Should You Fight the Good Fight: How to Evaluate Unemployment Claims and Choose the Ones to Contest
Unemployment claims are still on the rise in North Carolina. Whether you, as an employer, should contest an unemployment claim filed by a former employee depends upon how you terminated the employee. Further, how you contest an unemployment claim you choose to fight depends upon the specific factual background of the case and whether you expect additional claims from the employee in the form of an Equal Employment Opportunity Commission ("EEOC") charge or other action. Nonetheless, you should treat all unemployment claims with care, especially given the state of the economy, and devote the requisite amount of resources to evaluating each claim.
Unemployment Claims in General
Unemployment benefits are governed by Chapter 96 of the North Carolina General Statutes ("Chapter 96"), and Chapter 96 delegates the authority to hear and adjudicate unemployment claims to the North Carolina Employment Security Commission ("ESC"). When an employee is terminated and files a claim for unemployment benefits, the Adjudication Unit of the ESC interviews the employee to determine whether the employee qualifies for benefits. After the interview, but before making its decision, the Adjudication Unit will send you a form titled "Notice of Claim and Request for Separation Information." Your response to this form is your opportunity to provide your side of the story by telling the Adjudication Unit what you contend was the underlying basis for the employee's termination. This is the point at which you must decide whether you wish to contest your former employee's claim. Credibility with the ESC is tantamount, and you should never contest claims simply to avoid having your unemployment account charged.
After receiving your response, the Adjudication Unit makes its decision as to whether the employee qualifies for unemployment benefits, and then issues its decision in the form of a "determination." If you receive an unfavorable determination, you may appeal by submitting a request to appeal to the ESC within 15 days after the determination. If you appeal, a hearing officer for the ESC will convene a hearing. Usually, these hearings are telephonic; however, either party may request an in-person hearing. Regardless of the format, you should submit any documents you wish to use as exhibits during the hearing to the hearing officer and the employee in advance, and these documents will make up the record of the case.
Hearings typically last one hour and are tape recorded. Testimony at the hearing is elicited from sworn or affirmed witnesses. Witnesses must have personal knowledge of the employment situation in order to testify effectively. You should be on guard, however, and understand that employees may attempt to conduct their own investigation during the hearing in order to obtain information that can be used to bring other claims such as an EEOC charge. If it appears during the hearing that the employee is "fishing" for information not relevant to the employee's qualification for unemployment benefits pursuant to Chapter 96, you should object.
After the hearing, hearing officers generally issue orders promptly, setting out findings of fact and conclusions of law justifying the hearing officer's decision of whether or not to award unemployment benefits. If the losing party wishes to appeal, it need only send a written request to appeal to the ESC within ten days after receiving the unfavorable decision. Typically, another hearing will not take place. Instead, the full ESC will review all documents and evidence already in the record and any additional information submitted by either party. The appealing party needs to prove that there is an error in the hearing officer's earlier decision in order to convince the ESC to order the case heard again, often with a different hearing officer.
Should the ESC choose to affirm a decision awarding unemployment benefits, you still have an appeal to the Superior Court by filing a "Petition for Judicial Review." The Superior Court judge to whom the matter is assigned will hear oral arguments from counsel for the ESC and you, and review any documents already in the record. At this level, the ESC will argue that the earlier decision by the hearing officer and ESC was correct. The Superior Court judge then may affirm or reverse the earlier decision. The Superior Court judge's order can be appealed by the losing party for review by the North Carolina appellate courts.
Evaluating Unemployment Claims
Most employees in North Carolina are "at-will employees," meaning they can be terminated for any reason or no reason at all, as long as the provided reason does not violate public policy. However, just because you have the right to terminate the employee will not win the unemployment case for you.
Some employers have a knee jerk reaction to deny and contest all unemployment claims that come in the door. However, the more prudent approach, and the one that can save time and money in the long run, is to contest only those unemployment claims that, based on the facts, should be denied. Sometimes an employee is just simply entitled to unemployment benefits which will be charged to the employer's account.
How the ESC views cases, and how you should evaluate each claim for unemployment benefits, depends primarily upon why the employee was terminated from employment. The ESC's determination of whether or not to award unemployment benefits will depend upon whether the termination was a result of either "misconduct" or "substantial fault" on the part of the employee. A finding of "misconduct" denies the employee unemployment benefits completely, but is a difficult finding for employers to receive. Facts which would support a finding of "misconduct" are those proving that the employee was terminated for stealing from the employer. "Substantial fault" on the part of the employee is an easier finding for the employer to receive than misconduct and is made when the ESC determines that the employee was terminated for violating reasonable requirements of the job. "Substantial fault" is most commonly found when the facts prove that the employee was terminated for repeatedly violating reasonable rules and practices that the employer has in place. A finding of "substantial fault" will result in the employee receiving benefits in a reduced amount based on the hearing officer's consideration of all applicable mitigating factors.
Alternatively, if the employee quits instead of being terminated, the employee will be denied unemployment benefits unless the ESC determines that the employee quit for "good cause attributable to the employer" such as a finding that the employee was forced to quit because of mistreatment, harassment, or other extenuating circumstance for which the employer was responsible. Such a finding is not common, and employers typically find themselves in a more defensible position if the employee seeking benefits voluntarily quits.
Although witness testimony is important, any finding of misconduct, substantial fault, or good cause attributable to the employer is based more often upon the documentation introduced at the initial hearing. It will not be enough for a supervisor to testify as to the reasons for the employee's discipline and eventual termination. Paper will prove your case because it will show, for example, whether you provided the employee with multiple written warnings that the employee failed to heed. At a minimum, you should be able to provide the hearing officer with a copy of your progressive discipline policy which, depending upon the offense, allows you to skip disciplinary steps and proceed directly to termination. A successful defense against an unemployment claim will depend mainly upon what story your documents tell.
There are certain other circumstances in which a former employee is entitled to only limited benefits or the employer's account is not charged for benefits awarded. For example, if the employee is paid accrued vacation or severance pay as a result of separation from employment, the employee will not be entitled to unemployment benefits for the time period for which such payments are made. In addition, employees employed for less than 100 days and who the employer proves had a bona fide inability to perform the job for which they were hired, may be entitled to benefits, but the employer's account will not be charged. Further, when an employee leaves work because of a disability or health condition that cannot be accommodated and which prevents the employee from performing the employee's job, the employer and the employee often choose to stipulate to that fact, and the ESC may award the employee benefits but the employer's account will not be charged. Finally, if an employee's termination is due to an "undue family hardship" (i.e., an inability to obtain childcare, eldercare for a disabled parent, or care for any other disabled member of the employee's immediate family), the employer's account will not be charged.
Conclusion
You should not take the possibility of an unemployment case lightly. Even assuming you will not be liable for a claim of discrimination or harassment, having your account charged for unemployment benefits can be expensive. You should document the employment relationship carefully, respond to situations with discretion, and, if termination is the only alternative, be prepared to prove that the termination was the result of wrongful actions of the employee or another cause for which your account should not be charged.
For further information regarding the issues described above, please contact William A. Oden, III.
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This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.