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Does the Employer or the Employer Pay for Unemployment Benefits?

I was recently volunteering and a man came in with a legal question about unemployment benefits. His wife had been denied her benefits after working at the same company for twenty (20) years. The gentleman wanted to know how the company could deny her money since she'd been "paying into unemployment for twenty years." This prospective client's misconception is very common. While some states require an employee to pay for unemployment; in Colorado, it is illegal to require an employee to pay into an unemployment benefits fund.

Therefore, assuming his wife's company was operating legally, none of this woman's paycheck withholdings went to unemployment benefits. Instead, the unemployment fund is financed through employer paid premiums. Two (2) types of employers are required to pay Colorado unemployment premiums: 1) employers who paid wages of at least $1,500.00 in any calendar quarter during the prior or current calendar year; or, 2) any business that during twenty (20) weeks of the prior or current calendar year, employed at least one (1) person for any part of a day. Similarly, the Federal Unemployment Tax Act ("FUTA") imposes a payroll tax on employers, based on the wages they pay to their employees. FUTA taxes are also not withheld from an employee's wages, but are paid by the employer. The federal tax collected helps fund state workforce agencies. Colorado's collected premiums are paid into a fund which is disbursed by the Colorado Department of Labor and Employment, Unemployment Insurance Program as benefits.

Only employees, not independent contractors, are eligible for unemployment benefits. However, the standard for defining an "employee" is rather broad. Generally, an individual who is paid wages and performs a service for an employer is considered to have "covered employment" and the employer is required to pay unemployment premiums.

If a worker is eligible for unemployment benefits, and is separated from employment, he must meet the following factors to qualify to receive benefits: 1) be unemployed through no fault of his own; 2) be able, available, and actively seeking work; and, 3) have earned at least $2,500.00 during the base period. The base period is the first four of the last five completed calendar quarters before the start date of the claim. For example, if an employee files a claim in January 2015, he must have earned at least $2,500.00 between September 30, 2013 and September 30, 2014. The employee may also be eligible under the alternate base period which entitles her to benefits if she made at least $2,500.00 in the last four complete calendar quarters before the start date of her claim. For example, if she filed a claim in January 2015, she must have earned $2,500.00 between January 1, 2014 and December 31, 2014.

If you have been separated from your job and are eligible for benefits, the first step is to file a claim, which can be completed online. The Colorado Department of Labor and Employment ("CDLE") website also has a benefits estimator which allows employees to determine the amount of monies they may be eligible to receive. After filing the claim, you will need to register with the local workforce center which offers reemployment assistance, resume writing, and interviewing help. Processing your claim can take four (4) to six (6) weeks to complete. After you file, the CDLE will require separation information from your previous employer(s) and evaluate your previous wages. When processing is complete, you will receive a Notice of Decision either denying or granting you benefits. You may appeal any decision you disagree with through an appeal process.

If you have a question about the unemployment process, contact us at www.BryanKuhnLaw.com/ to discuss your legal rights.

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