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Employers: Know When To Fold On Unemployment Compensation Claims

Mon April 1, 2019 Publications

Employers rightfully want to keep costs down by avoiding unwarranted unemployment compensation claims. In fact, some believe in never giving in on unemployment. But allowing the claim to go through can be the wiser financial decision even where the employer might otherwise prevail. Why? Because employees who go from little to no income and are then denied benefits can become frustrated and angry. With no alternatives and as a matter of financial survival, they will seek out an attorney for advice. That puts the employer’s policies and entire relationship with its former employee up for scrutiny. Potential claims for unpaid wages, harassment, or discrimination are then made.

At our office, we analyze the pros and cons of challenging unemployment compensation on a case­by-case basis. I was recently reminded of why we do that. Last month, an ex-Chipotle worker told a California federal jury that she had decided to sue for disability discrimination only after learning that Chipotle had reported to the state unemployment agency that she had quit. She was out of work with no income and because of that report, she was initially denied benefits. If she wasn’t angry before, she was surely angry then. I suspect that prompted her to see a lawyer. By the time the agency determined she had been terminated and was entitled to unemployment compensation, it was too late. She had already decided to sue. Ultimately, the jury decided for Chipotle on the disability discrimination claim, but at what cost?

Avoiding litigation is not the only reason to allow an unemployment claim. Where the former employee has friends at the office, office morale can be affected by ongoing hostile litigation even in the form of an unemployment issue. Not only are employees concerned about the employer’s “unfair” treatment of their friend and former colleague, they are concerned that they will be treated similarly.

So, how does an employer allow a claim to go through? It does not respond timely, or responds stating something like, “The employer does not contest the employee’s claim for unemployment compensation.” The employer then allows the initial decision to stick, no appeal.

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