Picture the situation, Bob, an employee of your small business, has crossed the line one too many times, and you fire him for legal cause (assume one that may even disqualify him from receiving unemployment benefits). You give him his final paycheck and begin trying to figure out who will pick up Bob’s share of the workload until he’s replaced. Even once replaced, you need to train the new person, among a half dozen other matters. When that happens, it’s especially easy to fall behind on reading and responding to some of your mail, especially a nondescript letter. However, if that letter is from the Illinois Department of Employment Services (the IDES) concerning Bob’s unemployment claim, ignoring it for even a week can be exceedingly costly and devastating to your business’s future cashflow.
How Illinois Unemployment Taxes Work
Unemployment taxes are in place so that when a qualifying employee is fired or laid off, there is a pool of state funds to help modestly support him or her until a new job is found. Almost all Illinois employers must pay unemployment tax. This tax is not fixed and the total amount paid can quickly escalate when ex-employees receive unemployment.
How Illinois Unemployment Taxes are Calculated and Long Term Consequences
This tax is calculated based on a number of factors, but the biggest factor is the amount of benefits paid out by the Illinois Department of Employment Services to a given employer’s ex-employees (weighed against the employer’s total wages paid in the given period(s)). When an ex-employee received unemployment benefits, the future costs to the employer can be tens of thousands of dollars or more in increased taxes.
A Real Life Example
As a business attorney in Chicago, one of my clients gave me permission to use its actual figures from a recent claim to illustrate the extreme cost risks involved when an employer loses an unemployment claim. As background, the business is a trucking company, which at the time in issue had 19 total employees (some full-time, some part-time), 11 of whom were full time employee commercial truck drivers. A recently hired driver earning approximately $55,000.00 a year (annualized) was fired for misconduct and applied for unemployment. His claim for unemployment was initially granted by the IDES, but on appeal, was ultimately denied in favor of the employer based on Illinois law (820 ILCS 405/602A).
Because his claim was intimately denied, the company’s Illinois unemployment tax rate did not increase. However, if the employer had lost, it calculated and projected that the total payment amount for its unemployment tax would have potentially increased by as much as $100,000 over the next three years (from approximately $10,000 total to $110,000 total over the same period based on the figures provided to the company from the State of Illinois.
How The Unemployment Claims Process Works in Illinois
When an Illinois employee if fired or quits and files for unemployment with the IDES, the state agency only has 21 days to decide whether or not that person qualifies for unemployment. The applicant is entered into the system and their claims are considered. A state agent then sends out a letter to the former employer, typically stating that its ex-employee is seeking unemployment. The employer has 10 days from the date the letter was sent (not the date received). The IDES then makes its decision. If the employer does not respond in the very limited timeframe, the ex-employee will commonly receive unemployment benefits.
What is Required in an Employer’s Response to the IDES
If the employer responds, the employer MUST include:
(1) the claim number, the employer number, the employee’s social security number, and all other required information as directed in the IDES’s letter (along with a copy of the IDES’s letter with the barcode on it).
(2) a complete statement as to why the ex-employee is disqualified and should not receive unemployment benefits;
(3) a clear statement of the legal grounds as to why the ex-employee is disqualified;
(4) factual statements in support of the legal argument; and
(5) attach all other evidence as exhibits to the response (and include an explanation of what the attached evidence is and what it proves).
Failing to do all of the above properly or failing to respond will almost always result in the employee winning and receiving benefits, in which case the employer’s unemployment taxes will increase, possibly for years!!
If all of the above is done properly and timely submitted, the IDES will then decide whether or not to award the ex-employee benefits. The losing party will then have 30 days from the decision to file a formal appeal. Formal appeals are handled by an administrative law judge (referred to as either the ALJ or referee), and include a formal hearing with witnesses, examination, cross-examination, and exhibits for physical evidence.
How the Employer can defeat an Unemployment Claim
There are three general legal categories the employer can use to challenge an unemployment claim.
First – The employee voluntarily quit. An employer also need to establish that the employee was not laid off for lack of consistent work nor that the employee quit because his or her hours of work were reduced (as well as some other factors and considerations).
Second – That the employee was fired for provable felony theft under 820 ILCS 405/602B. Felony theft is often which is often difficult to demonstrate, and often requires a police report, an arrest, and/or other definitive evidence of both the theft and that the amount stolen was above the minimum amount required for a felony (not just a misdemeanor).
Third – That the employee was fired for “Misconduct” as defined under the controlling Illinois regulation and is disqualified under 820 ILCS 405/602A. Misconduct means:
“the deliberate and willful violation of a reasonable rule or policy of the employing unit, governing the individual’s behavior in performance of his work, provided such violation has harmed the employing unit or other employees or has been repeated by the individual despite a warning or other explicit instruction from the employing unit.”
Misconduct can also include a number of other actions such as:
(1) falsifying information on the employment application
(2) filing to maintain the legally required licenses needed for the job;
(3) certain knowing and repeated attendance violations, when other prior warnings and other requirements are met.
(4) damaging the employer’s property through gross negligence;
(5) certain intentional and repeated acts of insubordination after warnings to correct the same.
(6) consuming alcohol or illegal drugs at work.
(7) reporting to work under the influence of alcohol or illegal drugs; and
(8) grossly negligent conduct endangering the safety of the individual or co-workers.
A Few Common, Costly Reasons Employers Fail to Act:
(1) There is a VERY short timeframe to respond before the employer’s rights are lost (within 10 days from the date the IDES notice is sent).
(2) The full cost (the resulting unemployment tax increases) for not taking proper action is not seen at day one, so by the time the expense is noticed by the employer, it’s almost always too late to win.
(3) The employer doesn’t know how to properly respond, doesn’t have time, or forgets.
(4) The employer doesn’t have good internal employee records and can’t sufficiently document the reasons why the ex-employee should not receive unemployment.
Legal Best Practices
A few legal best practices (generally put into place at a business with the help of a qualified attorney) include:
(1) setting up and implementing a regular discipline policy and protocol;
(2) administering the policy uniformly as a standard business practice;
(3) documenting violations properly and consistently on forms that capture all critical information;
(4) properly logging, filing, and retaining necessary incident reports, correspondence, photos (if applicably), and all other evidence so it can be quickly and readily produced when needed; and
(5) ensuring all correspondence (i.e. letters and other documents) from the Illinois Department of Employment Services and the Illinois Department of Labor are immediately given to the proper party (or the company’s legal counsel) so the response can be properly drafted, all required evidence explained and included, and all materials are timely sent.
(6) When in doubt, always consult an experienced lawyer that can advise the business on its best course of action.
Employers that understand how to properly document employee termination issues, timely object to non-qualifying unemployment claims, lay out the proper legal arguments and factual support (or have legal counsel do so on the company’s behalf) may be able to save the business thousands of dollars a year.