Category Archives: Unemployment Insurance Benefits
Yes – the Minnesota Supreme Court recently held that an employer does not violate public policy by terminating an employee for applying for unemployment benefits, but employers should still be cautious about doing so.
In Dukowitz v. Hannon Security Services, A11-1481 (Minn., Jan. 2, 2014), the plaintiff applied for unemployment benefits after her work hours were reduced due to the elimination of her daytime shift. When the plaintiff initially suggested to her supervisor that she might apply for unemployment benefits, her supervisor openly questioned whether he should terminate her employment. When the plaintiff’s employment was terminated several months later, the plaintiff sued and alleged that her termination was wrongful because it violated the public policy of the State of Minnesota.
Under Minnesota law, there is a narrow public policy exception to the employment-at-will rule under which an employer may be subject to liability for terminating an employee because of the employee’s good faith refusal to violate the law. See Phipps v. Clark Oil & Refining Corp., 408 N.W.2d 569 (Minn. 1987). In Dukowitz, the court held that the plaintiff failed to state a claim under this narrow exception because she did not allege that her termination resulted from a refusal to commit an act that she, in good faith, believed to be illegal.
The Dukowitz court also rejected the plaintiff’s argument that the court should recognize a new cause of action under which an employer can be liable whenever the discharge of an employee violates a public policy of the State of Minnesota. The court held that this broad new cause of action would be more appropriate for legislative consideration, particularly because it would interfere with the employment-at-will rule. The court also expressed concern about the lack of any clear definition of what constitutes a “public policy,” remarking that the advocates of the rule could not “delineate the contours of the tort that they urge us to adopt.”
The irony of the Dukowitz decision, however, is that by terminating the employee for applying for unemployment benefits, the employer is essentially assuring that the employee will apply for unemployment benefits again. At that point, it would likely be difficult to convince an unemployment law judge that the employee’s initial application for benefits constituted employment misconduct sufficient to disqualify the employee from receiving unemployment benefits post-termination.
In addition, employers should also be aware that it is a misdemeanor under Minnesota law for an employer to “directly or indirectly . . . obstruct or impede an application or continued request for unemployment benefits.” Minn. Stat. § 268.192, subd. 1.
Takeaway: The Dukowitz decision is good for employers because it reinforces the doctrine of at will employment. The decision is also a victory for employers because it rejected an effort to recognize a broad new cause of action against employers. At the same time, it is largely a self-defeating task for an employer to terminate an employee for applying for unemployment benefits. Employers must also be cautious not to “obstruct or impede” an employee’s application for benefits.
Understanding how unemployment insurance benefits work and how unemployment tax rates are calculated is essential if an employer is interested in keeping its unemployment tax rate low.
How Unemployment Insurance Benefits Work: In Minnesota, for each employee in covered employment, the employer must pay unemployment taxes on the employee’s “taxable wage base.” The taxable wage base is calculated for each year as equal to 60% of Minnesota’s average annual wage on June 30th of the previous year. In 2013, the taxable wage base was $29,000.00, so employers had to pay unemployment taxes on the first $29,000.00 of wages paid to each covered employee. The unemployment taxes paid by employers are then deposited into a trust fund administered by the State. When an employee qualifies for unemployment insurance benefits, his or her benefit payments are paid from the trust fund – not from the employer.
How Unemployment Tax Rates Are Calculated: The State calculates an employer’s unemployment tax rate annually based on three primary components: (1) the base rate; (2) the employer’s experience rating; and (3) additional assessments.
The Base Rate: The base rate is a common rate that applies equally to all employers. The base rate is calculated each year based on the amount of money in the State’s trust fund as compared to the total amount of wages paid in covered employment in the State. The base rate ranges from 0.10% to 0.50%. In 2013, the base rate was 0.50%.
