Should an Employer Contest Claims for Unemployment Compensation Benefits?

Your Company’s delivery driver is caught drinking a beer while in the Company’s truck in the Company’s parking lot during his work break.  The Company fires him on the spot.  The Company then receives notice that the driver has filed a claim for unemployment compensation with the Indiana Department of Workforce Development.  Should the Company dispute the claim?  The answer depends on several considerations.    

Under Indiana’s unemployment statute, an employee may be discharged “for just cause” for “reporting to work under the influence of alcohol or drugs or consuming alcohol or drugs on employer’s premises during working hours.” Ind. Code. § 22-4-15-1(d)(6).  If an employee is disqualified from unemployment compensation after being discharged for just cause, the maximum unemployment compensation he may receive will be 75% of the benefits he would otherwise have received.  I.C. § 22-4-15-1(b)(1).  

Some companies do not take the time to respond to unemployment claims because the result may only be a 25% reduction in unemployment benefits to the former employee.  However, it is worth remembering that, if an employee is found to have been discharged for just cause, that incident will not be grounds to increase the Company’s “experience account” which determines the amount of unemployment taxes the Company must pay.  I.C. § 22-4-11-1(d).  The higher the Company’s experience account, the higher the percentage of payroll the Company must pay for unemployment insurance.  

Still, money is only one factor to consider.  In analyzing whether to contest a meritless claim, there are three other basic questions you should ask:

1. Are there other claims the employee may file? 

Keep in mind the employee may file other claims against the Company after being terminated, such as a discrimination claim with the Equal Employment Opportunity Commission or Indiana Civil Rights Commission.  The unemployment statute provides that any finding of fact, judgment, conclusion, or final order made by the Department of Workforce Development in an unemployment case is not conclusive or binding and may not be used as evidence in a separate action between an individual and the employer in an action before “an arbitrator, a court, or a judge.”  I.C. § 22-4-17-12(h).  However, sworn testimony provided in an unemployment case is not a “conclusion” or “finding of fact” and may be admissible as evidence in a discrimination case.  For example, if the employee testifies under oath in an unemployment hearing that he consumed alcohol on the Company’s premises during his work day, that statement itself may be admissible as impeachment evidence if he changes his testimony in the discrimination case.  See Fed. R. Evid. 801(d),. For this reason alone it may be worth challenging an unemployment compensation claim.

2. Is there “evidence” that you might uncover?

Another reason to challenge an unemployment compensation claim is that it may provide the Company with an opportunity to learn more about the employee’s allegations.  For example, an employee in an unemployment case may identify other employees who consumed alcohol at work but who were not disciplined, to support his discrimination claim that employees in different categories were treated differently.  This information could help the Company prepare to defend against the potential discrimination case.  

3. Will other employees “follow suit”?

An additional reason to challenge an unemployment compensation claim could be to prove to the former employee that the Company is serious about defending against meritless claims, which may cause the employee to shy away from filing other claims against the Company.  Additionally, taking a hard stance against meritless claims may reduce the number of claims in the long run.  Companies with a reputation of being “soft” against claims by former employees because they choose not to contest claims may find that they are easy targets for future employment law claims.  


All of these factors should be considered by the Company in deciding whether to challenge an unemployment compensation claim.  Even though the initial stakes may seem relatively small, the decision to contest an unemployment claim may provide strategic benefits to the Company.  However, that decision must be made quickly before the claims deputy makes an initial decision.  There are short deadlines for challenging unemployment decisions, so prompt action by the Company at each step is crucial to preserve its rights.

If you have questions concerning unemployment compensation or other employment law matters, please contact Don Smith.  

Donald S. Smith

Donald S. Smith


Author Donald S. Smith

Don Smith limits his practice to representing employers and executives in labor and employment matters. He defends employers in cases pending before state and federal courts, the National Labor Relations Board, Equal Employment Opportunity Commission, Indiana Civil Rights Commission, U. S. Dept. of Labor, OSHA, IOSHA, Indiana Dept. of Workforce Development, and Indiana Worker’s Compensation Board. Don advises employers concerning various employment issues such as employee handbooks, employment agreements, severance agreements, covenants not to compete, restrictive covenants, wrongful termination, collective bargaining, labor arbitration, unions, discrimination, harassment, wage and hour matters, unemployment compensation and worker’s compensation.

© Riley Bennett Egloff LLP

Disclaimer: Article is made available for educational purposes only and is not intended as legal advice. If you have questions about any matters in this article, please contact the author directly.

Permissions: You are permitted to reproduce this material in any format, provided that you do not alter the content in any way and do not charge a fee beyond the cost of reproduction. Please include the following statement on any distributed copy:  “By Donald S. Smith© Riley Bennett Egloff LLP – Indianapolis, Indiana.”

Posted on Dec, 18 2018 by Donald S. Smith