Changes to NC’s Unemployment Insurance Program

On Behalf of | Apr 29, 2015 | Corporate Law

Despite their best efforts, for many of our business clients, it sometimes becomes necessary to terminate an individual’s employment. Losing a job is always a difficult proposition and in almost every case, the separated individual will immediately file a claim for his or her unemployment benefits with the North Carolina Department of Commerce, Division of Employment Security (DES). In many cases, business clients neglect to respond to requests from DES or respond inappropriately, and as a result, separated employees are often awarded benefits, even in cases when the employee was terminated for misconduct or behavior that would otherwise disqualify the employee from receiving benefits. While some employers often elect to permit an otherwise ineligible employee to receive unemployment benefits as a show of goodwill, many do not realize that a charge against the employer’s unemployment insurance account will cause the employer’s rates to increase, often dramatically, and can also open the employer up to additional civil liability.

If a separated employee files a claim for unemployment insurance, the employer will receive a Request for Separation Information. This two page document asks the employer to verify basic payroll information on the separated employee and to provide details relating to the employee’s separation. We strongly encourage our clients who receive this notice to contact our attorneys for assistance in responding to the DES. Unemployment laws in North Carolina tend to favor employees not employers, Employers who respond to these notices themselves often find that they unwittingly open themselves up to liability in their response. For example, under recent changes to N.C. Gen. Stat. § 96-14(2), an employer can be charged for an employee’s unemployment benefits if the employee is terminated for misconduct if the employee did not have prior written or oral notice that the conduct was unacceptable. To avoid these pitfalls, it is important that our clients contact us to guide any responses to the DES. Additionally, failure to timely and accurately respond to the DES can create opportunities for fraud and abuse on the part of the separated employee, which will result in overpayments to the separated employee that will be charged back to the employer.

On February 19, 2013, Governor Pat McCrory signed into law provisions that significantly change North Carolina’s unemployment insurance program. As a result of the recent recession, North Carolina’s unemployment insurance fund did not have the resources necessary to cover the high volume of claims that were filed, and was forced to borrow those funds from the federal government. At the end of the recession, North Carolina had the third highest loan balance from the federal government for unemployment funds, totaling some $2.5 billion. As a result, the General Assembly enacted the following legislation, most of which takes effect on July 1, 2013:

  • The maximum weekly benefit amount has been reduced to $350/week; a 35.0% reduction from the previously-available $535/week;
  • The maximum number of weeks that benefits will be paid has been reduced from 26 weeks to a range of between 12 and 20 weeks, depending on the state unemployment rate.
  • The calculation of the weekly benefit amount has been changed from an amount based on the high quarter to an amount based on the two most recent quarters in the base period.
  • Most “good-cause” provisions for leaving work have been eliminated, making it more difficult for employees who resign to receive benefits.
  • A surtax equal to 20% of the contributions due from each employer will be imposed until the balance in the Unemployment Trust Fund equals at least $1 billion, projected to occur in 2017.
  • The minimum tax rate for employers has been increased from 0.0% to 0.06% of taxable wages, while the maximum tax rate has been increased from 5.7% to 5.76% of the taxable wages.

If you have any questions about these or any other employment or business related matters, please do not hesitate to contact our experienced business litigation team.