Last week, California’s Employee Development Department (“EDD”) released the California’s most recent unemployment figures, for March 2014 (8.1%) (See here). This number remained unchanged from February 2014 and was a decrease from 9.2% in March 2013.  While these numbers seem encouraging, it still means that many Californians are out of work.  This got us thinking about a common predicament facing employers, whether or not to appeal an award on unemployment benefits.

You’re fired!  That’s good-bye, right?  It is a situation that employers often face — finally reaching the last straw with a problematic employee, terminating him for misconduct, breathing that sigh of relief, and then receiving notice that the same employee filed a request for unemployment benefits with the EDD (See here). In response, you fill out a notice with the myriad reasons this guy couldn’t remain employed, with full confidence he won’t get any benefits based on his nefarious deeds.  But lo and behold, the next thing you know, here comes a surprise notice from the EDD: “Please be advised that the EDD has awarded your former employee, Mr. Slacker Uptonogood, unemployment benefits!”

So what’s your next move?  Once the steam leaves your ears, you have the option to appeal the ruling (See here). Alternatively, you can let sleeping dogs lie and choose not to challenge the benefits award. 

The decision to appeal can have several implications that employers sometimes do not consider.  Often times, the circumstances surrounding the employee’s departure can lead the employer to make a “principled” decision to appeal because they feel that it is wrong for the employee to rake in the dough after engaging in serious misconduct.  But the decision to appeal can create further challenges down the road, especially where the terminated employee disagrees with the termination rationale.

Will I win?  An initial consideration for the employer may be an assessment of the chances of winning the appeal.  Generally, individuals are not eligible for benefits if the employer discharged them for misconduct connected with their most recent work. (See, Unemployment Insurance Code § 1256.)  But there is a rebuttable presumption that the individual was discharged for reasons other than misconduct.  (Id.)  Thus, the employer bears the burden of proving “misconduct” to reverse the award of benefits.

But, he was a really bad employee.  Misconduct has been defined to mean “conduct evincing a willful or wanton disregard for the standards of behavior which the employer has the right to expect of the employee, as well as action showing an intentional and substantial disregard of the employer’s interests or of the employee’s duties and obligations to the employer.” (See, Precedent Benefit Decision No. P-B-194 here).  But a discharge resulting from a violation of a company rule is not in itself misconduct which results in a disqualification from benefits.  (Id.)  Given this high standard and the employer’s burden, it can be difficult to predict the outcome of any appeal.  Thus, the employer may want to take “principle” out of the equation and consider whether an appeal is worth the time.

What else should I consider?  As mentioned above, terminated employees are often upset about their termination.  But they but may not be thinking about pursuing any legal action against their former employer.  Recently-terminated employees generally file for unemployment benefits as a way to support themselves while they seek new employment.  Given the potential dependence on these benefits by the former employee, filing an appeal may provoke the employee into pursuing litigation — especially considering that the appeal has a more “legal” feel to it, with an administrative law judge taking testimony under oath.  And the next thing the employer knows, a simple unemployment insurance claim has become a discrimination lawsuit.  In addition, a finding by the hearing officer that the employer did not prove “misconduct” may lead an employee to believe that his termination was unjustified, which may embolden the employee to pursue litigation against the employer.

Or, consider the employee with existing litigation against the employer.  Recall that it is the employer’s burden to establish misconduct.  The hearing on the appeal is under oath.  Thus, the employee’s supervisors (likely the decision-makers) would likely need to testify regarding the reasons leading to the employee’s discharge.  It is not difficult to imagine a situation where an unprepared witness makes inadvertent misstatements during this hearing which later expose him or her to impeachment in a later legal proceeding.  Ouch.

Workplace Solutions:  Think of the big picture when deciding whether to appeal an award of unemployment insurance benefits.  Consider your chances of prevailing and determine whether it is worth the time and resources.  If you are leaning toward fighting, reflect on whether the former employee may be an individual who will become litigious.  And if you decide to appeal, make sure that your witnesses and representatives are as prepared as they would be for trial to put your best foot forward.  Retaining or consulting with counsel to discuss these issues can often be helpful when making what can be a hard decision.