The Employer’s Experience Rating: An employer’s experience rating is calculated by dividing 125% of the unemployment benefits paid on behalf of the employer during the 48-month period ending on the prior June 30th by the employer’s total taxable payroll for that same period, up to a maximum of 8.90%. For example, if $80,000.00 of unemployment benefits were paid on behalf of an employer with $4,000,000.00 in total taxable payroll during the 48-month period, the employer’s experience rating would be 2.50%.
For new employers, the state assigns an experience rating equal to the average experience rating in the State. However, if the employer is in a “high experience rating” industry, like construction, the State will assign an experience rating equal to the average experience rating for similar high experience rating industries. In 2013, the general experience rating for new employers was 2.50%, and the rate for new employers in high experience rating industries was 8.90%.
Additional Assessments: If the amount of money in the trust fund drops below certain levels in relation to the total amount of wages paid in covered employment in the State, the State may impose additional assessments on all covered employers to help make up the shortfall. In 2013, the State imposed an additional assessment equal to 14% of all unemployment taxes paid by each employer. The State also imposed an additional 0.10% Workforce Development Assessment to fund employment and training programs for workers who have permanently lost their jobs.
Takeaway: The only part of the unemployment tax rate that is within an employer’s control is the experience rating, which is calculated based on the amount of unemployment benefits paid on behalf of the employer. In general, the fewer unemployment benefits paid, the lower the employer’s experience rating will be. Therefore, one way to help keep an employer’s unemployment tax rate low is to avoid terminating employees unless they have engaged in employment misconduct and are not eligible for unemployment benefits.
Receipt of severance pay will typically either delay an applicant’s eligibility for unemployment benefits or will reduce the amount of benefits they receive. Minnesota law provides that an applicant is ineligible for unemployment insurance benefits during any week in which the applicant receives “severance pay … paid by an employer because of, upon, or after separation from employment” if the severance pay is “equal to or in excess of the applicant’s weekly unemployment benefit amount.” Minn. Stat. § 268.085, Subd. 3(a)(2).
The severance payments will affect the applicant’s eligibility for “all the weeks of payment.” When the severance payments are made periodically, the “weeks of payment” are calculated by dividing the total amount of the payments by the applicant’s last level of regular weekly pay from the employer. When the severance payment is made in a lump sum, the “weeks of payment” are calculated by dividing the amount of the lump sum by the applicant’s last level of regular weekly pay from the employer. See Minn. Stat. § 268.085, Subd. 3(b).
If the severance payment amount per week is equal to or greater than the applicant’s weekly unemployment benefit amount, the applicant is not eligible to receive unemployment benefits that week. If the amount of severance payment per week is less than the applicant’s weekly unemployment benefit amount, the applicant’s unemployment benefits are reduced by the amount of the severance payment for that week.
Takeaway: The impact of severance payments on a former employee’s eligibility for unemployment benefits is one factor, among many, that an employer may want to consider when determining whether to offer severance pay to an employee and, if so, how much.
Employers have the right to challenge unemployment compensation when an employee commits misconduct. The standard legal advice in Minnesota is that the bar for disqualifying misconduct is very high. As a consequence, challenging unemployment compensation has been regarded as difficult or ill-advised in all but egregious cases. But recent Minnesota appellate decisions show that disqualification is very fact-specific and, perhaps, the bar is not as high as commonly thought:
- A jewelry store manager who authorized a subordinate to purchase jewelry under her boyfriend’s name to meet her sales quota, and then return it the same day, committed disqualifying “misconduct.” Tietz v. Rogers Enterprises, Inc., A11-1574, 2012 WL 1914109 (Minn. Ct. App. 2012).
- A mail carrier who took a single piece of mail with a gift card and used it for his own benefit was disqualified. Brenna v. U.S. Postal Service, A11-1252, 2012 WL 2202968 (Minn. Ct. App. 2012).
- An employee who refused to sign documents acknowledging a disciplinary action was on that basis barred from benefits. Schneeweiss v. Schwan’s Consumer Brands, Inc., A11-1709, 2012 WL 2505815 (Minn. Ct. App. 2012).
