By Jennifer S. Hagerman
After a former employee files an unemployment claim, the employer is confronted with the decision of whether or not to contest the claim. In making the decision, it’s important to remember that the primary basis on which an employee who has been terminated will be denied unemployment compensation is that he or she engaged in work-related misconduct.
Work-related misconduct is defined in Tennessee as:
- Willful or wanton disregard of the rights or interests of the employer;
- Deliberate violations or disregard of standards of behavior that the employer has the right to expect of an employee;
- Carelessness or negligence of such a degree or recurrence to show an intentional or substantial disregard of the employer’s interest or to manifest equal culpability, wrongful intent or evil design; or
- Any conduct by a claimant involving dishonesty arising out of the claimant’s employment that constitutes an essential element for which the claimant was convicted.
Misconduct does not include:
- Inefficiency, or failure to perform well as the result of inability or incapacity;
- Inadvertence or ordinary negligence in isolated instances; or
- Good faith errors in judgment or discretion.
Under this standard, misconduct must be intentional behavior. Stealing, violence or threats of violence, and falsifying time records are typical examples of misconduct.
However, misconduct can also include continuing behavior that an employee fails to correct after being warned. This is where a properly administered progressive discipline policy can be helpful. Excessive absenteeism becomes misconduct after an employee has received a verbal warning, written warning and final warning/suspension yet continues to miss work. Even a single warning may be sufficient in some cases, such as refusal to obey a safety policy.
Unfortunately for employers, poor performance, the most common reason an employee is terminated, is not considered misconduct. Contesting unemployment in the case of poor performance is a waste of time and money, even if it makes your head hurt to think of more money going to an unproductive employee.
So what about in the close cases? Is there any downside to rolling the dice? There could be. Remember that an unemployment hearing, though seemingly informal, is a trial on the merits where the witnesses are under oath and hearsay carries very little weight. If the claimant denies threatening an employee, the employer must be prepared to call witnesses who heard the threat, not just the HR Manager who was told about the threat. Remember too that your witnesses who testify will be locked into a version of events very early on that may later prove to be erroneous or incomplete, but by which they can still be impeached if they testify differently later in a Title VII claim brought by the former employee.
Finally, employers that are deciding whether to contest the claim in a close case should consider whether they may win the battle but lose the war. Being fired is a very personal, devastating event for an employee. Employers who contest claims on principle may drive a financially desperate or emotionally distraught former employee to sue his or her employer for wrongful discharge when he or she might have been content just to collect unemployment compensation and move on.
Still unsure? Our employment team is here to help.
By Lisa A. Krupicka
Wait a minute! How can an employee on leave be eligible for unemployment benefits? Oh, you would be surprised. Here are some situations in which an employee on leave may still be eligible for unemployment compensation:
- Temporary or seasonal lay-offs – If an employee has been laid off with a return-to-work date within 16 weeks from filing his or her unemployment claim or is a member of a hiring union, he or she can apply for unemployment for the period during which he or she is temporarily out of work.
- Reduction in work hours – If, for example, an employer cuts hours in a department to avoid lay-offs, affected employees can receive partial unemployment payments.
- School employees – Employees, whether professional or non-professional, who do not have a contract and have not received reasonable written assurance from the school that they will be employed the following school year can draw unemployment during summer vacation.
On the other hand, if you are on FMLA leave or any other type of leave based on your inability to perform the essential functions of your job because of illness or injury, you are not eligible for unemployment during that time. In fact, if you lose your job and are unable to work because of illness or injury, you are still not eligible to draw unemployment. If you cannot work, you cannot actively look for work, which is an indispensable qualification for drawing unemployment compensation.
By Sarah E. Stuart
You know you have to pay it. But how does a former employee’s filing of an unemployment claim with the State of Tennessee affect your premium calculation for state unemployment insurance?
For premium-paying employers, Tennessee relies on a complicated formula to establish your “experience rating”— the ratio of your total premiums paid to claims made.
The Tennessee unemployment insurance program is financed by employer premiums paid to the state and employer federal unemployment taxes paid to the Internal Revenue Service (IRS). On the federal side, the Federal Unemployment Tax Act (FUTA) provides for a 6.0 percent tax on taxable payroll. Payment of state premiums in full for the previous year by January 31 will result in a 5.4 percent offset credit against the FUTA tax.
For state unemployment insurance, Tennessee employers pay premiums to the State of Tennessee only on the taxable wage base in effect for each covered employee in a calendar year. The current taxable wage base is $7,000 per covered employee. Employers are still required to report total wages paid to each employee for the quarter on the Wage and Premium Report so that the State may determine a claimant’s eligibility and the amount of benefits based on total wages.
Tennessee state premium rates on the taxable wage base vary from .01 percent to 10.00 percent, dependent on an employer’s use of the unemployment insurance system (this is the employer’s experience rating) and the balance in the Unemployment Compensation Trust Fund (this is the total balance in the State’s premiums account). An employer qualifies for an experience rating if the employer’s account has been chargeable with benefits and subject to premiums for 36 consecutive calendar months. An employer who does not have an experience rating is assigned a “New Employer” rating based on their industry.
For an employer with an experience rating, its premium is dependent on its “Reserve Ratio.” The Reserve Ratio can be calculated by dividing the balance of an employer’s unemployment insurance (UI) account (premiums paid less benefits paid for all years), divided by their average annual taxable payroll for the three most recent years. Essentially, for employers who qualify for an experience rating, their premium rate will be low if they have paid significantly more in premiums than in benefits and high if they have more charges for benefits than premiums paid.
The position of the employer’s Reserve Ratio on the State Premium Rate Table (link below) determines the employer’s premium rate. The balance of the Unemployment Compensation Trust Fund places the Premium Table 6 in effect for the present period (which is reevaluated every six months but has consistently been at Premium Table 6 for several years). The premium rates are relatively low so long as your premiums paid exceeds benefits charged. Additionally, changes in an employer’s Reserve Ratio will not significantly affect their rate, particularly since the taxable wage base in effect is only $7,000.
So long as you have a net positive Reserve Ratio (more premiums paid than benefits used), your premium will not go above 1.9 percent. Click here to view the premium rate chart for non-governmental employers.
Every Tennessee employer paying unemployment insurance premiums should receive a Notice of Premium Rate (BL-0482) during the first quarter of this rate year, based on your experience rating as of December 31. That rate goes into effect for the third quarter of that year. So, if you experience a high volume of unemployment claims in the first quarter of 2020, it would not affect your rate until the third quarter of 2021. On the other side, if you continue to pay in premiums with a low rate of unemployment claims, your premium may reduce. In good news, the Unemployment Compensation Trust Fund has been at Premium Table 6 consistently for several years, so low premium percentages should remain the norm.