As a primer, Maryland is an at-will state for employee/employer relationships. That means that an employer can terminate an employee for “good” cause or “no” cause, but not “bad” cause. The bad cause could be someone’s race, gender, or age, for example. However, as I often tell my business clients, “no” cause or “good” cause doesn’t necessarily mean that the employee will be denied Unemployment benefits. Unemployment benefits are designed to bridge the gap between jobs and the statutory scheme in Maryland is designed so that people who lose their job will be able to claim benefits.
Baltimore Small Business Lawyer: Will my unemployment costs go up if I don’t fight my case?
As a Baltimore Small Business Lawyer, I’ve been representing businesses at unemployment hearings for years now. I either help clients prepare for the phone interview. Or if they already lost at the phone interview stage, I generally handle the hearing on the Employer’s behalf with workers and managers as witnesses. I have been told of huge Unemployment Insurance increases the year following a claim, but never had hard numbers. A few weeks ago a Baltimore Small Business owner shared some hard numbers with me and they were staggering. Here they are for you:
- Business owner had 10 employees.
- His old rate prior to discharging two employees for “good” cause was .6%
- This translated into an annual cost of $510 of unemployment insurance per year at $51 per employee per year.
- Business owner discharged two employees, a few months apart, for cause.
- Business owner didn’t fight to prevent the employees from collecting unemployment despite both were discharged for multiple work-infractions such as tardiness, poor performance, and poor behavior.
- New rate, 1 year post claims was 12.3% (yes, a 20x increase)
- His new annual cost for his 10 employees was $10,455 or $1045 per employee.
- The new rate stayed with his business for 3 years until the claims aged out for a total cost differential of almost $30,000.
What can I do?
A less solvent company could be bankrupted by such an increase in unemployment insurance costs. This particular business was able to persevere through the costs and survive. As a Baltimore Small Business owner, when you are evaluating termination of employees you should consult with an attorney to determine if your reasons for termination are valid and how to properly document the termination to make your case stick. Also consider that while firing someone is lawful in Maryland, you should expect to pay unemployment for that former employee in many cases. Also, consider having your small business lawyer prepare you to handle the telephone hearing and represent you at the in-person hearing. A few dollars up front makes cents in the long run as illustrated above.
ENLawyers Bottom Line
If you are a Baltimore Small Business owner and are facing employee decisions, consider consulting our firm for legal advice on how to properly handle your situation. A few hours with a lawyer now could save you thousands in increased premiums down the road!