Should you Contest an Unemployment Claim?

When you receive notification that an unemployment claim has been made against your company, it’s important to act quickly. You typically have from one to ten days (depending on type of inquiry) to verify accurate wage, employment and separation information so that the State of Hawaii Unemployment Insurance Division can make their determination about the employee’s eligibility for benefits.

But what if you, as the employer, want to contest their claim?

The process takes time, money, and manpower, so it pays to know whether a claim is worth contesting. If you do decide to proceed, it’s advisable to consult with a legal expert who is familiar with the unemployment insurance claims process.

Why contest an unemployment claim?

It’s vital for employers to routinely contest, or at the very least investigate, unemployment claims they feel are unwarranted.

Keep your unemployment insurance rate low

While federal unemployment tax rates are set, a company can mitigate its state costs through effective claims control. That’s because state taxes are experienced-rated, which means that the more employees a company has collecting unemployment benefits, the more it has to pay into the system.

Discourage potential lawsuits

Contesting an unemployment claim gives an employer access to separation information the former employee provides to the state unemployment office and ensures that the employer’s side of the story is on record—which may be helpful if the former employee files an employment claim or lawsuit alleging, for example, discrimination or wrongful termination. An employer may make the business decision not to contest a claim (or appeal an eligibility decision) in hopes that it will minimize a potential lawsuit, but the possibility for the employee to pursue legal action always exists.

When to contest an unemployment claim

It’s important to always respond to an unemployment inquiry and provide all the facts surrounding the separation of employment. Understanding the circumstances surrounding an employee’s departure will help employers determine whether to contest an unemployment claim.

If the employee was laid-off…

DON’T CONTEST. An employee who is laid off, for instance, because of budget cuts or a business slow down, usually has a right to receive unemployment benefits. You should respond to the claim with the details surrounding the layoff. This would include providing any information regarding offers to work in other positions. Declining other offers of work may affect their eligibility. An employee who is still working for you but had their work hours reduced, could also be entitled to partial unemployment benefits.

If the employee was fired…

CONTEST, IF…the employee was fired for misconduct connected with work. An employee who intentionally and deliberately engages in misconduct does not have a right to receive unemployment benefits. This can include situations such as willful violation of company policies, chronic absenteeism, and extreme insubordination. Employers will have a better chance of contesting the claim if they are able to show a system of progressive discipline in which the employee was:

• Aware of the misconduct
• Aware of company policies and procedures and given an opportunity to improve
• Aware of the severity of their actions and given a final warning

Progressive discipline and a final warning are not necessarily required in cases of severe misconduct. Actions that would justify firing an employee, but don’t constitute misconduct, include the employee lacking the skills necessary to do the job or lack of cultural fit. Employees fired for these reasons may be entitled to benefits.

If the employee quit…

CONTEST. Always respond to the inquiry and provide all the details surrounding the voluntary resignation. An employee who quits voluntarily and without good cause does not have the right to receive unemployment benefits. Quitting because of job dissatisfaction or lack of career growth won’t normally constitute a good cause. This does not include forced resignations, in which an employee is given the option to resign or be fired.

Resignation in lieu of termination is treated as a discharge for purposes of unemployment. If an employee does quit for good cause attributable to the employer, it’s up to the employee to provide proof. This usually involves situations where the employee would have suffered harm or injury by staying, such as a hostile work environment, unsafe conditions, or discrimination and they must show that they exhausted all other options to resolve the issue.

Even if an employee was fired for misconduct or quit without good cause, contesting an unemployment claim is a decision that requires careful consideration. Ultimately, it is up to the State of Hawaii Unemployment Claims Examiner to determine if the employee was discharged for misconduct or if they quit without good cause.

For further reading, you can check out the State of Hawaii Department of Labor and Industrial Relation’s Handbook for Employers on Unemployment Insurance.

You might also consider outsourcing your HR administration to the experts at simplicityHR. Our team can walk you through the unemployment claims process or handle the entire case on your behalf.