Chapter 17:
Unemployment Insurance

Updated as of June 2006

SECTION CONTENTS
A. Introduction [below]
B. Definitions & General Information
C. Claims Process
D. Eligibility Issues
E. Protesting Unemployment Insurance Claims
F. Appeal Process
G. Unemployment Insurance Tax
H. Guides and Forms

 

A. Introduction

Unemployment Tax Law Overview

Unemployment insurance benefits paid to former employees are paid out of a fund established by employers. The fund is maintained by a quarterly tax that each tax-rated employer is required to pay. The tax is a percentage of the employer's "taxable" payroll. Each employer has a "reserve account." The rate an employer must pay is anywhere from 0.1% to 6.2% of their "taxable" payroll and is determined using an "experience rating" method. Former employees, who become out of work, draw their unemployment insurance benefits against the "reserve accounts" of their past employer(s).

The state credits each employer's reserve account with the quarterly tax they have been paying and charges their reserve account with the benefits paid to former employees. The balance of funds that remains credited to the reserve account is then divided by the annual average taxable wage base the employer had paid out over the last three years. Using a table, the state then assigns a new unemployment insurance tax rate reflecting this ratio. If there is a high reserve of funds in the account, the rate will be low. The reason unemployment insurance tax is called an "experience rated" tax is that each employer's annual tax rate reflects that employer's experience with unemployment tax credits, benefits charges and payroll.

When workers become unemployed, they file an unemployment insurance claim against a twelve-month period of time. They must have a certain amount of wages in this "base period," or they will not have a claim. All the employers that the person worked for during this twelve-month period are potentially chargeable with their portion of the person's unemployment benefits.

Employers can protect their reserve account from unwarranted charges by protesting claims filed against them by former employees. If former employees were discharged or voluntarily quit but are found to be out of work through no fault of their own, they will receive benefits and the subject employer(s) will be charged with their share of that person's benefits. But if the employer proves that the person's termination was due to his/her own actions and could have been prevented by the employee, then their reserve account will not be charged with the former employee's benefits.

The standards for a "discharge for misconduct" and a "voluntary quit without good cause" are complex and confusing. Generally, if a person was discharged for circumstances inside their control, or voluntarily quit for reasons that are not considered compelling, or quit because of circumstances that could have been remedied, then the employer will not be charged if they protest the claim. Presenting the state with adequate information is essential if the employer intends to seek relief of charges by protesting the claim. Warnings, rule books, evaluations, proof of damage to equipment, letters of resignation and notes from termination interviews can all be used to prove an employer's case.

There are, of course, things over which an employer has limited control: lay offs, seasonal conditions, natural disasters, and changing conditions in the work place. But discharges and voluntary quits can often be handled in a way that will cause less risk of unwanted charges to the reserve account if the state's standards are understood and implemented.

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