Contesting Employee's Unemployment Insurance

Question: I recently terminated an employee for poor performance, and the former employee has now filed for unemployment benefits. Should I fight the claim?

Answer: Unemployment benefits are designed to be a safety net to tide employees over between jobs. In California, an employee is generally presumed to be eligible for benefits. An employer can counter that presumption by showing that (1) the employee voluntarily quit employment without good cause, or (2) the employee was discharged for misconduct. Misconduct does not mean incompetence, negligence, or good faith errors in judgment. Misconduct means a willful or wanton disregard of an important duty to the employer, which disregards and injures the employer’s interests. Put another way, your employee must intentionally do something very bad in order to be disqualified from benefits. Thus, unless the employee does something egregious like steal or bring a weapon to work, more often than not the employee will prevail on a claim for unemployment benefits.

However, there is more to consider than merely whether you are likely to win or lose. Before deciding whether to fight an unemployment claim, you should assess several factors. On the plus side, if you win, your unemployment insurance account will not be affected. If you win, it may also discourage the employee from filing other, more dangerous claims against you.

On the negative side, even if you win, you may antagonize the employee and generate additional claims against you, such as discrimination claims or claims for unpaid overtime. Even if these claims have no merit, they will cost much more to fight than the unemployment benefits would have cost. Also, any statements you make in the course of fighting the claim could come back to bite you in any future litigation. In addition, if you fight the unemployment claim and lose, you may inspire the employee to file additional claims. Employees generally do not understand that while the employee gets the benefit of the doubt on an unemployment claim, on most other claims the employer is “presumed innocent until proven guilty.” Thus, a successful unemployment claim may make the employee think that the legal system offers easy money and generate additional claims.

If you decide not to contest an unemployment claim, you will not antagonize the employee, and the employee will receive a little money to help them through until the next job. This may allow the employee to move on with his or her life, rather than seeking revenge against you. Often, therefore, it will ultimately be more beneficial to allow an undeserving employee to obtain benefits than to fight every claim as a matter of principle.