Employers often face a quandary when asked by a state employment security commission for the reasons why an employee was terminated. The employer may have agreed to let the employee collect unemployment benefits, or otherwise does not want to provide an accurate version of the termination events out of concern that it will result in a disqualification of benefits. The employer either fails to respond to the ESC, or provides incomplete or inadequate information. State laws have always required employers to provide accurate responses to such questions, but a little-known recent change to federal law makes this requirement even more crucial.
The Trade Adjustment Assistance Act of 2011 provided certain federal subsidies for states to retrain and provide extended benefits to workers who are displaced due to foreign competition. One provision of this Act requires states receiving such subsidies to amend their unemployment insurance laws to try to cut down on awards of benefits to unqualified persons, whether or not those persons lost their jobs as a result of foreign trade.
These provisions have been incorporated into state law, and provide that employers’ accounts shall be assessed for otherwise non-chargeable unemployment claims if they fail to adequately and timely respond to an individual ESC inquiry, or more broadly fall into a pattern of late responses. This could result in substantially higher experience ratings and unemployment insurance premiums.
Some states outside of the Carolinas have gone beyond the federal minimums, defining a pattern of non-compliance as little as two late responses, or instituting civil and criminal sanctions for late, untimely or inaccurate responses.
Employers should change their approach to employee requests with respect to unemployment benefits. Departing employees should be told that the ESC and not the employer makes the benefits eligibility determination. The employer will provide a fair and accurate description of the reasons for the separation from employment. At most, the employer could agree not to appeal the ESC’s decision to award unemployment benefits. Employers seeking to help departing employees should not inadvertently allow these attempts to result in a violation of the law.