Unemployment Compensation

In general, only workers who involuntarily leave their jobs are eligible for unemployment compensation. But that doesn't mean someone who quits won't file a claim. Such people can allege that they were forced out due to illegal or discriminatory practices, or they may misrepresent the circumstances under which they left.

The benefits paid to jobless workers are financed through federal and state unemployment taxes paid by employers like you. Every state imposes unemployment tax at a rate based on the amount of benefits that has been paid to your former workers. Therefore, you can lower your unemployment tax rate if you fire or lay off workers only when absolutely necessary, and use the proper procedures to do it. You should also routinely contest unemployment benefit claims when you think the worker is ineligible. In some states, you can lower your rate to zero, and pay no unemployment taxes at all. On the other hand, if you don't pay attention to these things, you may well find your unemployment taxes eating into your bottom line. To stay on top of the system, you need to know who’s eligible for unemployment benefits and what actions can disqualify an otherwise eligible worker.

There are a few other requirements that must be met before someone is eligible for unemployment benefits. If you think an ex-employee doesn't satisfy these requirements, consider contesting the payment of benefits.

The worker must be truly unemployed. A worker who has a part-time job or is self-employed is ineligible for benefits.
The worker must make a claim for benefits at the local state employment office, and respond to any cards, letters, or requests to appear from the government.
In most areas, the unemployment office also helps jobless workers find a new position, and the person must cooperate by filing job applications, interviewing, and accepting a suitable position if one turns up. In some states, a worker must report to the agency the number of job applications submitted each week, to prove that a job search is continuing.
The worker must be ready, willing, and able to work. That means his or her health must be good enough for work in a reasonable number of jobs that are available in your area. If the worker has enrolled in some type of school or training course, it must be approved by the state unemployment agency, or the worker must be willing to leave the course if school hours would conflict with a suitable job offer.

Some people otherwise eligible for benefits can still be disqualified from receiving benefits, based on how and why they lost their jobs. Generally, unemployment benefits are designed for people who are laid off because the employer doesn't have enough work for them, or who lose their jobs because of something the employer did wrong. So, workers will be disqualified if:

The worker left the job voluntarily, without a good cause connected to the job. In all states, a worker who quits because the employer does something nasty like harassing or discriminating against him or her, or making a significant change in wages, hours, job duties, location, or other working conditions, has "good cause" to quit and won't be denied benefits. States differ in their interpretation of whether "good cause" includes quitting for health-related or personal reasons, such as a spouse’s relocation. Consult your attorney for the most up-to-date rules that apply to your area.
The worker turned down a suitable job offer during the period of unemployment.
The worker was fired for misconduct. In situations involving misconduct, documenting warnings and disciplinary measures taken will enable you to easily prove what happened and keep the worker from receiving benefits at your expense. Poor performance or incompetence is not usually considered misconduct. Although you have the right to fire a poor performer, he or she will probably be able to collect unemployment compensation.
The worker is unemployed because of a strike or other work stoppage caused by a labor dispute.
The worker is receiving workers’ compensation payments, Social Security payments, a private pension, or severance pay.
The worker lied on the benefit claim or omitted some important information, in order to get or increase benefits.