The Unemployment Insurance System Part I. FYI

[TheMastersNemesis]

Many workers have encountered the unemployment insurance system during this recession. I worked with that system for 24 years and took thousands of claims during my career. So here is the skinny on the system.

The UI system was passed as part of the Social Security Act during the New Deal. FDR realized the unemployed workers needed some kind of insurance against unemployment that would pay them some sort of stipend while they sought work.

The federal mandate to establish unemployment insurance fell under the Wagner Peyser Act as well and set up the apparatus by which individual states would operate. The general model allowed the states a fair amount of leeway in establishing their own system as long as it followed the general guidelines set up by the federal legislation.

Each state could set up its own criteria for eligibility. Each state could set up its own benefit limits because the cost of living in the various states would vary. The system would be funded by a tax on employers based on usage as a percentage of their gross payroll. Higher usage would mean higher tax rates base on quarters. The Social Security number would end being used as the account number for the claimant. The primary requirement was that applicants be able and available for work and have sought work for each week claimed. The local administrative authority had the right to set the criteria for what constituted a valid work search.

Each state would set up the minimum earnings criteria to monetarily qualify for unemployment insurance base on money earned for each quarter. The states would also set up base periods for counted earnings. Some states would use the last 12 months earnings. Other states would set up the first four of the last five quarters and employers back to 18 months could be in the claim depending on when a person filed during a quarter.

Every employer who was liable on the claim in that base period had a right to challenge a claim based on reason for separation.
Every employer who had a legal objection would be given a period of time to protest a claim and give their reason for job separation. And law judge would adjudicate the claim for each employer and assess a penalty for bad separations as defined by state statute. A claimant would have the right to appeal any penalty to a law judge who was a lawyer and have a one on hearing. If the appeal went against the claimant they could further appeal the an Industrial Commission. If a penalty was reversed the claimant would receive payment for all weeks claimed while they were unemployed. Any employer worked for no matter even if it is one hour can disqualify a claim.

Unemployment claims must be qualified by monetary earnings and valid reasons for separation of each employer worked for during the base period. A claim is valid for a year from filing. All states are not the same some states have more severe requirements and penalties than others. Each state passes its own local statutes in accordance with the federal legislation.

Contrary to popular belief claimants themselves do NOT pay directly into unemployment insurance. The employer pays that tax.

What I have shown here is the basic set up of the UI system and why it is so complex. Usually only about 30% of applicants for UI actually get a check.