Managing Poor Performance to Lower Unemployment Compensation Costs

Published: April 23, 2024 by Wayne Rottger

There are many factors that dictate whether former employees receive unemployment benefits. Often, employers are surprised to learn termination that seemed clearly justified resulted in unemployment benefits paid, thus increasing their unemployment compensation costs. 

If employees fail to perform to employers’ standards, it is presumably because of their inexperience, incompetence or inability to perform the duties of the position, or because of honest mistakes. Therefore, none of these are considered willful misconduct and employees terminated for poor performance typically receive unemployment benefits.

While it may be complicated to determine the reason for termination in some situations, understanding the distinction between poor performance and repeated willful misconduct can help employers ensure more favorable outcomes and lower unemployment compensation costs.

Poor Performance vs. Willful Misconduct

If employees perform assigned work to the best of their ability but simply cannot meet the employer’s standards or needs, this would be considered poor performance. In these cases, there is no willful and substantial disregard for the employer’s interests and employees simply cannot perform the job duties. Also, a single incident of poor judgment or ordinary carelessness generally is not considered misconduct and falls under poor performance issues.

On the other hand, misconduct exists only when employees’ work behavior shows a willful and substantial disregard for the employer’s interests and expected standards of behavior. Misconduct is generally defined as a deliberate or willful act by the employee that violates local, state or federal laws. This may also be an act that could cause injury to another person or violate a company’s policy after prior warnings that place the employee’s job in jeopardy.

Therefore, if an employee has the skills, and physical and mental abilities to do the job and has shown the ability to perform in the past but now chooses not to, this would result in a denial of benefits and help employers reduce unemployment compensation costs. On the other hand, if an employee never demonstrated full capability or if previously adequate abilities have diminished through no fault of their own, it will likely not be considered misconduct.

Tips for Reducing Unemployment Compensation Costs

The mere inability to do the job on a consistent basis is not considered misconduct, even if employees are warned that continued poor performance will result in discharge. In some states, employers must prove deliberate misconduct and in others either repeated or gross misconduct. However, in no state is poor performance alone a disqualifying reason.

With any type of discharge, it is the employer’s burden to prove that the claimant’s actions were willful and deliberate. To that end, they need to take different steps to enhance the odds of winning unemployment claims and reducing unemployment compensation costs:

  • Employers’ liability for unemployment compensation is limited based on the length of time the employee worked for them and the number of wages they earned. Therefore, as soon as they notice poor performance from a new employee and there is no willful misconduct, employers should terminate that person as soon as possible. Delaying this decision will only increase their liability and result in more unemployment compensation costs;
  • Another step employers can take is to analyze poor performance and understand its cause. If it is possible to connect poor performance with willful misconduct, employers’ cases must be documented with written warnings signed by the employee. Employers should try to determine why employees fail to meet work standards and recognize elements of their behavior that might constitute willful misconduct. These may include insubordination, failure to complete assigned tasks, time away from their workstation, attendance or tardiness. In addition to this, employees should be warned in writing that their job is in jeopardy and that another incident can result in termination. When the misconduct occurs, the employee should be discharged for repeated willful misconduct and not for poor performance;
  • To determine eligibility for unemployment benefits, states make their decisions based on their definition of misconduct, and not necessarily the company’s policy. For them to establish misconduct on the part of the employee, employers must prove misconduct occurred and submit the following:
    • A detailed description of the final incident, dates of employment, name and title of the person who terminated the employee, a copy of the company policy, and a document signed by the employee acknowledging receipt of the policy or handbook;
    • Copies of prior written or verbal warnings outlining previous similar incidents. Each warning should contain the date the incident occurred, a detailed description of what happened, and a statement of what further disciplinary actions could be taken in case of any subsequent incidents;
    • Documentation proving that the employee was previously able to meet the company’s performance standards for at least three months and is no longer meeting those standards as well as examples of specific acts that demonstrate misconduct.

The Cost of Poor Performance

In addition to increasing unemployment compensation costs, poor performance can cause other negative consequences. Underperforming workers may encourage others to ignore their duties. Also, if they seem to get away with this, other employees may become frustrated, resentful, and less interested in doing well themselves.

Poor-performing workers negatively impact the time and productivity of the companies’ management. Taking excessive time to coach, discipline, and document the behavior of one worker causes managers to have less time to deal with other important issues and other team members to feel neglected.

Taking this into consideration, employers need to react timely and have a system in place to deal with poor performance. Knowing how to discipline and when to let someone go can help organizations improve their results. In addition to this, employers can outsource unemployment claims management and make sure they are documenting all activity in the most effective way and keep unemployment compensation costs as low as possible.

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