Employers who terminate employees routinely fight the award of unemployment benefits if they feel that the employee was terminated for cause or for misconduct and should not receive unemployment compensation, which results in increasing the premium that the employer has to pay toward that insurance reserve with the State.
Fighting unemployment benefit and even winning that fight is very likely to backfire and turn out to be much more expensive than simply letting an employee collect unemployment. Many employees, when laid off or terminated, at the very least consider in the back of their mind the possibility of suing their recent employer. Whether the employee decides to aggressively pursue litigation against his former employer depends on the number of factors, but the emotional component – the anger at the employer is certainly not an insignificant element in that decision. Often, it’s what makes a difference between letting things go and going after the employer in court.
Consider terminating an employee who feels that he was fired unjustly. He is hurt and angry, but at the same time thinks that it’s a better idea to take a break, collect unemployment and look for another job. He applies for unemployment and gets denied benefits because the employer stated that the employee was terminated for misconduct. This very likely takes the employee over the edge and drives him to file a lawsuit for wrongful termination, harassment, discrimination, defamation, intentional infliction of emotional distress, and many other possible claims.
Whether the employer wins or loses, the company will likely spend anywhere between $20,000 and $50,000 in legal fees on defense and often much more. Thus, even if the company prevails in the wrongful termination lawsuit, the cost will be much greater than allowing the employee collect unemployment and possibly paying out a small severance in exchange for a full release of all claims, like many wise employers routinely do.