Unemployment benefits are a form of insurance: Employers pay into the program, and employees who lose their jobs through no fault of their own can collect benefits temporarily, until they find new work. However, not every unemployed person is eligible for unemployment benefits. To qualify, applicants must meet their states' eligibility requirements.
To get benefits, an applicant must file a claim with the state's unemployment agency. The agency will review the information, interview the former employer, and may interview the applicant. Then, the state will decide whether or not the applicant is eligible for benefits. The former employer can't deny the employee benefits; only the state agency can make that decision. However, if the employer contests the employee's claim and argues that the employee shouldn't get benefits, it might persuade the state agency to rule against the employee. This article explains how and why this might happen -- and what to do if your claim is denied based on your employer's statements.
How Employers Contest Unemployment Claims
When you file a claim for unemployment, the state agency will contact your most recent employer. The state wants to make sure you meet the eligibility requirements to collect benefits. This vary from state to state, but generally speaking you will qualify for benefits only if:
- You meet the state's earnings and/or work requirements. Only employees who have a minimum amount of recent earnings or work history qualify for benefits; those who have worked very little or have been out of the job market for a long time might not be eligible. (For more information, see What Are the Earnings Requirements for Unemployment?)
- You are out of work through no fault of your own. If you quit your last job voluntarily, without good cause (as your state defines that term), you won't be eligible for benefits. You also won't qualify if you were fired for serious misconduct, again as defined by your state.
- You must be able and available to work, and you must be actively seeking work (the required number of work search activities you must perform are determined by your state).
Your past employer doesn't have the right to "deny" you benefits. This decision is up to the state agency, not the employer. An employer that wants to fight your claim for benefits must prove to the agency that you don't meet the eligibility requirements. For example, the employer might argue that you earned less than you claimed, and so you don't meet the state earnings requirements. Or, an employer might claim that you walked off the job without good cause, rather than being laid off as you claimed in your application for benefits.
If your former employer contests your claim and contradicts what you put on your application, you should have an opportunity to give your side of the story. Typically, the state agency will hold a hearing, in person or by phone, to resolve the issue.
Why Employers Contest Benefits
Employers have an economic incentive to contest claims for benefits. Employers must pay taxes to fund unemployment. When an employer first starts paying into the system, it pays at a set rate. After the employer has been in the system for a few years, it will receive an experience rating. Employers that have generated more claims for unemployment will pay a higher tax rate; employers with fewer claims will pay less. So, the more claims for unemployment the employer can successfully defeat, the less it will have to pay in the long run.
Despite this incentive, savvy employers contest only those claims that really are illegitimate. After all, most employees who are out of work count on unemployment benefits to make ends meet while looking for a new job. An employer that fights every claim will quickly get a bad reputation, both with its other employees and with the state agency. By antagonizing employees who are already financially strapped, such employers also breed the kind of resentment that can lead to wrongful termination lawsuits.
How to Appeal a Denial of Benefits
If your claim for benefits is denied, you have the right to appeal the decision. The time limits for filing an appeal vary from state to state, but they are quite short. Typically, you'll have to file your paperwork within ten to 30 days after receiving notice that your claim was denied. The state agency may send you an appeal form and information on filing an appeal along with your denial notice; if not, contact the agency right away to find out how to appeal. (Find links to each state's agency at State Unemployment Agencies.)
In your appeal paperwork, you'll have to explain why you believe your claim should have been granted. The state agency will schedule a hearing, at which you and the employer will have an opportunity to make your arguments. Then, the hearing officer will issue a decision that either grants or denies your claim for benefits. If you lose the appeal, you can appeal again. In some states, this second appeal is also within the state unemployment agency; in others, you must appeal to the state court system.