United States: Don't "Shoot Your Eye Out" Defending Unemployment Benefits Claims

Last Updated: December 14 2017
Article by Geoffrey C. Westbrook

Seyfarth Synopsis: The ordinary headaches of responding to unemployment claims with the EDD do not have to bog down employers in 2018. Here, we provide recommendations for managers to consider before the ball drops in Times Square this New Year.

'Tis the season to be jolly, sing holiday songs with family by the fire, and aspire to reach new heights in the coming year. Employers, consider making it one of your New Year's resolutions to reevaluate your approach to unemployment benefits claims. Certainly, more time and fewer headaches are things we can hope for in 2018.

Many of us are well-acquainted with the frustrations of defending unemployment claims made by employees recently fired for misconduct. Suppose an employee with a history of warnings for rude comments makes one final zinger on a conference call, forcing your hand to fire him. The resulting distraction and lost morale are bad enough, but next he hales your business into a claims process with the California Employment Development Department (EDD) for unemployment benefits. You spend the next few months answering questions from EDD agents and submitting detailed proof of the employee's bad behavior. A manager and other witnesses take the day off to testify at the hearing. After all this, the employee is awarded benefits anyway and, worse, he now sues you for wrongful termination. This nightmare before Christmas is enough to make any employer a scrooge!

Our holiday gift to employers is a set of best practices to help you navigate the EDD's blizzardy claims process, and to minimize any potential problems should a Grinch-y employee sue you later. We hope our recommendations result in many silent nights in the year to come.

Determine If The Employee Was Bad Enough For the EDD's Naughty List

Employers do not need a shepherd or a shooting star to know that employment in California is at will. So long as the decision is not discriminatory or unlawful retaliation, managers may terminate employment because of misconduct, poor performance, for violations of company policy (even on first-time infractions), or, ultimately, for no reason at all.

But the EDD will deny a claim for unemployment benefits only if it finds a much narrower type of serious misconduct. The broken rule or policy at issue must be important to the business. If a misdeed did not harm the company, then the discharged employee will likely win an award of benefits. Also, a single, isolated mistake usually will not preclude such an award. Poor job performance—unless highly egregious and persisting after multiple warnings and a clear threat of termination—will probably not suffice either. What the employer needs to prove are acts of serious misconduct, such as embezzlement, workplace violence, or harassment, and EDD will demand real proof, such as documents and convincing testimony.

Remember, the EDD is in the business of awarding benefits, so expect that in most cases that is just what the EDD will do. That is, most terminations will not disqualify a former employee from an award of unemployment benefits. Employers should carefully evaluate the reason for the discharge, and the supporting evidence, before trudging down the icy path of litigating an unemployment claim. And if you do decide to challenge a claim, make sure to bring more than a Red Ryder BB gun to the hearing; the EDD will expect hard evidence and credible witnesses before it denies benefits.

Just As Santa Does With His List, Check Your Facts As Least Twice

Most disputed unemployment claims are contentious. No holiday carol extols the joy of getting fired, and that is for good reason. Opposing a former employee's benefit claim is often like throwing gasoline on a fire, and lawsuits for wrongful termination are usually not too far away.

The EDD's claims process is complex, so it is not uncommon for claimants to lawyer-up. None of the parties' communications with the EDD are privileged, however; interviews, position statements, and the like are all discoverable, as are the documents submitted and the testimony given at the hearing. In a later lawsuit, a plaintiff's lawyer can subpoena the EDD's entire file, which frequently includes an audio recording of the hearing, and search for inconsistencies or admissions to use against an unsuspecting employer in litigation. Because companies often give EDD claims a low priority, statements made to the EDD often are not scrutinized by counsel or senior staff. Employers should carefully vet the facts of a termination before they are presented to the EDD. Otherwise, bad evidence, like the ghost of Jacob Marley, may just come back to haunt you.

Consult Your Trusted Magi On High Risk Terminations

In some cases, the likelihood of litigation over a termination is clear before or soon after the termination decision. A high-risk termination may be preceded by the threat of a lawsuit by an employee's newly hired lawyer during the company's investigation for misconduct. It may not be wise, depending on the circumstances and the employer's ultimate goal, to oppose the employee's unemployment claim. Or, conversely, it may be strategically sound to educate the employee's attorney on the Gremlins hiding in the case from the outset.

Workplace Solutions: When litigation is on the horizon, we recommend that employers consult with their trusted counsel on these strategic decisions as early as possible. Our attorneys are ready to help guide employers through these dynamics, whether it be this holiday season or in the year to come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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