WASHINGTON – It’s hard enough to lose a job. But for a growing proportion of U.S. workers, the troubles really set in when they apply for unemployment benefits.
More than a quarter of people applying for unemployment compensation have their rights to the benefit challenged as employers increasingly act to block payouts to former workers.
The proportion of claims disputed by former employers and state agencies has reached record levels in recent years, according to Labor Department numbers tallied by the Urban Institute.
Under state and federal laws, employees who are fired for misbehavior or quit voluntarily are ineligible for unemployment compensation. When jobless claims are blocked, employers save money because their unemployment insurance rates are based on the amount of the benefits their workers collect.
As unemployment rolls swell in the recession, many workers seem surprised to find their benefits challenged, their former bosses providing testimony against them. On one recent morning in what amounts to one of Maryland’s unemployment courts, employees and employers squared off at conference tables to rehash reports of bad customer service, anger management and absenteeism.
Unemployment compensation programs are administered by the states and funded by payroll taxes that employers pay. In 2007, employers put up about $31.5 billion in such taxes, and those taxes typically rise during and after recessions, as states seek to replenish the funds.
With each successful claim raising a company’s costs, many firms resist letting employees collect the benefit if they consider it undeserved.
“In some of these cases, employers feel like there’s some matter of principle involved,” said Coleman Walsh, chief administrative law judge in Virginia, who has handled many such disputes. But, he said, “nowadays it appears their motivation has more to do with the impact on their unemployment insurance tax rate. Employers by and large are more aware of unemployment as a cost of business.”
Wayne Vroman, a researcher at the Urban Institute, has documented the rise of challenges to unemployment claims using the Labor Department data. He found that the proportion of claims challenged on the basis of misconduct has more than doubled, to 16 percent, since the late 1980s. Claims disputed on the grounds that the worker simply quit represent about 10 percent of the otherwise eligible applications.
Even as more employers have alleged employee misconduct, their success rate has stayed relatively stable – they lose on such issues about two-thirds of the time.
“What is clear is that employers have become more willing to contest claims from claimants,” Vroman said of the data.
Hearing officers and others in the industry said it isn’t clear why the number of challenges to unemployment claims has grown. The labor force has changed over the years, with less of it devoted to manufacturing and more of it from the service sector.
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