[NJFAC] Why Your Boss Can Block Your Unemployment Benefits

Why Your Boss Can Block Your Unemployment Benefits And what it means for worker wellbeing and access to the safety net  Alexander Hertel-Fernandez and Alix Gould-Werth  2/10/26

When you lose your job, applying for unemployment insurance should be straightforward: you file a claim, the state verifies you're eligible, and you start receiving benefits to keep you afloat while you search for new work. But there's a player in this process most people don't know about until it's often too late: your former employer, who has both the right and a powerful financial incentive to fight your claim.....

Follow the Money

The U.S. unemployment insurance system has an unusual method of funding benefits that exists virtually nowhere else among other rich democracies: "experience rating." Under experience rating, employers generally pay payroll taxes that fund UI benefits, and those tax rates rise when their former workers successfully claim benefits. (Only one state–Alaska–uses a different system in which employer taxes rise in proportion to their layoffs, rather than benefit claims.) It's like car insurance: more claims mean higher premiums for employers.

The original theory behind this system was elegant: employers would avoid unnecessary layoffs if doing so raised their tax bill. In addition, employers would help "police" the system to ensure that only eligible workers receive benefits.

But experience rating creates another incentive too—one the program's designers perhaps didn't fully anticipate. Employers can also lower their tax burden by contesting their workers' legitimate and illegitimate claims, making it harder for laid-off employees to receive benefits in the first place.

Indeed, the experience rating system has spawned a growing industry of "claims management" consultants who market their services by promising to reduce employers' UI tax bills through more aggressive contestation. As one journalist put it, these firms have turned fighting unemployment claims into a "boom industry."....

Important recent work on one state (Washington) shows that employers strongly influence worker access to UI benefits. The authors find that "if all employers [in Washington in their sample from 2005 to 2013] with below-median claim effects moved to the median, then the UI claim rate would increase by 6 percentage points." The authors also find that employer effects help explain the income gradient in UI benefit access, with higher-earning workers more likely to receive benefits because their employers are less likely to contest their claims. But we do not have a national perspective.

A Quarter of Claims Face Employer Pushback

To tackle this absence of national evidence, we drew from an original nationally representative survey of workers who experienced unemployment between 2019 and 2024. In that survey, we asked unemployed workers who filed for UI benefits if their employer fought their claim. We find that about 26 percent of UI applicants reported having their claim contested by their employer. That's far higher than the 4-8 percent suggested by earlier studies that focused on one state (Washington) where researchers can access detailed UI records.....

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June Zaccone
National Jobs for All Network
http://www.njfac.org

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