Updated July 16, 2015
What happens when a former employee files for unemployment?
Generally, if you are the last chargeable employer and the ex-worker receives benefits, it will cost you additional money.
The Department of Employment Security is basically a large insurance-type fund. Like any insurance, if you have too many claims you’re going to end up paying additional premium. Unemployment insurance generally is not much different.
When an ex-employee makes an unemployment claim, they will list their last or most recent employer on the forms. Only the last employer who has employed this person for over 30 “working” days is responsible for this person’s unemployment compensation. Eight hours equals one “working” day. If you only employed this person for 29 “working” days, then your account will not be charged if the ex-employee receives benefits. Whoever the employer was before you that actually employed this ex-worker for 30 or more “working days” will be charged. If you are going to have any defense at all and not be charged for these benefits, then extremely detailed records must be kept.
When you receive a notice stating that a former employee is seeking unemployment, it is time to respond. This form can be accepted, or disputed. If you choose to dispute the claim, the department will perform an investigation. You will need to prove your allegation in writing. An example would be if the ex-employee quit, rather than being fired or laid off, you will not be held responsible. But how would you prove this if the employee just didn’t show up one day, and no documentation was created to prove this fact which could be entered into evidence?
If the ex-employee was fired for cause, and that cause happens to be an acceptable cause given unemployment law, then you could also win the case and not be charged for the unemployment benefits. But once again, your allegations must be proven in a written format. Hearsay is generally not acceptable. The Department has always been pro-employee in their stance to provide compensation to unemployed workers. The concept of fairness to employers generally doesn’t enter into the equation.
If you employed a worker, treated them like an independent contractor, and they file for unemployment, then you have a real problem. Just because you didn’t pay into the system, doesn’t mean that they will be denied benefits. But paying a little unemployment tax isn’t the main problem. The real nightmare occurs when the department checks your account, notices that you didn’t pay in any taxes on that employee, and audits your company. If and when you lose the unemployment audit, it will probably depending on the liability, be referred to the Illinois Department of Revenue for audit. After you lose that one, it will probably go to the IRS. Without the proper representation even a double bankruptcy may not save you and your company from financial ruin for many years.
If you are having problems when a former employee files for unemployment or have issues with your accounting in general, we would love to help. I love hearing from my readers, and can be contacted at
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.
Updated July 16, 2015