February 23, 2009

Elizabeth Schulte explains why a majority of people who lose their jobs are barred from receiving unemployment benefits under the existing system.

IT WAS awful enough when Kenneth Brown lost his job in October. But then the hotel electrician took another hit--his former employer tried to block his unemployment benefits.

Brown had begun receiving benefits of $380 a week to try to support himself, his wife and three children. Then the owners of the Gaylord National Resort and Convention Center, just outside Washington, D.C., filed an appeal, claiming he had been fired for being deceptive with a supervisor.

"A big corporation like that...it was hard enough to be terminated," he said. "But for them to try to take away the unemployment benefits, I just thought that was heartless."

When a Washington Post reporter showed up at Brown's unemployment hearing in Maryland, the company dropped its appeal and refused to comment.

Kenneth Brown isn't alone in what he faced. According to an Urban Institute analysis of Labor Department statistics, more than a quarter of people who apply for unemployment benefits have their claims challenged by their employer.

Employers are trying to wriggle out of the obligation to pay unemployment to laid-off workers. (Eric Ruder | SW)

While unemployment benefits are paid out by the government, companies pay unemployment insurance taxes in most states. Although the formula varies from state to state, a company's unemployment insurance rates are in large part based on the amount of benefits their workers collect when they lose their jobs.

More and more companies are deciding that they can save money by blocking former employees from receiving benefits. According to state and federal laws, workers who are fired for misbehavior or quit voluntarily are ineligible for unemployment benefits. The proportion of claims that were challenged on the basis of so-called misconduct has doubled since the 1980s to 16 percent, according to the Urban Institute.

Laws in some states have made it easier for companies to block benefits, broadening the definition of employee misconduct and putting the burden on the worker to prove his right to receive benefits. Thus, Texas and Florida have a higher rate of challenges "because the employers basically have to meet a lower bar to establish misconduct," said Wayne Vroman, an economist and researcher at the Urban Institute. The courts also typically favor employers in their rulings.

Some companies spend the extra money to hire firms that specialize in helping them challenge former employees. The Post reported on a company named TALX, whose Web site boasted that it had removed "over $6 billion in unemployment claims liability annually."

These aren't the only vultures waiting to prey off of the unemployed. Some 30 states now provide debit cards through which unemployed workers can receive their benefits. The catch: checking a balance or withdrawing the benefits that they are owed comes with a fee.

Citigroup, Bank of America Corp., JPMorgan Chase and US Bancorp all have deals with states to handle the debit cards, with fees ranging from 50 cents to check a balance to a $20 overdraft fee. In many states, the debit card is the only option for unemployed workers to collect their benefits.

According to an Associated Press report, "Some banks, depending on the agreement negotiated with each state, also make money on the interest they earn after the state deposits the money and before it's spent. The banks and credit card companies also get roughly 1 percent to 3 percent off the top of each transaction made with the cards."

"They're trying to use my money to make money," said Arthur Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M. "I just see banks trying to make that 50 cents or a buck and a half when I should be given the service for free."

The AP calculated that Central Bank, which handles the cards for the state of Missouri--with 94,883 people claiming unemployment benefits through debit cards--stood to make an average of $6.3 million a year.

EXISTING UNEMPLOYMENT rules already leave out thousands of workers. Even though the majority of jobless workers contributed to unemployment insurance, only 36 percent collect benefits, according to the Department of Labor.

Individual states decide on eligibility rules. Many deny benefits to several categories of workers--for instance, workers who are looking for part-time work only; workers who left their jobs for "compelling family reasons," such as a child's illness or domestic abuse; or workers who had previously exhausted benefits and are now in training programs.

Many workers don't even seek out benefits, because they think they are ineligible or are confused by the rules in their state.

As part of the recently passed stimulus bill, the federal government is allotting $7 billion to try to entice states into broadening the categories of workers who will receive benefits.

The legislation would also offer money to states that agree to update their unemployment insurance rules so they use the most recent payment information when determining a worker's benefits. Many states still exclude workers' most recent three to five months of employment when determining if they have worked and earned enough to qualify for benefits, because the rules were instituted before widespread use of computers.

The stimulus plan will increase weekly benefits by $25 through 2009 and extend benefits for up to 33 weeks--an immediate improvement for a growing number of workers.

Joyce Burke has been trying to find a job for more than a year after losing her job at Chase Bank in Westerville, Ohio. "I'm only getting $200 a week in unemployment," Burke told the Columbus Dispatch. "I'd never been on unemployment before. Now I eat one meal a day."

The stimulus bill's $7 billion is recognition that the safety net for unemployed workers as it exists today is grossly insufficient. But much more is needed to overcome the injustices that face workers after they've already suffered the blow of losing their job.