Should You Protest Unemployment Claims?

Unemployment claims can cost you money as an employer because your Texas Workforce Commission tax rate will escalate the next year if an employee is awarded benefits. But handling your unemployment claim deftly has become critical in avoiding even more expense down the road when your employee sues you.

It is not always an easy decision about whether to protest unemployment and you have to make that decision quickly (usually within 14 days of the notice of an unemployment claim). On the one hand, you as an employer don’t want your tax rate to increase. On the other hand, you don’t want to say something harmful in an unemployment appeal hearing that will have significant consequences in later litigation.

At an employment law conference that I attended this week, I heard an employee’s lawyer with 40 years of experience say that he believes that TWC unemployment appeal hearings are one of his best tools for winning discrimination cases for employees. Why? Because at the appeal hearing, the company’s witnesses have to testify under oath about the reasons an employee was fired. Often, the employer’s witnesses are not represented by legal counsel and they are not adequately prepared for the testimony they are going to give. They give inconsistent or unprovable reasons that later come back to haunt them when the former employee sues the company in a completely different matter.

The plaintiff’s lawyer admitted that he likes to ambush supervisors and HR representatives at the TWC unemployment hearing and get helpful sworn testimony for his client from those witnesses, because the company’s representatives rarely expect the employee to appear at the hearing with legal counsel. When he cross-examines them, the witnesses get flustered and accidentally provide testimony harmful to the company.

The result is that the employee’s lawyer has obtained very inexpensive testimony on the record from unsuspecting company witnesses that will be used against the company in a later discrimination case.

That doesn’t mean that an employer should never protest unemployment claims. The cost of allowing an employee to draw unemployment benefits can be significant. A calculator to estimate the actual cost in future taxes is available from the TWC.

My point is that decision about whether to protest a former employee’s unemployment claim is more complex that you think. Talk it over with your employment lawyer when you first get notice that the unemployment claim has been filed, either by receipt of a notice of application for unemployment benefits or by a call from a TWC investigator. Don’t go into an unemployment appeal hearing unrepresented by counsel.

Even better, discuss all of these issues and other potential legal landmines with your employment lawyer before you fire anyone.

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