When You Are Entitled to Unemployment Compensation

by Attorney Amy DelPo

Not everyone who loses a job is entitled to unemployment benefits. Find out if you are.

Even if you lose your job, you'll always have unemployment compensation to fall back on, right? Not necessarily. Former employees are eligible for unemployment benefits only if they are out of work through no fault of their own. This rule works differently depending on whether the employee quit, was laid off, or was fired.

And, because unemployment compensation is administered by each state, whether or not you are eligible for benefits may also depend on your specific circumstances and your state’s rules.

If an Employee Quits

If an employee quits or resigns from a job, the employee will be eligible for benefits only if he or she left for a compelling reason -- that is, the worker would have suffered some sort of harm or injury if he stayed. Put another way, you are eligible for benefits only if any reasonable person in your job situation would have quit. In legal terms, the reason for quitting  is called “good cause.” Even if you think you had a good reason to leave a job, that doesn't necessarily mean you had good cause in the eyes of the law. The law requires the reason to be “compelling."

For example, leaving a job because it doesn’t offer opportunities for career advancement may be a good reason, but it won’t make a worker eligible for unemployment benefits. Similarly, simple job dissatisfaction is a good reason that doesn't add up to good cause.

In some states, former employees are eligible for benefits if they leave a job for compelling personal reasons -- for example, to relocate in order to accompany a spouse who got a distant job or because of a family emergency that requires the worker to be home. In other states, the reasons must be related to the job.

If an employee leaves a job because of intolerable working conditions (such as being sexually harassed) or because he or she was told to resign or face being fired, most states allow the worker to collect unemployment compensation. Similarly, leaving a job because it poses a serious threat to your health or safety is usually good cause.

If an Employee Is Laid Off

An employee who loses a job through a layoff or reduction in force is generally eligible for unemployment benefits.

If an Employee Is Fired

Fired employees can claim unemployment benefits if they were terminated because of financial cutbacks or because they were not a good fit for the job for which they were hired. They can also receive benefits if the employer had a good reason to fire the person but the infractions were relatively minor, unintentional, or isolated.

In most states, however, a fired employee will not be able to receive unemployment benefits if he or she was fired for “misconduct.” Although you may think that any action that leads to termination would constitute misconduct, the unemployment laws don’t look at it that way. Not all actions that result in termination are serious enough to qualify as misconduct and justify denying benefits.

Common actions that often result in firing but do not constitute misconduct are poor performance because of lack of skills, good faith errors in judgment, off-work conduct that does not have an impact on the employer’s interests, and poor relations with coworkers.

On the other hand, actions that constitute misconduct are those in which an employee willfully does something that substantially injures the employer's business interests. Revealing trade secrets or sexually harassing coworkers is misconduct; simple inefficiency or an unpleasant personality is not. Other common types of misconduct include extreme insubordination, chronic tardiness, numerous unexcused absences, intoxication on the job, and dishonesty.

What qualifies as misconduct is a matter of interpretation and degree. Annoying one coworker might not be misconduct, but intentionally engaging in actions that anger an entire department even after repeated warnings might be.

What to Expect

If you are deemed eligible for unemployment benefits, you will probably receive significantly less money than you made while at your job, and the benefits generally last for up to 26 weeks only. (Depending on your circumstances and your state, you may be eligible for extended benefits for an additional 13 to 20 weeks.) For more information or to apply for unemployment compensation, contact your state’s labor department or the agency that administers unemployment benefits in your state.

Anatomy of an Unemployment Compensation Claim

Although the unemployment compensation system varies in each state, some general principles apply in most cases. An unemployment claim will typically proceed through the steps described below.

Filing of claim. The former employee files a claim with the state unemployment program. The employer receives written notice of the claim and can file a written objection -- usually required within seven to ten days.

Determination of eligibility. The state agency makes an initial determination of whether the former employee is eligible to get unemployment benefits.

Hearing. If the employer or the former employee disagrees with the initial eligibility decision, they can appeal the decision and have a hearing before a referee -- a hearing officer who is on the staff of the state agency. Normally conducted in a private room at the unemployment office, this is the most important step in the process. At the hearing, the employer and the former employee each have their say. In addition, each is entitled to have a lawyer there and to present witnesses and any relevant written records, such as employee evaluations.

Administrative appeal. If the employer or the former employee disagrees with the referee's decision, they can appeal it to an administrative agency, such as a board of review. This appeal is usually based solely on the testimony and documents recorded at the referee’s hearing, although in some states the review board can hear additional evidence. While the review board is free to draw its own conclusions from the evidence and overrule the referee, more often than not it goes along with the referee’s ruling.

Judicial appeal. If the employer or the former employee is unhappy with the board of review's decision, either can appeal to the state court system, but this is rare. Typically, a court will overturn the agency’s decision only if the decision is contrary to law or isn’t supported by substantial evidence.

Adapted from The Employer’s Legal Handbook, by attorney Fred S. Steingold (Nolo).