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Unemployment Benefits — General Issues

In addition to the Social Security program established to assist retired and disabled individuals, the Social Security Act of 1935 included a provision for a federal/state unemployment insurance program. This program provides payments to individuals who have lost their jobs, typically through no fault of their own. These payments, which are subject to certain eligibility requirements and are paid for through employer payroll taxes.



Unemployment benefits are paid out of a fund maintained for each state by the United States Treasury Department. Each state has its own system for determining and collecting taxes from employers. Some use a fixed rate method, by which all employers pay a fixed percentage of their total payroll. This rate will vary based on the state’s unemployment rate.

More and more, however, states are turning to a system known as experience rating. This system establishes a procedure in which every employer is given a rating based on the number of its former employees that have collected benefits. This rating is used to determine the specific employer’s tax. This “payment for risk” system has a number of benefits. First, it more fairly distributes the burden of funding unemployment insurance. Second, it makes employers more accountable. That is, it may serve to reduce the number of layoffs and terminations without cause and it encourages employers to speak out against fraudulent claims.



Eligibility for receiving unemployment benefits depends on a variety of factors. First, an individual must have worked in a job covered by the program. That is, the individual’s employer must be paying into the unemployment fund. Additionally, he must have worked to a certain extent within that position. (This amount may be based on time worked–hours, weeks–or on the amount a person has been paid in the time he worked.) He also must be able and willing to work.

It is possible that an otherwise eligible person may be disqualified from receiving benefits. This is the case for a person who has been fired for misconduct or one who voluntarily quits his job without a good reason. Additionally, someone who refuses to accept an available position (without a good reason) may be denied benefits. An individual with substantial other income may also be disqualified.

What qualifies as a “good reason” for quitting a job or not accepting a new one varies from state to state. Some states allow benefits to a person who has left his job for compelling personal reasons, such as relocation of a spouse. Some limit eligibility to circumstances related to the job or employer. This would include a reduction in workforce as well as an employee resigning as a result of sexual harassment in the workplace.

In cases where an individual is denied unemployment benefits, he will be provided with a report that details how the state made such a determination. The report will also include a notation of the duration of the denial, which may be a set period of time or the entire time the individual is unemployed.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.