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Employer Unemployment Insurance

Unemployment Insurance can be confusing and frustrating when you have an employee or former employee file for unemployment and you receive the claim. Understanding unemployment insurance is and the impact it can have on your company can go a long way in easing the frustration and confusion that comes from receiving an unemployment claim.

What Is Unemployment Insurance?

Unemployment insurance are the benefits that an employee can file for and receive from the state when they are laid off by their employer, terminated without just cause, receive a reduction in hours, voluntarily quit due to unfavorable working conditions or lose their job due to other unforeseen circumstances. These benefits are paid from the unemployment taxes the state receives from each employer in the state every year. The state administers and pays the unemployed employees from these unemployment taxes.

How Does Unemployment Insurance Work for Employees?

When an employee loses their job, one of the first things they can do to be compensated is to apply for unemployment. Depending on the reason for their termination, they might be eligible for unemployment. Not all terminated employees are eligible for unemployment. Typically, employees follow the steps below when filing for unemployment compensation.

1. Apply for Unemployment

For employees, the first step to filing a claim for unemployment is to apply for unemployment in the state where they pay taxes. This is important to remember, especially as a remote employee. If the company is based in Utah, but the employee lives in Arizona and pays state taxes to Arizona, then the unemployment claim should be filed through Arizona. In order to apply for unemployment, an employee can go to the state employment website and click on “file for unemployment.” The website will direct them to the necessary form to fill out.

2. Provide Employment Information

As part of the unemployment application, the state will ask the employee to provide their dates of employment with the company, their wages, personal identification (social security number, date of birth) and reason for termination. When the employee inputs their social security number and date of birth, the application should provide what employer the employee worked for (based on what has been reported by the employer). If it is not the correct employer, the employee should contact their employer to verify. Some employers might be listed under a different name than the company it is known as.

3. Provide Termination Details

A key to determining if an employee is eligible for unemployment benefits is the reason for their termination. Some claims are pretty straightforward, such as being laid off or hours being reduced at work. Others, such as being fired or voluntarily quitting, are a bit more complicated and require as many details as possible from the employee. If the employee voluntarily quits, the burden of proof is on them to prove that they quit due to unfavorable working conditions. If they are fired, the burden of proof falls to the employer.

4. Post Claim Communication

Once an employee has submitted an unemployment claim, the employer will receive notice of the claim and have a chance to respond. The state will likely reach out to the employee for further details on the claim, depending on the employer’s response. It is imperative that the employee is responsive with the state so there is no delay in their claim. No communication needs to take place between the employee and the employer after a claim has been submitted. All communication should happen through the state.

How Does Unemployment Insurance Work for Employers?

When an employer receives an unemployment claim from an employee, it is their chance to provide details and information to the state based on their records. If they fail to do so, the state will go off of all information reported by the employee. It is also important to understand the impact a claim can have on your company.

Every company pays an unemployment tax, which is calculated by the state, based on the amount of unemployment insurance benefits that have been awarded to your employees. The less benefits awarded, the lower your unemployment tax rate will be. That is why, from a fiscal perspective, you want to respond to all unemployment claims to avoid paying more in unemployment taxes for employees that shouldn’t have qualified for them.

1. Receiving an Unemployment Claim

Depending on what state your employee filed through, the employer will receive a paper or electronic copy of the unemployment notice of claim filed. As an employer, you want to make sure you know how your notices are being communicated to you so that you don’t miss any notices, especially if you work in multiple states.

2. Responding to the Unemployment Claim

When an employer receives the notice of claim filed, it will ask for the employee’s employment dates, wages, average hours worked and reason for termination.

Depending on the nature of the employee’s termination, the employer will want to provide as many details as possible. If the employee was fired, the burden of proof falls on the employer to prove to the state that the employee was fired with just cause. The employer must prove that the employee intentionally, willfully, or recklessly committed an act (or failure to act) that harmed the employer’s interest. This can be proven through proof of the employee having been properly trained, providing warnings the employee received of their behavior and detailing the final incident that led to the employee’s termination.

