Agreement Not To Contest Unemployment


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It should also be noted that some labour professionals believe that even if an employer decides not to challenge an application for unemployment benefit, the former employee is equally likely to apply for discrimination. Some even feel that this is even more likely, since the worker may conclude that no challenge has been brought because the employer knows that it cannot defend the reason for the dismissal. They also argue that by successfully challenging the claim for benefits, the employer demonstrates that it is confident in its procedure against the employee, which can be used to discourage prosecution. Given the diversity of government legislation adopted, employers should review and consider revising the standard “no contest” provisions in their separation agreements. Abandoning the language, which indicates that an employer “will not contest” a right to unemployment benefit, may deter the employer from liability under the new state laws and liability for a possible breach of contract if a public agency asks the employer for additional information that could be interpreted as contrary to a right to benefits. Is there a risk in this practice? Is this a free and risk-free way to ensure a full release of all claims of dismissed employees? As with many things that seem “free,” there is a risk. The Unemployment Insurance Integrity Act, which came into force on October 21, 2013, stipulates that all 50 states must have laws punishing employers who have a “model” for not responding “in a timely or appropriate manner” to Employment Agency (EDD) applications for unemployment. Employers who do not react exactly – or do not respond at all – are not credited for fees on their unemployment tax account for unemployment benefits paid in error. Thus, employers cannot have it in both directions: on the one hand, they cannot withhold information that would deter a laid-off worker from receiving benefits and then claim a credit because benefits were wrongly paid to that worker.

By Lilian Doan DavisThe most employers are very aware of the public and federal taxes they have to pay to fund unemployment benefits. Many employers routinely include “no-contest clauses” in their separation agreements under which they agree not to challenge applications for unemployment benefits. While a non-contest rule appears to be a simple, risk-free and inexpensive bargaining tool, the inclusion of a non-contest clause may expose an employer to potential liability. State reactions to the IU Integrity Act have been different. To date, almost all states, with the exception of Missouri, have successfully passed laws to comply with the UI Integrity Act. In states such as Kansas, Texas, South Carolina, Washington and California, employers who have defined a “model” of inequity or appropriate response to complaints from thieves in the event of unemployment are punished.

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