- An employee who violated the company’s work rules by use of profanity in the workplace, after several incidents and prior warnings, was denied unemployment compensation benefits even though profanity was apparently common at the workplace. DeVilliers v. SVF Co-Op, A11-1228, 2012 WL 1070101 (Minn. Ct. App. 2012).
- Even common absenteeism is meeting the bar: an employee, who had been given at least one written warning for tardiness and then missed work because her car had been towed was deemed to have been disqualified based as “misconduct.” Franklin v. Goodwill Industries, Inc., A11-1466, 2012 WL 7657628 (Minn. Ct. App. 2012).
None of these fact situations seem particularly egregious and could easily have been initially regarded by the employer as not meeting the bar necessary to mount a successful challenge.
Takeaways: The common advice about the difficulties of opposing an unemployment claim on a misconduct basis may be worth a second look given these and other recent cases. A Minnesota employer with a “close-call” situation should consider working with legal counsel to identify any analogous precedent and make an informed decision about challenging employment compensation in what may be a new era of a more favorable interpretation of misconduct disqualification for the employer.
Not in Minnesota. Minnesota law states that “[a]ny agreement by an individual to waive, release, or commute rights to unemployment benefits or any other rights under the Minnesota Unemployment Insurance Law is void.” See Minn. Stat. § 268.192. The law further states that “[a]ny agreement by an employee to pay all or any portion of an employer’s taxes, is void,” and that “[n]o employer may directly or indirectly make or require or accept any deduction from wages to pay the employer’s taxes, require or accept any waiver of any right, or in any manner obstruct or impede an application or continued request for unemployment benefits.”
Takeaway: Employers should be cautious of any arrangement in which an employee proposes that he or she will not seek unemployment benefits in exchange for something else. That type of agreement is unenforceable under Minnesota law. Employers also generally cannot agree not to contest unemployment benefits in exchange for an employee quitting or leaving employment.
The Minnesota legislature recently passed a law that prevents employers and former employees from enforcing agreements in which the employer agrees not to contest the former employee’s eligibility for unemployment benefits. The legislation revised Minn. Stat. § 268.192 to provide that:
An employer may not make an agreement that in exchange for the employer agreeing not to contest the payment of unemployment benefits, including agreeing not to provide information to the department, an employee will:
(1) quit the employment;
(2) take a leave of absence;
(3) leave the employment temporarily or permanently; or
(4) withdraw a grievance or appeal of a termination.
See S.F.No. 2224. The legislation further states that “[a]n agreement that violates this subdivision has no effect under this chapter.” The law took effect on July 1, 2012.
Takeaway: Under Minnesota law, agreements by an employer not to contest a former employee’s eligibility for unemployment benefits are now unenforceable.
Poking a coworker can potentially constitute employment misconduct and render an employee ineligible for unemployment insurance benefits. The Minnesota Court of Appeals addressed this question in Potter v. Northern Empire Pizza, Inc., 805 N.W.2d 872 (Minn. Ct. App. 2011).
In Potter, the court emphasized that, while Minnesota law used to recognize an exception for a single “hotheaded” incident, that exception is no longer the law. Current Minnesota law “does not provide a single-incident exception” for employment misconduct determinations. The court further held that “angry physical contact between employees constituted employment misconduct regardless of frequency.” Accordingly, the employee’s single incident of poking another coworker constituted employment misconduct and rendered the employee ineligible for unemployment benefits.
Takeaway: Employers should not tolerate violence in the workplace. Even a single incident that does not result in any harm may be grounds for termination and may constitute employment misconduct under Minnesota law.
Under Minnesota law, one of the reasons a terminated employee may be found ineligible for unemployment insurance benefits is if the employee was terminated for “employment misconduct.” Minn. Stat. § 268.095, Subd. 4.
