Work-Refusal Unemployment Claims Spike During Pandemic

​Unemployment compensation claims from employees who refuse to return to work after being furloughed during the coronavirus pandemic are on the rise.

"Since the onset of the pandemic, and continuing through 2021, the employers we assist with claims management are reporting more than triple the number of work-refusal claims compared to pre-pandemic [levels]," said Steve Solovic, vice president of unemployment cost management operations with Equifax Workforce Solutions in St. Louis.

Here are tips for employers that may want to contest the claims.

Background

A state workforce agency makes the benefits determination for workers who have been laid off or furloughed, and each state has its own set of decision standards.

"Unemployment insurance was created to support individuals in need who have lost their main source of employment income," Solovic said.

Each state agency has a different benefits calculation. In general, an individual's benefit amount usually is determined by the amount of wages earned in the 18 months prior to the effective date of the claim, though each state may have eligibility rules, such as work-search requirements. When laid-off or furloughed workers return to work after being called back by the employer, the unemployment benefits end.

"Several of our clients have had employees who they have recalled but who have not reported to work and have [nonetheless] continued to collect unemployment insurance benefits," said Jason Morris, an attorney with Newmeyer Dillion in Newport Beach, Calif. In most cases, employees can't refuse a recall to work and still collect unemployment, but ultimately it is up to the state to decide on a case-by-case basis.

The employer does not manage or influence the benefit amount, other than to provide the wage data to the state for its calculation, Solovic said.

"Employers should focus on making their workplace one to which employees want to return," said Amy Moor Gaylord, an attorney with Akerman in Chicago. "Fostering a culture of mutual respect, collegiality and open communication, coupled with a competitive compensation package, can go a long way to making sure employees want to get back into the workplace."

But if an employee chooses not to return and the employer has a legitimate ground to contest an unemployment claim, "it can and should do so," said Kristin Ahr, an attorney with Nelson Mullins in West Palm Beach, Fla.

[SHRM members-only how-to guide: How to Determine if You Should Contest an Unemployment Claim]

"A claimant can be disqualified for unemployment benefits if the state determines that the claimant refused suitable work," Solovic noted. Generally, states tend to look for parity in the rate of pay, the location, the job duties, the work schedule and other job conditions. The employer usually provides this information in a refusal-of-work response, he noted.

During the pandemic, unemployment compensation claimants increasingly have raised altered personal circumstances, including lack of transportation and child care, as factors to be considered in refusals to work.

Proactive Steps

Employers can do three things to reduce unemployment claims when furloughed or laid-off employees refuse to return to work, according to Morris.

First, employers can clearly document that they are open for business and that they have requested in writing that their employees return, he noted. In California, if an employee refuses to come back, employers should provide the California Employment Development Department with this information. The department will then determine whether the employee is eligible to continue receiving unemployment insurance benefits.

Second, employers should ensure that they are following federal, state, county and local laws, guidelines and best practices regarding COVID-19. "Doing so will reduce the ability of reluctant and recalcitrant employees to point to employer failures as the basis for refusing to return to work," he said.

Third, employers should incentivize employees to return to work through competitive pay and benefits.

Jeff Kopp, an attorney with Foley & Lardner, said employers can take other steps to proactively support a return to work and discourage employees from opting to stay home, including the following:

• Create and communicate a plan. Prepare a written COVID-19 safety plan and communicate it to employees. The plan and communication should emphasize the steps the employer has taken to make the workplace safe, such as providing proper personal protective equipment, increasing sanitization practices and implementing contact-tracing protocols. This should make employees feel more secure about returning to work.
• Consider accommodations. Discuss and offer accommodations to employees who have a medical condition that makes them particularly vulnerable to COVID-19. While not legally required, employers may also consider offering accommodations for employees whose personal circumstances have been altered by the pandemic.
• Notify individuals that refusals will be reported to state agencies. Consider communicating to employees that if a recalled worker refuses to return to work while collecting unemployment benefits without a valid reason, the claim will be contested.
• Report refusals to return to work. Employers should inform the state unemployment agency if an employee has refused to return to work because of a generalized fear of COVID-19 or the desire to continue collecting unemployment benefits. This will trigger an investigation into benefits eligibility and discourage individuals from refusing work without good cause.

In addition, "when employers receive notice of an unemployment insurance claim, they should evaluate it to determine whether the information the employee provided is accurate," Morris noted. For example, the claim should accurately reflect that the employee worked for the employer, the wage rate, the date of unemployment, any severance benefits provided and the reason for unemployment, he said.

"If any of the information is inaccurate and the inaccuracy could impact whether the employee is entitled to unemployment insurance benefits, then the employer may have good reason to contest the employee's claim," Morris said.

Nonetheless, he cautioned that employers should not contest claims that clearly are meritorious.

'Unprecedented Demand'

COVID-19 and the resulting economic hardship, particularly for those in the service industry, have created "unprecedented demand for unemployment insurance benefits," Morris said. Many across the country have "struggled tremendously as a result of business closures, lockdowns, personal and family health care issues, child care demands, and other factors."

Morris noted that the federal government responded by subsidizing state unemployment insurance benefits but these programs are set to expire in September and some states opted out of federal benefits prior to their expiration.

"The end of these federal programs may reduce employees' willingness to reject employers' return-to-work offers," he said.

[Want to learn more? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]