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A Matter of Time (and Accuracy)

Legal experts say every state in the union will soon be enacting new legislation that will penalize employers for not answering unemployment claims from former workers in a timely manner.

Monday, September 30, 2013
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Employers are being advised to pay close attention as states begin to enact legislation before an Oct. 21 deadline that will compel them to respond "timely and accurately" to requests for information from state unemployment offices relating to former employees’ claims for benefits or risk being penalized.

The legislative actions are tied to a mandate in the Federal Trade Adjustment Assistance Extension Act of 2011, which was passed by Congress on Oct. 21, 2011.

Stacey Adams, an attorney in Littler Mendelson’s Newark, N.J. office, says that the large companies she works with don’t usually bother to challenge unemployment claims, because there‘s no real incentive to do so, adding that not challenging such claims could also help employers avoid costly litigation from disgruntled former workers.

“Big employers will get the maximum tariffs anyway," she says, "so they don’t bother to challenge [unemployment claims].”  

New Jersey’s new law, enacted on Aug. 19 and applicable to benefit payments made on or after Oct. 22, 2013, could change that practice.

http://www.hreonline.com/images/89794596unemploymentclaimsL.jpg“This law will penalize employers who fail to respond to inquiries by the state’s unemployment offices,” says Adams, noting that blue states will likely adopt additional penalties above what the federal law requires, while red states will only require the minimum amount of compliance.

She says that if New Jersey's Division of Unemployment and Temporary Disability Insurance makes an error in paying a benefit because an employer failed to respond in a timely and adequate manner to a request for information relating to the claim, and an employer has established a pattern of failing to respond to such requests, then the division cannot relieve the employer’s account of the erroneously charged benefit payments.  

On the other hand, Minnesota, South Carolina, Wyoming and Iowa have all passed laws that not only refuse to give employers that fail to respond the credit for erroneous payments, they ask them to refund the overpayment, she says.

Mark Terman, an employment attorney in the Los Angeles office of Drinker Biddle, says there are several valid reasons for an employer not to respond to an unemployment-insurance office’s request for information for particular individuals.

“Generally, a former employee is eligible for unemployment if the separation was involuntary and it was through no fault or misconduct on the part of the employee,” he says. “An employer might miss the notice and not know it’s there. Or an employer might be aware of the notice, and they might have a basis to contest the claim, but, knowing that times are tough in this economy, they don’t want to stand in the way of a former employee getting unemployment benefits."

Another reason an employer might choose not to respond, he says, would be in the case of a problem employee, in which case HR would not want to initiate a dispute at the unemployment stage. Or the employer might think that a former employee could have [legitimate] claims against them, but they might be less inclined to pursue those claims if they’re happy enough receiving unemployment payments.

Terman points to a California statute that went into effect this year that says organizations that fail to report a material fact about an employee’s separation from work may be assessed a cash penalty.

“I’ve not seen that happen yet," he says, "but that statute is there.”

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 As an employer, you need to be familiar with the laws enacted in the states where you do business, and you need to have a coordinated process to stay on top of unemployment insurance claims, says Morgan, Lewis & Bockius partner Michael Puma in the firm's Philadelphia office.

“So far, 13 states have laws in place providing for increased penalties if an employer doesn’t comply with the statute,” he says.

“If employers don’t follow these laws, it will cost them money,” says Terman. “Even small increases in unemployment-insurance taxes can add up to a lot of money for almost any size workforce. The employers [that] have in the past chosen not to respond should revisit that, and if there is a response, it should be truthful.”

Puma says that there may be occasional exceptions.

“In those cases where there’s likely to be litigation," he says, "it may be wise for the employer not to provide the requested information."

If such a request is only ignored "once in a while," Puma says, "that wouldn’t rise to the level of a pattern of not providing information. But in the majority of cases, you should provide the information requested."

He advises HR leaders to have a process in place to get the information quickly and make sure information provided in a timely basis.

"There should be a review of your practices of responding to claims, and you should evaluate the potential additional cost against not responding timely or adequately," he says.

“The question of whether you should respond to unemployment applications is not as straightforward as it used to be,” says Adams. “You have to sit up and pay attention now."

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