Some situations can be cause for immediate termination (harassment, breaking the law, etc). If the employer wants to avoid an increase to their unemployment tax rate, they need to provide all the necessary documentation and details that led to the employee’s termination.

After all of this information has been gathered, you will need to submit the form back to the state. Typically, you have about one to two weeks as the employer to provide a response back to the state, otherwise they will go off of the information provided by the employee.

3. Post Claim Communication

Once the state receives a response from the employer, they will compare the information provided by the employee and the employer. If there are any discrepancies, they will reach out to the employee and then the employer for clarification. Sometimes there will be some back and forth, so it is important for the employer to be responsive when the state tries to contact them. Once the state has gathered information from both parties, and both parties have had a chance to provide information, the state will make a decision based on the information they have gathered.

Employers Response Options to an Unemployment Claim

As an employer, when you receive notice of claims filed, there are a few options for how to respond. The option an employer chooses will likely depend on the termination reason of the employee.

Do Nothing

If the employee was laid off, or there was a reduction in hours, no response is needed by the employer unless severance pay or a PTO payout, pust termination, needs to be reported. As the employer, you can disregard the notice and no further action is needed.

Choose Not To Dispute

If the employee was fired or voluntarily quit but the employer chooses not to dispute it, they can notate that on the notice of claim. This might be the case if the employer decides they don’t want to spend time fighting the claim or they are ok if the employee receives unemployment benefits. By responding on the notice that you choose not to dispute the claim, it will speed up the process for the employee and the state will not try to contact you for more information.

Dispute the Claim

If an employer receives a notice of claim and doesn’t think the employee should qualify for unemployment benefits, they can dispute the claim. This is done by providing all details and documentation of the employee’s termination. The employer can submit all the information with the notice of claim response. The state will then go back to the employee with a series of questions, depending on the employer’s response.

Unemployment Appeal Hearings

If a decision is made by the state and the employee or employer disagrees with the decision, they can file for an appeal hearing. As part of filling, the party can explain to the state why they disagree with the decision. After the state receives the request for an appeal hearing, they will schedule one where the employee and employer meet with an appeal hearing judge to discuss the decision previously made. Whichever party is appealing the decision will have the burden of proof to prove to the judge why the decision previously made was incorrect. The judge will ask both parties questions about the employee’s employment. The party who is not appealing the decision is not required to be a part of the hearing, but they risk having the decision reversed if they don’t participate. After the hearing, the judge will send out a decision to both parties.

Questions You’ve Asked Us About Unemployment Insurance

Can a fired employee collect unemployment insurance?
Yes, if the employer is unable to prove that the employee was fired with just cause. This is typically proven through documentation and details of any warnings the employee received, as well as the final incident that led to the employee’s termination.
What happens when an employer contests an unemployment claim?
The state will then go back to an employee for a response to the information the employer provided. The state will work with both parties to make sure they get all the correct information.
How do unemployment claims impact business taxes?
Every employer pays an unemployment insurance tax. The amount of unemployment insurance tax that each business pays depends on the amount of unemployment insurance benefits employees receive. The more unemployment insurance benefits received by employees, the higher the unemployment insurance tax will be for employers.
Has COVID-19 changed employer responsibility for unemployment insurance?
Immediately after COVID-19, shortly after March 2020, most states put a hold on any claims affecting the employer’s unemployment insurance tax rate. However, since the end of 2020, most states have returned to normal so that any unemployment insurance benefits awarded will affect the employer’s unemployment insurance tax rate.

Tanner Pierce

Tanner has over 4 years of HR professional experience in various fields of HR. He has experience in hiring, recruiting, employment law, unemployment, onboarding, outboarding, and training to name a few. Most of his experience comes from working in the Professional Employer and Staffing Industries. He has a passion for putting people in the best position to succeed and really tries to understand the different backgrounds people come from.

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