://www.uschamber.com/co/start/strategy/employer-deny-unemployment-insurance
  2. https://www.wolterskluwer.com/en/expert-insights/unemployment-benefits-and-contesting-a-claim
  3. https://www.uschamber.com/co/run/human-resources/employers-guide-to-unemployment-benefits
  4. https://www.shrm.org/resourcesandtools/tools-and-samples/how-to-guides/pages/contestunemploymentclaim.aspx
  5. https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/coronavirus-unemployment-claims-spike.aspx
  6. https://www.dol.gov/ui/data.pdf
  7. https://www.nelp.org/news-releases/unemployment-benefits-kept-4-7-million-people-out-of-poverty-in-2020/
  8. https://www.desmoinesregister.com/story/news/politics/2021/10/20/gov-kim-reynolds-announces-changes-iowa-unemployment-process/6104985001/