Employment misconduct is defined as “any intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly: (1) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee; or (2) a substantial lack of concern for the employment.” Minn. Stat. § 268.095, Subd. 6(a). Whether the conduct in which the employee engaged was only a single incident is an important fact in determining whether the conduct rises to the level of employment misconduct, but is not in itself decisive.
The statute expressly states that the following types of conduct do not qualify as employment misconduct:
- Conduct that was a consequence of the applicant’s mental illness or impairment;
- Conduct that was a consequence of the applicant’s inefficiency or inadvertence;
- Simple unsatisfactory conduct;
- Conduct an average reasonable employee would have engaged in under the circumstances;
- Conduct that was a consequence of the applicant’s inability or incapacity;
- Good faith errors in judgment if judgment was required;
- Absence because of illness or injury of the applicant, with proper notice to the employer;
- Absence, with proper notice to the employer, in order to provide necessary care because of the illness, injury, or disability of an immediate family member of the applicant;
- Conduct that was a consequence of the applicant’s chemical dependency, unless the applicant was previously diagnosed chemically dependent or had treatment for chemical dependency, and since that diagnosis or treatment has failed to make consistent efforts to control the chemical dependency; or
- Conduct that was a consequence of the applicant, or an immediate family member of the applicant, being a victim of domestic abuse.
Takeaway: Knowing what constitutes employment misconduct can help employers know when it is appropriate to oppose a former employee’s application for unemployment benefits and when the employer’s resources could be better focused elsewhere.
What are common considerations a Minnesota employer faces when determining whether to oppose a former employee’s application for unemployment compensation?
Let’s say the employee was involuntarily terminated for continuous workplace rule violations but when told, the employee accused you of discrimination or retaliation or some other wrongful discharge. You then get the notice of filing for UI benefits from the Minnesota Department of Employment and Economic Development, which will provide you the opportunity to determine whether you will oppose benefits. There are definitely pros and cons to opposing unemployment benefits. Here are some factors to bear in mind:
- Are you likely to win? The standard for disqualification for benefits because of “misconduct” is either: (i) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee; or (ii) a substantial lack of concern for the employment. See Minn. Stat. § 268.095, Subd. 6. Simple unsatisfactory conduct does not satisfy the standard. It’s important to remember that unemployment compensation is an insurance plan the employee has paid into and, therefore, the presumption is that benefits are payable if he or she didn’t “reject” employment by quitting or willful misconduct.
- Do I need to “build a record” of my reasons for termination at the unemployment compensation stage in case the employee subsequently files a discrimination charge or sues? Probably not. The Minnesota Unemployment Compensation Statutes provide that there is no “collateral estoppel” applied to unemployment compensation hearings – in English that means that a determination made in an unemployment compensation matter cannot legally bind a finding in a subsequent wrongful discharge or discrimination case between the parties. Testimony from an unemployment hearing also generally cannot be used in other proceedings, except proceedings initiated by a local, state, or federal human rights agency with enforcement powers (like the Equal Employment Opportunity Commission or the Minnesota Department of Human Rights) or by the Department of Employment and Economic Development. As a result, there is some limited risk that sloppy, inaccurate or otherwise damaging testimony could come back to haunt you in certain types of proceedings. See Minn. Stat. § 268.105, Subd. 5–6.
- Will opposing unemployment compensation be prudent? If you have a good basis to oppose the applicant’s eligibility and can put the effort into preparing your case, challenging unemployment compensation could enflame the former employee and send him or her to the EEOC, MDHR, or an attorney to start litigation on some wrongful discharge basis. Angry terminated employees may lose their ardor to sue if they are getting unemployment compensation and getting on with their life. Sometimes “penny wise/pound foolish” is the deciding factor for the prudent employer.
Takeaway: These and several other important considerations should be taken into account when an employer is determining whether to oppose unemployment compensation after a volatile or complex employment termination. Counsel can always help with the “think-through.”