Business owners, especially small business owners, are constantly concerned about keeping costs down—and rightfully so. But there are some scenarios in which culture and costs clash—and employee departures is one such area.
If you have too many unemployment claims, your cost as a business goes up. As a result, many businesses go to great lengths to ensure that employees do not win their unemployment claims. For instance, instead of firing employees, companies place heavy pressure on employees to resign, making them ineligible for unemployment.
Is this an effective strategy as a small business? Should you try to save money by forcing resignations, instead of terminating an employee? Should you challenge every unemployment claim in order to keep your costs down?
No, no and no. After years of experience in the HR industry, I feel confident saying you should rarely oppose an unemployment claim.
This advice seems to run contrary to popular wisdom. Your goal is to keep costs down, right? So not getting dinged for unemployment seems like the right thing to do, but let's break it down. Here are a few things to think about.
Lawsuits Are Expensive
When you terminate someone, what's your real goal? To get that person to go away and not bother you again. And by bother, I mean sue you.
When you fire an employee, for whatever reason, they are likely to be angry. Most likely they think you were unfair. While you followed procedures and made decisions by the book, all it takes is this employee convincing an attorney that he was treated differently than other employees who were a different race, gender, religion, or other protected class, and you're on the hook for thousands of dollars—not because you're guilty of illegal discrimination. But, even responding to the attorney will cost you money, and it could cost you your reputation if the employee can garner public support. Cutting someone off from employment and unemployment makes people angry—and angry people will be far more likely to retaliate in court.
It's Your Fault If Someone Is Fired
Anytime you have to fire someone, you should look back on what you did wrong. Rarely is the answer "nothing." Did you ignore red flags in the interview? Did you let bad behavior slide for a long time until you couldn't stand it any more? Are your managers not compassionate? Do you focus on rules, rather than employees? If you answered yes to any of these questions, you're partly to blame for the termination. Don't punish the person because your managers can't manage.
You Want to Build Goodwill
You may have fired John for insubordination, but chances are he has friends at the office. These friends already think you were unfair, and when you fight back against unemployment, their shaky trust in you shatters. You don't want that. You want your employees to know they'll be treated well should something happen.
Another important thing to remember is that unemployment payments aren't exactly a reward. You're not giving former employees unemployment payments; you're just not opposing that they receive them. Employment attorney Robin Shea advises:
If an employee (let's call him "Jimmy") is being terminated for "misconduct," I'd fill out the unemployment paperwork giving the true reason for the termination. If you want Jimmy to be able to collect, you may want to be gentle with the details. But by all means be honest. And then add, "Employer does not intend to contest Claimant's claim for unemployment." Depending on the (truthful) reason you gave for the termination, Jimmy may be initially disqualified from receiving benefits.
If Jimmy is denied and appeals, you can just not show up to the hearing. You aren't rewarding bad behavior. You're not lying. You're just being kind. And we all know the world needs a bit more kindness.
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