Unemployment Benefits -- Not for Everyone

— Feb. 22, 2009 -- Across the country, unemployment offices have never had so much business. The latest government tally has nearly 5 million people on unemployment. But the newly unemployed are discovering that drawing unemployment checks isn't as straightforward at they may have thought. A growing number of employers are trying to block benefits by challenging unemployment claims.

Wayne Vroman, an economist and researcher at the Urban Institute, tracks trends using data from the U.S. Department of Labor. He says that in the last four decades, the share of claims that have been challenged by employers has been rising, such that now 16 percent of claims are challenged on the basis of employee misconduct on average and roughly 10 percent on the basis that the employee voluntarily quit.

"There is a clear upward trend," says Vroman. "And the trend is in misconduct allegations by the employer — that is, the person is let go for reasons that were behavior detrimental to the company."

Employers have a financial motivation to challenge unemployment claims. While unemployment benefits are paid out by the government, it is companies that pay unemployment insurance taxes in most states. In general, the more employees that claim unemployment benefits, the higher their premiums rise based on complicated mathematical formulas that vary by state.

Joshua Stone, a retail sales representative at a small furniture store in Boston, says he was shocked when his application for unemployment benefits was denied due to an ongoing investigation. Joshua was let go from his job in November after, he says, he showed up "a few minutes" late.

"I never had any warnings for anything," Joshua says, "No write-ups or anything like that."

But Joshua's employer sent ABC News a statement saying, "He was nearly 45 minutes late…The fact that Joshua made no attempt to contact anyone demonstrates deliberate misconduct and therefore was clearly in violation of company policy."

If the unemployment agency finds that there was misconduct, Joshua may not see a dime. Vroman says certain states, such as Texas and Florida, have a higher rate of challenges "because the employers basically have to meet a lower bar to establish misconduct."

It's advised that workers file for unemployment as soon as they lose their job and are aware of the eligibility requirements. Vroman also advises that applicants provide accurate and complete statements on their application when asked to describe the reason for the separation with their employer. Finally, he says the applicant should provide good contact information in the event that the agency needs to call for more information.

"[These cases] present the agency with a difficult problem because in many situations of human endeavor, there's ambiguity," says Vroman. "There's also some fault on both sides, and the agency has to come down one way or the other."