Understanding Voluntary Terminations: Part 3 of The Unemployment Road Map

Even the best employment relationships can end and sometimes, when they do, they result in the former employee filing for unemployment benefits. If you have received an unemployment benefits claim and are not experienced with the process, you will likely have some questions. This blog series, The Unemployment Road Map, is a resource that TriNet offers to provide you with guidance on this journey.

The word termination confuses some employers. They assume that termination means that an employee was fired. In the world of unemployment benefits claims, “termination” simply means the end of an employment relationship. This term is used regardless of who severs the relationship. There are generally two types of terminations – voluntary and involuntary. In this post, we’ll focus on unemployment benefits claims based on voluntary terminations.

A voluntary termination is one where the employee initiates the separation or termination of employment. Voluntary terminations or resignations or “quits” are generally easier to prove than involuntary ones when the proper documentation is maintained. It’s very important to get a resignation letter from the employee. Ideally, the letter outlines the reason for leaving, amount of notice, last day of work and is signed by the employee. Unfortunately, this level of detail is not typical. In fact, many employees avoid stating a resignation reason. Further, many employees send their resignations by email and no signature is included. However, a resignation e-mail is still helpful for unemployment benefits claims purposes because it shows the sender, recipient, date and time.

Another important procedure to follow when an employee resigns is the exit interview. Here, the employee may reveal their reason for leaving. Document the concerns stated in the interview, and if possible, have the employee sign it. There are a few reasons this matters:

• In unemployment benefits claims, any state considering the claim will ask for the reason the employee quit. The burden is on the employee to prove they had a good reason to quit (states define “good reason” differently). A state typically asks both the employee and the employer, and it will question inconsistencies. If an employer has an employee’s written acknowledgement of the reason for quitting and it differs from the employee’s testimony, a state may judge the claimant untruthful.
• A voluntary termination or quit does not guarantee that the employee will be disqualified from receiving benefits. The reason for quitting is one of the factors a state evaluates when deciding whether to award benefits.

A voluntary resignation -- especially for non-compelling reasons -- usually disqualifies an employee for unemployment benefits but there are significant exceptions. In most states, if an employee quits for documented reasons attributable to the employer, they will likely be awarded benefits. The employee must be able to prove that the employer was informed of the situation and made no attempt to fix it. Other reasons that a state might grant benefits to an employee who quits include:

• Health issues – the employee’s or those of a close family member
• Military transfer – usually applies to the spouse of a service member
• Unsafe work conditions
• Changes to the terms of hire – hours, pay and in some cases, changes in management
• Harassment that can be proven by the claimant

Additionally, in some states, claimants who leave one position to go to another that pays more or provides better benefits may be able to collect unemployment benefits.

Don’t turn a quit into a discharge

In some states, if an employee submits a resignation and you release them immediately without pay, this will be viewed as a discharge. In a recent determination, the state of California granted benefits to an employee who had found another position and submitted a letter rendering a two-week notice to the employer. The employee was released the same day and filed for unemployment for the weeks they would be out of work. Benefits were granted because the employer did not produce an adequate response for why the employee was let go immediately and not paid for that period. Look out for these questions on your state claim form:

• What was the stated last day of work?
• Was the employee paid through this period?

These questions might give some insight into how your state leans in this situation.

Mutual agreement

Most states will not accept an employee’s claim that a separation was by “mutual agreement.” If an employer and employee make an agreement to separate, a state will typically want to know if the separation falls into one of four categories – quit, discharge, layoff or reduced hours. This can be determined by asking, “who initiated the separation?” If an employee tells their manager that they are not happy working there and the manager agrees to terminate employment, then it is typically considered a voluntary termination or quit. If the employer goes to an employee and says it’s not working out and the employee agrees to separate, then it is typically considered an involuntary termination or discharge.

Voluntary terminations are only slightly less complex than involuntary ones. It bears repeating that just because an employee resigns, it will not necessarily result in a positive outcome for the employer. Keep these tips in mind when faced with a resignation. We will visit involuntary terminations next time in The Unemployment Road Map, Part 4: Know Your Terms – Involuntary Terminations.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.