Unemployment is at a 26-year high, and Americans are filing claims in near-record numbers.
Just days after losing their jobs, a huge portion of the newly jobless get a second nasty surprise: At least 25% of those who file unemployment claims will find that their former employers have challenged their rights to benefits.
"It felt like not only was I not valuable enough to be kept as an employee but that my former employer truly didn't care about me at all," says Roger Sheridan, an out-of-work midlevel manager in Chicago.
In the past 15 years, the number of employer challenges has more than doubled.
"High-turnover industries like retail, transportation and restaurants are fighting every claim because their unemployment rate assessment is so high," says Linda Konstan, a Denver consultant on employee issues and legal compliance.
Yet few workers may know they have the right to appeal or that their chances of success are pretty good if they move quickly.
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Use our interactive map to find out where the recession is hitting hardest, and find out how much each state pays in unemployment benefits.
How the system works
For small-business owners, contesting claims can be crucial to company survival."I have to fight every one," says small-business owner Raul Diaz of Mobile, Ala. "I always feel bad fighting to prevent someone from collecting when I know they need it. But I also have to fight to keep my business open."
Only employers pay unemployment taxes: a federal tax that tops out at $56 per worker a year and a state tax based on an employer's claims history and how likely that industry is to face job losses. Rates vary widely by state and by industry, but a company's "experience rating" can make a huge difference in its bottom line.
The minimum tax rate in Minnesota, for example, is 0.56% of the first $26,000 in wages, and the maximum is 10.7%. That's a difference of more than $2,500 per worker.
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When workers are laid off or fired, they apply for benefits, affirming they are able to work and are actively seeking jobs. The state looks at the reasons for the job losses and notifies the workers of benefit approval or denial.
Lack of work is the most common reason for new claims, and that usually means weekly checks will begin to flow after the state's required waiting period. Benefits are typically denied if a worker quit voluntarily or was fired for misconduct.
Once the state has decided whether benefits are warranted, either side can appeal.
Your likelihood of receiving benefits varies greatly from state to state, depending on your state's eligibility requirements and legal standards around denials. For instance, if you live in Montana, you're much more likely to receive benefits than someone in, say, Georgia. More than 70% of Montanans who lose their jobs collect a check; in Georgia, that figure is just 34%. Nationwide, about 44% of the unemployed received benefits in 2008, according to the Department of Labor. In addition to those whose claims were denied, some simply never filed, and others, such as the self-employed, were ineligible.
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It's about the bottom line
With most employers already running on skeleton crews, you might think there wouldn't be time to fight unemployment claims. Think again. Denver consultant Konstan says there's big money at stake for employers who win a challenge. "Each claim won can save an employer anywhere from $30 to $100 annually (in reduced premiums per employee). Or more, depending on how many claims are charged against them," Konstan says.Some employers challenge every claim. Some outsource the task to companies that specialize.
Konstan says that not only are employer challenges increasing but that claims of misconduct now account for the majority of cases. Urban Institute economist and researcher Wayne Vroman says 16% of claims are challenged on misconduct grounds and 10% as voluntary separations.
The number of employers winning challenges varies by state, largely because the rules on what constitutes misconduct vary. Misconduct can include claims of insubordination and criminal behavior such as theft, sexual misconduct or even violence. The most common claims of misconduct, Konstan says, include comparatively minor infractions such as excessive tardiness and sick days or spending too much time on personal calls or Web surfing.
"You have to wonder if those whose claims were denied realized they're able to appeal benefit denials -- and possibly have the denial reversed," Konstan says.
Continued: Getting what's yours
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