No one wants to have to terminate employees or implement a reduction in force (RIF), but sometimes it’s an unavoidable necessity.
It is important that employers do everything they can to minimize their liability and manage their unemployment claims. Claims can cause a company’s experience rating to be re-evaluated and the associated tax rate to rise.
There are ways to manage the impact of a termination or layoff and reduce the impact to your business.
What to do after a RIF or termination:
After the RIF or termination, you will receive a Claimant’s Separation Statement from the Employment Security Department (ESD).
If you RIF’d the employee due to lack of work, you cannot fight the claim, and only need to return the form if it contains any errors. There is nothing you can do to prevent this claim from affecting your tax rate.
If you terminated the employee for cause, complete the form. Here are some important tips:
- The key to successfully making your case is to provide as much information and detail as possible, as quickly as possible.
- You should always maintain as much documentation as you possibly can, and give as many details as you are able when filling out the form.
- You must return the form by the date indicated on it (usually about 10 days from the date it was mailed).
- If ESD calls for follow-up information, again, remember that providing lots of documentation and detail in a speedy fashion is key.
Will an employee who quits working for you be entitled to unemployment benefits?
They might be. For instance, they will receive benefits if they:
- Resign for a legitimate job offer that ends up falling through
- Relocate with a spouse who is transferred
- Leave due to the illness or death of an immediate family member
- Resign to protect themselves or an immediate family member from domestic violence or stalking
Circumstances such as these are not attributable to you, the employer, and generally your account won’t be charged. If it is, you should request relief of the benefit charges.
When an employee resigns for reasons that are attributable to you as the employer, your account will be charged. These reasons include:
- A change in the worksite which materially increases an employee’s commute or difficulty of travel
- A deterioration of worksite safety that has been reported to the employer, and which the employer has failed to rectify in a reasonable period of time
- A change in the employee’s job that violates their religious convictions or moral values
- A reduction of an employee’s hours or wages by 25% or more
Do you have to pay unemployment for an employee terminated for good cause?
Surprisingly, the answer may be yes.
ESD’s guidelines about the definition of “cause” are simultaneously very specific and troublesomely vague. ESD only allows you relief of charges for “misconduct or gross misconduct” — but the definition of that is murky and up to the State.
Behavior that was termination-worthy to you may be considered by the ESD adjudicator to actually be something that was beyond the employee’s control.
For example, the ESD deems failing to grasp certain aspects of a job or being a poor fit for a position as an “inability to meet the minimum job requirements,” which is something that is beyond an employee’s control. Similarly, an employee who has repeatedly called in absent due to having a sick child at home also falls outside the ESD’s definition of misconduct.
Even if an employee was terminated for actual misbehavior, the adjudicator can still put the burden back on you by deciding that you failed to provide warnings about the transgression’s consequences and did not give the employee sufficient opportunities to change prior to the termination. In all of these circumstances, the employee will be entitled to their unemployment.
It is vital to keep great records so that you can prove the validity of your claims to the adjudicator when it comes down to your word vs. the employee’s. It is also important to have a good, thorough Employee Handbook (ideally one that employees have to sign and date when they receive it) to prove that the employee was fully aware of your company’s policies on misconduct.
Why you need to pay attention to those Notice to Base Year Employer forms:
Many employers are unaware that they need to pay attention to the Notice to Base Year Employer forms they receive from ESD. These forms are received when a former employee has been separated from their next employer.
The form appears to be informational in nature, and can list one or more former employees on it. Sometimes employers read it, and file it away, or toss it out. In actuality, this form is notifying you that a former employee has filed for unemployment benefits and that your account will be charged, unless you respond within 30 days.
The Notice to Base Year Employer form documents when someone worked for your company, wages reported, and the percentage of their unemployment that you’ll be charged, which could be as high as 100%.
Even though it comes with no form to fill out or questions to answer, you need to provide the same information that you would on a Separation Statement questionnaire. You can do this via a letter, a fax, or by writing on the form and returning it. If you don’t respond, your account will automatically be charged.
The Shared Work Program helps you hold onto your workforce during business slowdowns:
If you’re experiencing a business slowdown, but are trying to hold onto your skilled workforce, Washington offers a Shared Work Program through ESD, which provides unemployment benefits when a company reduces staff hours across the board. It accommodates work units whose employees are working 20-36 hours a week. The employees receive a percentage of their unemployment benefits corresponding to their percentage cut in hours.
Your company has to apply to ESD to be accepted into the program, and more information is available at ESD’s website.
Other ways employers can control the impact of layoffs on their unemployment insurance rates:
Oftentimes, employers lessen the impact to the employee by offering them severance pay. Instead of paying a lump sum of severance on the last day the employee works, consider paying severance in payments over the appropriate period of time, essentially keeping the employee on the payroll, but no longer working. This allows the employee some time to look for work, while extending the period before they’re eligible for unemployment.
If you’re laying off a good employee, utilize yours and your company’s network to assist them in their job search. If you can refer them to another company that is hiring, you will lower the burden on your own unemployment tax rate.
Alternatively, consider hiring the services of a career coach and/or professional resume writer to prepare the employee for their job search. For a fairly small investment, this professional assistance may very well help them land a job much quicker.
One last way to control your costs is to rehire former employees who are currently on unemployment. Put them on the top of your list, and if you have a need, make that person a priority for a job offer. Anyone collecting unemployment benefits has a responsibility to seek work and accept a suitable offer of work.
Staffing companies shoulder the burden of unemployment costs for you:
In this volatile economy, many companies are finding that their staffing needs are fluctuating. It’s often hard to tell if business has stabilized to the point that an employee can be hired permanently onto the payroll. If you are a small company and hire someone, only to let them go in a few months, you will be liable for their unemployment. When companies are smaller, RIF’ing an employee causes the business’s tax rate to take a bigger hit.
An effective solution for this is to hire employees through a staffing company. The staffing company bears the liability for the employees, and you can use them only when you need them. If you hit another bump in the road, you can lay them off without bearing any of the liability in your company. If your needs stabilize, you can take the employees onto your payroll.
Get help navigating the unemployment system:
Navigating the unemployment system can be quite cumbersome, and finding answers to questions can be next to impossible. It’s difficult to get the same person on the phone twice, and even the Director of Employment Security, Karen Lee, has admitted to me that any two claims adjudicators can make two different decisions on the same case.
ESD’s website provides much more information to an employee seeking benefits than it does to an employer seeking answers. But progress has been made! Lisa Vanderlugt has been hired as the small business liaison. If a business has a problem or needs training, she’s the person to call. She can bring trainers into a company, industry association, or business group such as a Chamber of Commerce. Lisa can be reached at (360) 902-9298, or by email at email@example.com.
Originally published in the Kitsap Peninsula Business Journal.