All businesses deal with the unemployment compensation system at some level. Employers subject to the Texas Unemployment Compensation Act (“TUCA”) are required to pay unemployment insurance taxes to the Texas Workforce Commission (“TWC”). When employees cease employment, they may file a claim with the TWC to receive unemployment benefits. However, the unemployment process—particularly representations made by either the employer or employee to the TWC—may have unintended consequences beyond determining eligibility. For example, statements may be used to support claims of discrimination or retaliation under Title VII of the Texas Labor Code or misclassification under the Fair Labor Standards Act. Consequently, it is important to evaluate each situation early in the process to determine if it is advisable to seek legal assistance when responding to the TWC.
Performance vs. Conduct: Employers are often confused by their right to terminate an employee’s employment at-will and an employee’s right to unemployment benefits. Unemployment insurance is for the benefit of employees who become unemployed through no fault of their own. Generally, employees will be entitled to unemployment benefits unless they were discharged from employment for misconduct connected with work. Employees who are discharged from employment because they failed to meet performance expectations will not be denied benefits unless the failure to perform amounts to misconduct. Employees who are performing their jobs to the best of their ability but are still underperforming will not be denied benefits.
Be Honest about the Termination Decision: Inevitably, it will become necessary to terminate the employment of a known troublemaker—someone who is always complaining about something. When this occurs, some employers may be inclined to not fight the unemployment claim with the hope that both the individual and associated problems will just go away. However, our experience suggests this is seldom appropriate. First, this is insurance provided by statute and the TUCA requires an honest answer to the TWC’s question as to why the employee was terminated. Additionally, failing to dispute a claim involving serious misconduct could be used against an employer in a subsequent wrongful discharge claim. Employees have a very low legal hurdle to establish a potential discrimination or retaliation claim, but employers may successfully avoid liability if they can show that the employee was discharged for a legitimate business reason, such as misconduct. However, if an employer fails to disclose the misconduct to the TWC, asserting that the separation was due to misconduct in response to a subsequent discrimination charge or suit may be viewed as a pretext to cover up the employer’s discriminatory or retaliatory conduct.
Seek Legal Advice Early: Employees who have been terminated for misconduct often file for unemployment benefits even though they are ineligible to receive those benefits. Employers sometimes believe that if it contests the employee’s claim, the employee will counter by alleging that the employer discriminated against the employee during his or her employment, or that the employer otherwise took action that constituted a wrongful discharge. Fearing such an allegation, employers are sometimes unsure how to respond, if at all, to unemployment claims filed by these individuals. Employers who are concerned that they may find themselves in this predicament should consider seeking legal advice at the initial stage of the unemployment claim process to make sure they are able to present their case in the best light possible, while avoiding actions and statements that could aid the former employee in making claims against the employer. For employers, this is a real opportunity to question an employee’s claims and narrow the scope of any potential suit. Conversely, if the company’s representatives testifying before the TWC are unprepared, it is also an opportunity for the employee to obtain statements that are helpful to his/her position. In these situations, getting good legal advice early in the game can help the employer put its best foot forward.
Takeaway for Employers: Do not underestimate the significance of responding to a claim for unemployment benefits. Employers should provide accurate information regarding the reason for termination and consider seeking legal advice if there are pending or anticipated charges or claims of discrimination, retaliation or other unlawful conduct. After the employer submits its initial response, the TWC will issue a determination, which both parties can appeal. If an appeal is filed, a hearing is held. A TWC appeal hearing is very much like a mini-trial for the resolution of the unemployment claim, and while the TWC’s findings may not be controlling in other matters, the statements made under oath by either party may be used in other proceedings.
Employers should give careful consideration when responding to unemployment claims and preparing for hearings. If this is something we can assist you with, please feel free to contact Keith Sieczkowski, Labor & Employment Lawyer with Branscomb | PC, at firstname.lastname@example.org or (361) 886-3800, or Sandra White, Labor & Employment Lawyer with Branscomb | PC, at email@example.com or (210) 598-5800.