All employers are required to contribute to state and federal unemployment funds,
which are used to help laid-off workers make ends meet until they can find another
job. Families typically don’t think much about these small taxes until after they
have to lay someone off. Here are the most common questions regarding unemployment
What is Unemployment Insurance?
Unemployment insurance is a government program designed to provide financial assistance
to employees who have been "let go" from their job due to no fault of their own.
It is funded through payroll taxes imposed on employers. Benefits are not paid to
employees who quit their job or who are terminated for good cause (i.e. they are
unable or unwilling to perform duties to the employer’s satisfaction). Qualification
for benefits is determined on a case-by-case basis after an application has been
submitted to the state labor/employment department for formal review.
If I pay my employee “under the table” is she eligible for unemployment benefits?
No. When you pay your employee illegally, you are not paying the payroll taxes that
fund unemployment benefits. As a result, your employee would not be eligible for
benefits. In addition, the state will require back taxes, penalties and interest
to be paid on all previous compensation. Once back taxes have been paid, your previous
employee will qualify for benefits.
Will it cost me anything if my previous employee qualifies for unemployment benefits?
No. Employers do not pay unemployment benefits. Your unemployment insurance taxes
paid quarterly flow into a general fund, and benefits are distributed from the fund
to employees who qualify. The only effect you will possibly see is a slight tax
rate increase for the next year. Each employer is re-evaluated every year and rate
adjustments – up or down – reflect the employer’s track record for laying off workers.
I received a notice that my previous employee has applied for unemployment benefits,
but she quit. Does she qualify for benefits and what should I do?
If your employee quit or was let go with good cause, she should not qualify for
unemployment benefits. The state notifies every employer when an unemployment benefits
application has been filed by a previous employee. You are being asked to verify
the facts of the termination or to dispute them if you feel that they were not presented
accurately. A state case-manager will review all documentation provided and determine
eligibility for unemployment benefits. You will be informed in writing of the decision.