What would you do if a marginally performing employee came to you asking you to be laid off so he could collect unemployment?
On the one hand, the thought of ridding yourself of an underperforming employee who did not want to work for you any more sounded appealing. On the other hand you hated the prospect of letting him collect.
This was the issue facing one of my HR HelpLine clients who called me asking if there were any risks in laying him off. Business was good at the company, so he would have to be replaced, but “anyone” seemed better than this guy.
While it was tempting to dump this individual, my advice was that it was not without risk. Here are the risks:
1) You are committing fraud. In general, in order for an employee to qualify for unemployment compensation benefits the employee must be separated from employment involuntarily and without having committed misconduct. When an employee files a claim for unemployment compensation benefits, the employer is routinely solicited by the state unemployment compensation agency to provide separation information. In general, an employee who asks to be laid off would be considered to have voluntarily separated from employment and the claim for unemployment compensation benefits would be disqualified. If an employer would willfully state that an employee, who requested to be laid off, was involuntarily separated from employment, the employee’s unemployment compensation claim would probably be paid. The employer may be liable for intentionally providing false information to a state agency and for aiding another in the commission of a fraudulent act.
2. It will cost you. Unemployment compensation benefits are paid from an employer’s unemployment insurance account with the state. The employer’s account is funded by a payroll tax charged to the employer. The employer’s contribution tax rate is determined, in part, based on the employer’s experience rating. Experience is based on the dollar amount of unemployment compensation benefits paid out of an individual employer’s account on an annual basis. The more claims that are paid to former employees of a given employer, the higher the employer’s experience rating would be and the higher the payroll tax rate would be likely be. Providing false information about an employee’s termination to facilitate the employee’s ability to collect unemployment compensation benefits would tend to increase the employer’s unemployment compensation payroll tax cost unnecessarily.
3. You just opened Pandora’s box. Using unemployment as a tool to address performance problems is a poor management practice and it also send a bad message to the rest of your workforce. If employees underperform, address them. If they prefer to work elsewhere, tell them to quit. Finally, the last thing you can afford is a reputation for letting people quit and then getting a free pass to draw against your unemployment account.
The easy, short-term solution was to let him collect; the better, long-term resolution is to tackle the problem employee head-on.
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