Before the Cut: Tips to Consider to Mitigate Unemployment Costs
By James Ezell
It is no secret that Texas school districts find themselves in a difficult situation regarding budget gaps and proposed spending cuts by the Texas Legislature. TASB staff is already fielding numerous calls from districts on the potential for Reduction in Force (RIFs), layoffs, and other means to reduce costs. Some of the most common questions concern unemployment costs to member districts and what they can do to reduce, mitigate, or prepare for them.
We fully understand that this is not a pleasant or easy process to undertake. Real friends and families will be impacted by these decisions. The goal of this discussion is to provide information to assist members in making well-reasoned choices when faced with unpleasant facts. Keeping in mind that nothing is certain yet, there are some strategies we recommend.
When considering options, the best to worst scenarios available to members would be to consider reassignments first, then look at cuts in pay, incentive plans, retirement, and finally, RIFs. Each scenario offers its own set of facts for whether an employee can receive unemployment benefits. Before proceeding with a course of action, make sure you have considered multiple options.
If employees have questions on their eligibility for UI benefits, the best answer is always to refer them to the TWC, as opposed to answering the question yourself.
First, Unemployment Insurance (UI) benefits are paid by the Texas Workforce Commission (TWC) to those employees who lose their jobs through no fault of their own, are discharged for a reason that is not work-connected misconduct, or voluntarily quit because of good cause connected with the work. If employees have questions on their eligibility for UI benefits, the best answer is always to refer them to the TWC, as opposed to answering the question yourself. The simple reason for this is because employers do not get to determine who does and does not receive UI benefits. That decision is made by the TWC and only the TWC.
UI benefits are not paid to those who are discharged for misconduct connected with the work or those who voluntarily quit without good cause connected with the work. This means that discharges (including layoffs and RIFs) for a reason that is not misconduct grants benefits. Similarly, quitting with good cause connected with the work also grants benefits. Armed with this knowledge, it is important not to give employees good cause to quit if you reassign them to other positions.
Dependable employees are a precious commodity, so transferring them into other jobs should be considered before terminating employment for financial reasons.
We recommend districts reassign personnel wherever possible. Dependable employees are a precious commodity, so transferring them into other jobs should be considered before terminating employment for financial reasons. The TWC has refined a set of precedent cases for what it does and does not consider good cause to quit. While space does not permit a discussion of all the cases, the general rule to follow regarding reassignments is that “an employer may reassign workers to different positions within the same enterprise where doing so is reasonable, and the job location, pay rate and working conditions are substantially similar. A worker so transferred must try out the new position for a reasonable time before quitting."* What this means to school districts is that any employee who quits rather than at least attempt the new work runs the risk of being disqualified from UI benefits, and you should challenge any unemployment claim from someone in that situation.
Another factor to consider for employees who quit in response to a modification is that of pay. The TWC has established a bright line test for cuts in pay, which is 20 percent. Simply stated, cutting an employee’s pay by 20 percent or more is considered a substantial modification, which gives an employee good cause to quit.
Cutting an employee’s pay by 20 percent or more is considered a substantial modification, which gives an employee good cause to quit.
Employers are free to cut pay by more than that amount, but you should realize that doing so gives the person good cause to quit and draw UI benefits. Since the TWC has established 20 percent as the standard, we read this line of precedents that any cut under that amount does not give a claimant good cause to quit.
Another strategy to consider in reducing UI benefit claims is to offer a stipend or other incentive to employees to give early notice of resignation. A key factor in this method is to let employees self-select who is laid off by volunteering. If a district approaches an employee and informs him or her that his or her position has been selected for a RIF, it almost automatically grants a claim for UI benefits. However, if a district takes the approach of asking for volunteers, and gets some, then those volunteers have voluntarily quit because they might not have necessarily been the ones selected in a RIF. For example, a district might ask for 50 volunteers in a RIF. If 30 people volunteer without the district making a decision yet on which positions would be targeted, then it could be successfully argued that these employees quit voluntarily and on their own.
If a district takes the approach of asking for volunteers, and gets some, then those volunteers have voluntarily quit because they might not have necessarily been the ones selected in a RIF.
The TWC even has a precedent case that is very similar to the current situation, notably holding that “in an effort to avoid layoffs, the employer offered a monetary incentive to workers who opted to leave their work. Had layoffs been necessary, workers would have been laid off by seniority. However, the claimant, because of her seniority, would not have been subject to layoff. In the end, layoffs were not necessary as sufficient workers, including the claimant, elected to accept the monetary incentive and leave work. The claimant asserted that she had taken this action in order to permit a less senior co-worker to continue working. HELD: As the claimant could have, because of her seniority, continued working, her election to accept the employer's monetary incentive and leave the work constituted leaving the work voluntarily without good cause connected with the work.”**
These are just two strategies that employers can implement to reduce potential unemployment claims. For more, feel free to contact James Ezell, Unemployment Compensation Attorney for TASB Risk Management Services, at 800.482.7276, ext. 6258.
Endnotes
*TWC Appeals Policy and Precedent Manual, Voluntary Leaving, VL 515.90. Working Conditions: Transfer to Other Work, Appeal No. 97-008709-30-081397
**TWC Appeals Policy and Precedent Manual, Voluntary Leaving, VL 495.00. Voluntary, Appeal No. 86-14984-10-111886
