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You need to let a worker go; Will this make your unemployment insurance costs increase?

On Behalf of | Jan 14, 2021 | Employment Law, Unemployment Compensation |

A few years ago, a colleague told me a woman had been with his firm for years, but had quit to take a new job. That job did not work out for her, so she left it, and she filed for unemployment compensation. My friend got a notice from the Ohio Department of Job and Family Services telling him that his former employee was going to be collecting benefits. He was worried that he would be paying her directly.

I assured him that the system does not work that way. His firm pays a percentage of its payroll into the unemployment insurance program once a quarter. The payments are calculated based on the size of his firm’s payroll and the industry risk percentage that his employees will, at some point, need unemployment benefits.

The rate employers pay for unemployment insurance is based on their industry layoff and termination statistics. Most states have good sets of data to set those rates. As long as an employer does not stray far from the industry layoff rate that they have been assigned, employee claims for benefits will have no effect on their premiums.

But will an employer get a bill from the state for unemployment benefits paid to an employee by the state? 

Not unless there was a significant failure by the employer to pay premiums, and even then, not until after some litigation.

In most cases, an employer has paid for a state sponsored insurance policy administered by the state. If the employer pays its premiums, then there is little chance they would have any liability to repay the state for unemployment benefits paid to workers.

Additionally, when a former employee makes a claim for benefits, they are entitled to rely on the premiums paid by all their former employers. That is why employers occasionally get a notice that someone who has not worked for them for months has made a claim for unemployment. 

The employer is notified that a claim has been applied to their house, and occurs because the claiming employee had not been with her new employer long enough to secure benefits. 

Here is the bottom line, unless an employer varies strongly from the expected number of layoffs or terminations in their industry, a terminated employee’s claim for unemployment compensation will not affect the employer’s costs one bit. 

By: James Langendorf, Esq., Attorney at Hurley Law


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