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Changes to Unemployment Insurance Law Should Benefit Tennessee Employers

A number of employer-friendly changes to Tennessee's unemployment insurance compensation system finished phasing in as of September 1, 2012. Employers should see a decrease in compensable claims now that the "Unemployment Insurance Accountability Act of 2012," enacted in May, has fully taken effect. The Act's provisions are outlined below.

Revised Definition of "Misconduct"

The unemployment law has for some time provided that a claimant is disqualified from receiving benefits if he was discharged from work for "misconduct connected with the claimant's work." T.C.A. § 50-7-303(a). The new law strikes the former definition of misconduct, which required a showing of willful and wanton behavior. Instead, the new law provides that "misconduct" includes:

  • Conscious disregard of the rights or interests of the employer;
  • Deliberate violations or disregard of reasonable standards of behavior that the employer expects of an employee;
  • Carelessness or negligence of such a degree or recurrence to show an intentional or substantial disregard of the employer's interest or to manifest equal culpability, wrongful intent or shows an intentional and substantial disregard of the employer's interests or of the employee's duties and obligations to the employee's employer;
  • Deliberate disregard of a written attendance policy and the discharge is in compliance with such policy;
  • A knowing violation of a regulation of this state by an employee of an employer licensed by this state, which violation would cause the employer to be sanctioned or have the employer's license revoked or suspended by this state; or
  • A violation of an employer's rule, unless the claimant can demonstrate that:
  • The claimant did not know, and could not reasonably know, of the rule's requirements; or
  • The rule is unlawful or not reasonably related to the job environment and performance[.]

T.C.A. § 50-7-303(b). The first three prongs of the definition are essentially re-statements of the old standard. Items (iv), (v), and (vi) are new however, and should provide a basis for employers to challenge some claims where the discharge was due to violation of an attendance policy or other policy clearly stated and communicated to employees.

As with the old definition of misconduct, though, a claimant will not be denied benefits if the discharge was due to mere "[i]nefficiency" or to "failure to perform well as the result of inability or incapacity"; to "[i]nadvertence or ordinary negligence in isolated instances"; or to "[g] ood faith errors in judgment or discretion." In other words, although benefits may be denied if the claimant was discharged for violation of a policy, benefits likely will not be denied if the claimant was discharged for being unable to do her job well.

Other Eligibility Changes

The new law clarifies that where a claimant receives wages in lieu of notice, such as salary continuation paid pursuant to a severance agreement, the claimant is not entitled to draw unemployment benefits. Thus, when drafting severance agreements with a confidentiality clause, consider an exception to the clause permitting or requiring the parties to disclose the amount of the payment to the Department of Labor if the employee files an unemployment claim.

Additionally, the new law provides that claimants must substantiate their efforts to find work by submitting information to the department showing they contacted at least three employers per week or accessed the department's career center services. The law directs the department to conduct "random verification audits" of 1,000 claimants each week to ensure the requirement is being met. Claimants caught falsifying job search information will be disqualified from benefits for at least eight weeks.

The law also adds to the definition of what is "suitable work" for purposes of claimants re-entering the workforce. (A failure to apply for or accept suitable work disqualifies a claimant from benefits.) The law already provided that factors to be considered in determining whether work is "suitable work" include the degree of risk to the claimant's health, safety and morals; the claimant's physical fitness and training; the claimant's experience and prior earnings, the claimant's length of unemployment and prospects for securing local work in the claimant's customary occupation; and the distance of the available work from the claimant's residence. T.C.A. § 50-7-303(a). The law now also provides that work is suitable only if it meets all the other criteria and the work pays gross wages that equal or exceed the following percentages of the claimant's average wage during the quarter of the base period in which the claimant's wages were highest:

One hundred percent (100%), if the work is offered during the first thirteen (13) weeks of unemployment;
Seventy-five percent (75%), if the work is offered during the fourteenth through the twenty-fifth week of unemployment;
Seventy percent (70%), if the work is offered during the twenty-sixth through the thirty-eighth week of unemployment; and
Sixty-five percent (65%), if the work is offered after the thirty-eighth week of unemployment.

The law notes that it is not to be construed to require a claimant to accept a job paying less than minimum wage. Notwithstanding that qualifier, it appears that the new wage provisions may allow claimants to decline work more readily, at least in the early weeks of unemployment.

Finally, the new law provides that claimants are not eligible to draw benefits during any week in which they are incarcerated for four or more days.

Information Provided by Employers

The new law provides that an employer may proactively supply information to the department, rather than waiting for the department to send its request for separation information. The department has revised its request for information to comport with the new law; the new form seeks much more detailed information than the old form.

Employers should continue to be cautious in completing these forms, as any information supplied-like any witness statements made during an unemployment hearing-can be used against the employer if the employee later files any type of charge or lawsuit. For example, the new form asks if the claimant violates company policy and if so, asks for specific information about the policy, the infraction, and any prior warnings. Employers who respond to these requests must be very careful to get the facts straight before submitting the form, because any discrepancies can and will be exploited by a plaintiff's lawyer later.

On the other hand, employers should also take comfort in the fact that the unemployment law has a privilege for information supplied by both employers and employees in the course of unemployment proceedings; the law provides that any information "shall not be made the subject matter or basis for any suit for libel or slander in any court." T.C.A. § 50-7-701(c). Thus, employers should not be fearful of libel or slander lawsuits for providing truthful and accurate information, even if unkind to the employee. Nevertheless, the forms and other information that employers supply to the Tennessee Department of Labor could eventually be used as evidence in other proceedings, for example, if an employer asserts one reason for separation of employment when responding to the Tennessee Department of Labor and asserts a different reason in another form it could be problematic.

It remains to be seen how zealous the department will be in enforcing the new rules, as well as how strictly they will be interpreted by the courts. In the meantime, employers with questions or concerns should contact their Wimberly Lawson attorney for guidance.

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