The North Carolina Legislature signed into law comprehensive reforms to the State’s unemployment insurance system (NC HB 4). These reforms will apply to new claims beginning July 1, 2013, and may have an impact on North Carolina employers. Among other things, the new law will reduce weekly benefit amounts and the number of eligible weeks that an individual can receive benefits, eliminate partial disqualifications (also known as Substantial Fault) and eliminate unemployment benefits paid due to health disability.
One of the more publicized changes to the law is the reduction of maximum weekly benefits. Currently, a recipient of unemployment benefits is eligible for a maximum weekly benefit of $535 per week. This amount is formulated based on several factors, including length of employment and salary. Beginning July 1, 2013, the maximum weekly benefit will be reduced to $350 per week. Further, benefit recipients will see the number of weeks in which they are entitled to draw unemployment benefits fall from 26 weeks to 20 weeks. The number of weeks of eligibility may drop further depending on the State’s unemployment rate.
The most crucial impact of the law is the elimination of Substantial Fault. The term “Substantial Fault” references a decision handed down from the Division of Employment Security in which a claimant receives a partial disqualification of four to thirteen weeks due to, and an many instances, a violation of a known and reasonable workplace policy. Substantial Fault is used by many Administrative Law Judges (“Appeals Referees”) as a way to reach a compromise in a hearing. The claimant does not lose all of his/her unemployment benefits based on a determination of “Misconduct”, and more importantly, an experience rated employer will receive a Non-Charging determination.
Finally, another major reform to North Carolina unemployment law is the elimination of benefits awarded due to a claimant or his or her family member’s health disability. Currently, the State awards benefits to those individuals who can show that their separation from employment is related to their health disability or due to care for a family member with a health disability. An experience rated employer will receive a Non-Charging determination in the event of a separation due to health disability. While this may not play a major impact, employers will still need to be careful when separating an employee for health-related issues.
The elimination of Substantial Fault will have a negative impact on the State’s employers. The reason being is that Appeals Referees will now be required to make a yes or no decision, which cannot involve any grey area. In my opinion, Appeals Referees will begin to construe the laws in favor of claimants due to the “all or nothing” parameters. The employer, who maintains the burden of proof in a majority of the hearings in this State, will be required to show that the claimant’s violation of policies or procedures was willful and deliberate
Based on the changes summarized, it is strongly encouraged that employers be mindful of these reforms. Specifically, with the elimination of Substantial Fault, it will be advantageous for employers to utilize legal counsel in order to be successful in future hearings. Employers should ensure that employees are acknowledging and signing off on Handbooks and policies. Also, enforcing workplace policies, and enforcing progressive corrective action will be more important than ever in garnering a favorable decision.
