Should You Fight Your Ex-Employee's Benefits Claim?

If an employee you fired "for cause" is now claiming benefits, is fighting the claim in your best interest?

By Cliff Ennico

Opinions expressed by Entrepreneur contributors are their own.

A reader sent in the following question recently in regards to an ex-employee's benefits claim:

"A couple of weeks ago, I fired one of my employees. I made it clear that her firing was 'for cause'--she kept coming in late every day, wasn't meeting her deadlines and refused to follow orders. She said she was going to talk to a lawyer about suing my company for discrimination, as she was, at the time, our only female employee, but so far she hasn't done so. Last week, I received a notice from the state unemployment compensation people asking me if I want to challenge this ex-employee's claim for benefits. According to the notice, she claims that her employment with me was terminated 'without cause,' which is absolutely not true. I don't care if she gets unemployment benefits--frankly, it's worth paying the higher premiums to get rid of her--but I don't want her to be getting benefits under false pretenses if she's not otherwise entitled to them. I'm also afraid that if I don't challenge her version of the facts, she may use my failure to respond as evidence against me if she decides to sue me for discrimination. Should I challenge her application for unemployment benefits?"

Generally, when a person is out of work, he or she is entitled to claim unemployment benefits from the state. When a company hires its first employee, it usually registers for unemployment compensation with the state department of labor and makes regular payments into the state compensation system, just like insurance. Also like insurance, the more claims your ex-employees make for benefits, the higher the "premium" payments you have to make into the system.

The law varies from state to state, but ex-employees aren't usually entitled to claim benefits if they either voluntarily resigned their position with your company or their employment was terminated for repeated willful misconduct or insubordination over a period of time. If you've created a solid paper trail that this ex-employee was insubordinate over a period of time, you have every right to challenge her application for benefits.

But that doesn't mean you should.

If you do challenge the application, there are two things you should know. First, the person who determines whether your ex-employee gets benefits is a low-level government employee, not a judge, an arbitrator or a professional mediator. Since in most states benefits are denied only for compelling reasons, even if you make a solid case that the ex-employee lied on her application, your ex-employee probably will get benefits anyway.

Second, your conversations with the labor department will be recorded--either by tape or by a court stenographer who'll take down every word you and the ex-employee say during the proceedings.

The good news: You can use the recording as evidence if the ex-employee sues you for discrimination. You can claim, for example, that "We consistently said she was terminated for wrongful, repeated misconduct."

The bad news: If you say something extremely stupid, such as "This [expletive] wouldn't follow orders," the ex-employee can use the recording as proof that your office environment was hostile to females and that the real reason you terminated her was to create a "boys' club" with no girls allowed.

In virtually all states I'm aware of, your failure to challenge an ex-employee's application for benefits cannot be used by the ex-employee as evidence that you agreed with her explanation of the reason you terminated her. So if you're concerned you'll lose it during the proceedings, you have little to lose by not showing up. Let your ex-employee get her benefits, and accept the higher payments you'll have to make to your state labor department as a cost of doing business (they're fully deductible for tax purposes, by the way).

If you do decide to challenge, I'd ask if you can have an attorney present--many states allow this, and it's probably worth an hour or two of your attorney's time to keep you out of trouble. Keep in mind, though, that your ex-employee may also have an attorney present, so what starts out as a hearing on her unemployment claim may end up being the first deposition in her wrongful termination or discrimination lawsuit.

Cliff Ennico

Cliff Ennico is a syndicated columnist and author of several books on small business, including Small Business Survival Guide and The eBay Business Answer Book. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state.

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