How to minimize your unemployment claim losses

By Forrest Flinn

Every dealer at some point has had to deal with an unemployment claim when an employee is terminated or quits their job. Generally, dealers believe that it is impossible to win against an employee no matter what they do. The bad news is that most employment claims against the dealership are often ruled in favor of the employee. The reason for losing is not because of the merits of the case, but mostly due to the way the dealer manages the process of termination. The focus of this month’s blog is to provide you some tools and advice on managing the termination process and reducing lost unemployment claims.

The following are tips, processes and procedures that I have personally found useful in winning unemployment claims for dealerships:

  1. Do you have to really win at all costs? No, you don’t, and your goal should not be to win every single claim. If you truly know that you are going to lose an unemployment claim, do not put the effort and energy into a process where you know the outcome. I have seen some dealers embarrass themselves because they are angry and want to prove to the world that they are right and the employee was wrong. Pick your battles and learn from your experience. Translate your anger into other productive activities.
  2. Performance versus misconduct. There is a big difference between performance and misconduct in dealing with your employees. For example: In California, if you terminate an employee for poor performance with multiple write ups, then you can expect to lose on an unemployment claim. However, if that same employee was to do something that was misconduct while on the job then your odds for winning the claim have increased. Knowing the difference between these two concepts helps you win an unemployment claim.
  3. Acts of passion. Never under any circumstances fire an employee in the heat of the moment. When you are that angry or upset it is never a good idea to make any decision that could negatively affect your dealership. Even though your state may follow the doctrine of “Employment-at-Will” there are limits to what and when you can terminate an employee and still win an unemployment claim.
  4. Time bombs. Official unemployment notices are time bombs just waiting to explode! Make sure that you respond timely before the deadline date. Most states now allow you to respond to notices online. Just missing the deadline by one day could automatically rule in the favor of the employee. Remember that procrastination killed the cat!
  5. Taking no action when an employee complains. When your employee complains to you about a valid issue regarding their employment make sure you address their claims preferably in writing. I have seen many claimants win because their bosses did not do anything when an employee complained about something that interfered with their ability to do their job. Take all legitimate complaints seriously and communicate with your employees about their complaints and how you are going to resolve the issue.
  6. Ignoring dealership policies and procedures and prior warnings. Do not be a victim of your own dealership’s policies and procedures. If you have a rule where you cannot be late to work and you are inconsistent in its application, then be prepared to pay an unemployment claim if you are called out on it. If you have given an employee a prior warning and the behavior persists and you don’t do anything about it for six months be prepared to lose the claim. The overarching goal is to be consistent with the rules and procedures that you have put in place in your business. The rules have to apply to everyone and not just when you feel like applying the policy or procedure.
  7. Use details and facts when responding to the initial claim. Many dealerships lose unemployment claims because they do not use facts, details, and witness testimony when responding to initial claims. Most tend to use general language that is open to interpretation and shaded with emotion. For example, John was terminated for failing to report to work on time. A winning response would include detailed timecards, prior warnings, write-ups, a copy of the company policy on time and attendance, a copy of their job description detailing working hours, and a brief written testimony from their manager describing the behavior and the impact on the department. Avoid using vague language that is subjective and open to interpretation. Use objective verifiable evidence in response to unemployment claims.
  8. Failing to discuss the problem with the employee. Avoid at all costs terminating an employee without discussing the performance issue with them first. Maybe there is a misunderstanding of a policy or perhaps the employee just does not understand what is expected of them? Discussing performance problems with employees on a regular and consistent basis improves communication and possibly can help you save the relationship. Be prepared to lose an unemployment claim if the employee’s first knowledge of the issue is the same time they are being fired. Remember, our job as managers is to coach and train employees so that they are successful.
  9. Document! Document! Document! The key word here is documentation of any and all issues that affect the employee and employer relationship. Most dealerships are really bad at documentation. Documentation can be just a simple email to yourself, a Word document, or an official form that your dealership may use. Documentation is a solid basis of defense when done in real time. Manufacturing documentation after the fact, which I have seen many dealers do, is just unethical and bad business.
  10. Familiarize with your states rules and regulations. Every state has different rules and processes to follow. Start by going to your state’s unemployment website to provide yourself with a thorough understanding of the rules. Also, I strongly suggest you reach out to a human resource professional or attorney prior to terminations.

Dealing with employee terminations is never easy or fun. As my momma always said, "Life is not fair," but she also said "If you keep your ducks in line, you will not have much to worry about." You may not win unemployment claims all the time but having good dealership policies and procedures that are sound and legal can help you minimize losses, decrease your costs, and avoid further legal problems.

After all, it’s just good business.

Forrest Flinn, MBA, PHR, SMS has been in the motorcycle industry for more than 20 years and has been a true student and leader serving in various capacities. He previously worked as an implementation consultant for Lightspeed and as a general manager with P&L responsibility for a large metro multi-line dealership. Currently Forrest is the managing partner and chief visionary for a consulting firm that specializes in outsourced accounting, human resources, social media strategy, dealership operations consulting and Lightspeed/EVO training.


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