When workers become unemployed, they can apply to receive benefits from a state unemployment compensation fund until they find other work. Every employer, even owners of small businesses, must pay unemployment insurance on each employee in its organization, and these payments are then placed into the state fund.

Former employees can receive unemployment compensation only if they are out of work through no fault of their own. Voluntary separation or termination for misconduct may make it difficult for the worker to make a claim for benefits, and employers are entitled to challenge claims for unemployment when they believe the claims are invalid.

This article provides a general overview of unemployment insurance (UI). See FindLaw's Unemployment Benefits section for additional articles and resources.

Unemployment Insurance: Employee Quits

If an employee quits, he or she will only be eligible for UI compensation if the resignation came about for a valid reason that was somehow caused by the employer. To be eligible for unemployment benefits, it must be shown that the worker would have suffered some sort of harm or injury if he or she stayed on the job. The standard is whether a reasonable person in the job situation would have remained on the job.

In order to constitute good cause for quitting, the employee's reason must be compelling. Deciding to quit a job because it doesn't offer opportunities for advancement may be a good reason, but it will not be considered compelling by most courts. Dissatisfaction with the job is also not considered a compelling reason to quit.

For purposes of collecting unemployment insurance compensation, compelling reasons to leave a job may include:

• Harassment.
• Discrimination.
• Substantial reduction in hours or pay.
• Threats of termination or choice of resignation.
• Unsafe or hazardous working conditions.

Unemployment Insurance: Employee Is Laid Off

If an employee is laid off by an employer, or working hours are significantly decreased, the worker will receive unemployment benefits as long as he or she has enough employment tenure to be eligible under the state's program.

In some special circumstances, like a pandemic, the federal government may allow the states to extend the eligibility of employees to qualify for benefits when the employee is temporarily laid off. This happens when the business is forced to shut down for a specified period of time. 

Unemployment Insurance: Employee Is Fired

Employees who were fired can claim unemployment compensation benefits if they were terminated for reasons other than their own misconduct. For example, if an employee was terminated because the company was experiencing financial difficulty and had to reduce the size of the workforce, then that employee is entitled to unemployment compensation. A fired employee may also be eligible for unemployment benefits if the employer had good cause to terminate him or her, but the infractions were minor or the misconduct was unintentional. In other words, not all actions that result in termination are serious enough to qualify as misconduct so as to result in a denial of unemployment compensation benefits.

What Unemployment Insurance Provides

If your unemployment claim is approved, you will begin receiving benefits on a weekly basis after a one-week waiting period. In other words, you will not receive benefits for your first week of unemployment. Unemployment benefits typically last for 26 weeks, although this period may be extended when the economy is struggling and jobs are scarce.

The amount you will receive each week is determined by the office handling unemployment claims in each state, and is subject to tax. Mississippi pays the lowest maximum weekly amount of $235, while Massachusetts has the highest maximum amount, at $635 (as of July 2013).

If you are a federal employee, you may be eligible for the Unemployment Compensation for Federal Employees (UCFE) program. Although it's operated by the federal government, the claim amount and other eligibility requirements are still determined by state regulations. The agency will ask how your position was terminated (fired for cause, laid off, etc.), and then will contact your former employer for verification.

How to File a Claim

Each state has its own procedures for filing unemployment claims, although they are fairly similar to one another. Most states allow applicants to claim UI benefits via telephone, mail, or online. You will need to provide all of the basic personal information (such as name, address, Social Security number, etc.) as well as your employment history.

Stages of an Unemployment Compensation Claim

While there are variations from state to state, a typical unemployment compensation claim proceeds as follows:

1. The claim is filed.
2. The state agency makes an initial determination as to whether the former employee is eligible to receive unemployment benefits.
3. If there is a dispute, the employee and employer will submit relevant forms and documents.
4. If the matter still is unresolved, a referee conducts an unemployment insurance hearing where both the employer and the former employee may call witnesses to support their positions.
5. If either party disagrees with the referee's decision, they can appeal it to an administrative agency.
6. If the employer or former employee disagrees with a board of review's decision, they can appeal it to the state court system.

Get Legal Help With Your Unemployment Insurance Concerns

Employees who've been laid off, wrongfully discharged, or forced to leave employment for a compelling reason are entitled to receive unemployment compensation benefits. However, disputes can arise after a termination regarding whether a termination occurred for legitimate reasons. Contact an experienced employment law attorney today.