Webster’s unabridged dictionary defines a "myth" as a "traditional or legendary story; a collective belief; an alleged person or event … with or without a determinable basis."
When it comes to understanding the Unemployment Compensation process and how it affects a small-business owner, each of those definitions may be appropriate.
Let’s look at the example of Pat, a disgruntled employee who, due to slow business trends and a decreasing profit margin at "Tight Binderies" (a fictitious employer) has had wages and regular hours reduced.
Pat’s new supervisor has just informed Pat of the reduction in wages and hours, and Pat has just dropped a large wrench in the works of an expensive press. The human resource manager and the shop supervisor call Pat to the front office, where they ask for Pat’s resignation.
Pat refuses to resign and is told to turn in his keys, leave work and to call the owner if he so chooses. Pat leaves, files for and gets Unemployment Compensation.
Tight’s company owner directs the human resource manager to appeal the claim. When they both attend a hearing before an administrative law judge, they are both confused and embarrassed by what happens: they loose the appeal. The judge rules in favor of Pat. Benefits are allowed and billed to the Tight unemployment account.
Tight’s declining profits may have just been lowered again, as its unemployment insurance rate may be raised due to the ruling. The truth is that the employer almost always carries the burden of proof.
Today the unemployment insurance paid by a small business can literally put it out of business. Furthermore, handling an appeal, such as in the above example, could also lead to an Equal Opportunity, Wage and Hour, Worker’s Compensation, or civil court action. Conversely, proper handling and knowledge of the process can greatly increase profits by reducing or avoiding claims.
What could have been done to prevent Tight’s situation? Many things.
The fundamental issues are formed well before Pat was hired or parted ways with "Tight." They begin with such things as employee screening, orientation and training, ongoing evaluation and proper disciplinary procedures.
The object of avoiding theses costs lies in knowledge of the unemployment process. Working in reverse, one can see how to proceed in the future to reduce existing costs and avoid new ones.
The burden in the Tight case simply means that the employer has to prove, with reasonable and convincing evidence, that misconduct occurred. Tight’s HR manager and supervisor asked for Pat’s keys, leaving no possibility for Pat to continue employment other than a talk with the owner.
But where was the employment bond separated? And by whom?
Misconduct is a willful disregard for the employer’s best interest. To demonstrate misconduct, both intent and damages must be proved by the employer.
Initial statements made to the investigator in an unemployment insurance claim are critical, as is the preparation for the actual hearing. These are legal proceedings, not a casual talk with a mediator, with serious and costly ramifications. Proper representation is necessary.
The effect of one claim on a small business can be devastating. One claim alone can raise its rate as a percent of payroll, cause morale problems, reduce productivity and cost overtime. The list goes on and again opens an employer to other legal actions. But in the Tight case, there’s hope – hope for Pat, too.
As a general rule "It’s better to fix than fire." Guidelines to help a small business achieve that fix will appear in future issues of Small Business Times. These will take a closer look at avoidance, the difference between a "quit" and a "discharge," good cause, medical circumstances, able and available issues, cost reduction and proper representation.
Robert C. Tibbits is owner and senior consultant for Labor Management Consultants, a national consultant firm specializing in Unemployment Compensation. More can be found at: www labormanagementconsultants.com
Feb. 20, 2004 Small Business Times, Milwaukee