10 Facts Texas Employers Should Know About Unemployment

Do I have to pay unemployment on my employee who just quit/resigned/got fired/was laid off?

During most of my thirty years as an employment lawyer, I have been asked that question at least once a week. Here are ten basic facts that every employer in Texas needs to understand about our state’s unemployment system:

  1. A Texas employer doesn’t “pay unemployment” on any particular former employee. The great majority of employers pay unemployment taxes on the first $9000 earned by each employee during the year. That unemployment tax rate is set at the beginning of each calendar year and will rise and fall based on how many of your former employees successfully claim unemployment compensation from the Texas Workforce Commission. So, you will not see the effect of any one unemployment claim until the next calendar year, and then it will increase the unemployment taxes that you pay to the State of Texas on each person you employ at that time for three years.
  2. Who initiated the job separation and for what reason are the most important questions in any unemployment claim. An employee who voluntarily quits for personal reasons (got a better job, going to school full-time, wants to stay home with a new baby, etc.) is not entitled to received unemployment compensation. That’s a good reason to get a written resignation letter or email from any employee who quits. You should also attempt to get the employee to write in that letter the reasons that the employee is quitting. You could make this kind of written resignation letter a written policy requirement before paying any accrued but unused paid time off.
  3. Employees who abandon their jobs by not calling and not showing up for at least three working days are not entitled to unemployment benefits and will be considered to have voluntarily quit.
  4. An employee who quits for good cause connected to the work (being sexually harassed or bullied, workplace is unsafe, pay is cut 20% or more, etc.) is entitled to unemployment compensation if the employee can prove that the reasons for quitting constituted good cause. So as an employer, consider publishing a written policy about the handling of any grievance that the employee needs to raise. That way you can solve the issue without the employee quitting.
  5. If you lay an employee off for lack of available work, that employee is entitled to collect unemployment benefits because the employee is out of work through no fault of his/her own. So, don’t say you are “laying off” an employee who you are really firing because he is a poor performer, drunk on the job, or otherwise committing misconduct.
  6. An employee who cannot work because of a medically-verifiable illness is entitled to unemployment benefits, but you as the employer won’t be charged for those benefits, so your tax rate will not increase. If your employee is ill to the point of not being able to perform his/her job, document that situation not only for unemployment benefits’ purposes, but also so that you can defend against any kind of disability discrimination claim.
  7. An employee whom you fire is entitled to unemployment compensation, unless you as the employer can prove that you fired the employee for misconduct (violation of a written policy) after the employee received (preferably) written warnings and had a chance to cure the misconduct. Documentation of any disciplinary actions that you took with the employee makes all the difference in the employer prevailing on these unemployment claims.
  8. Brand new employees may be entitled to unemployment benefits. There is no amount of time that an employee has to have worked for you before that employee can file an unemployment claim. So, an employee who has only been with you for three weeks and is still in your “probationary period” can still apply for unemployment compensation. However, your tax rate won’t increase with that employee’s claim because of the “base period” calculation that the TWC makes with each employee.
  9. Part-time employees, temporary employees and seasonal employees are entitled to unemployment benefits under the same conditions as regular full-time employees. It doesn’t matter that the employee understood or agreed that the job was only temporary or seasonal. The TWC will just treat it as a lay off for lack of available work to do. You as the employer are still on the hook for a possible increase in your unemployment tax rate when you end any employee’s employment for anything but misconduct.
  10. Illegal immigrants cannot claim unemployment An employee who is awarded unemployment compensation must be eligible to return to work legally, meaning that the employee must be able to meet the Form I-9 verification of eligibility requirements. TWC does check eligibility to work in the U.S. when the unemployment benefits application is filed.

If you receive a notice from the TWC that a former employee has made an application for unemployment benefits and based on the above information you believe that he/she is not entitled to those benefits, you may still want to investigate if it is financially worth protesting your former employee’s claim by calculating the future effect that claim will have on your unemployment tax rate. Here is the TWC’s calculator.

There are other factors in deciding if it is worth protesting an unemployment claim, such as whether the sworn testimony you give at the unemployment hearing will be used against you in later litigation. If you decide to protest the award of benefits, read the information that the TWC provides you and follow it to the letter. Don’t miss any of the stated deadlines. Most importantly, enlist the help of an employment lawyer if you are concerned at all that an unemployment claim may be only the first step in a long line of claims that the former employee will assert against your company, such as discrimination, overtime violations, failure to provide Family and Medical Leave, or other legal grievances.

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