Exclusions from Unemployment Chargebacks: What Are They?

By: Mario Hernandez

Legal Counsel to Commissioner Joe Esparza

Employers in our great state know that unemployment claims arise from all kinds of different job separations. Typically, if a claimant receives unemployment benefits, those benefits are charged back to the taxed employers who have reported ?base period wages? for that claimant. This is what is known as a chargeback, and it affects the employer?s unemployment tax rate. A higher unemployment tax rate means that the employer pays more in unemployment taxes. But if a claimant receives unemployment benefits, will it always result in a chargeback to the employer?s account?

A Quick Note for Reimbursing Employers

The exclusions from chargebacks that will be discussed will not apply to reimbursing employer accounts. Please see Texas Labor Code Section 205.0125 for the law on the exceptions from a reimbursing employer?s duty to pay a reimbursement.

Exclusions from Chargebacks

The list of exclusions from chargebacks can be found in Texas Labor Code Section 204.022, but this article will focus on those exclusions that tend to come up more frequently in unemployment claims.

Separation Caused by a Medically Verifiable Illness

Sometimes job separations are the result of an employee being out for too many days due to illness. Similarly, job separations can occur for attendance violations that were caused because the claimant needed to care for a sick minor child. For these types of job separations, Section 204.022(a)(5) of the Texas Labor Code may provide chargeback protection for taxed employers.

However, as noted in our online Texas Guidebook for Employers, medical separations could have consequences for employers beyond an unemployment claim. Sometimes employees with medical issues could be protected by laws such as the Americans with Disabilities Act, Family and Medical Leave Act, and Workers? Compensation. Employers should consult with private legal counsel if the employer is thinking of discharging these employees.

Separation Caused by the Operation of Federal or State Law

Chargeback protection is also available to taxed employers for job separations that were necessary to comply with federal or state law. For instance, this type of job separation can arise if a claimant fails to maintain a credential or license that either federal or state law requires to perform the job. Sections 204.022(a)(1) and 204.022(a)(2) of the Texas Labor Code outline these exclusions from chargebacks.

Will these Exclusions from Chargebacks be Applied Automatically?

In short, the answer is no. If the employer?s position on an unemployment claim is that the job separation was the result of something that would qualify as an exclusion from chargeback, the employer should not assume the Texas Workforce Commission (TWC) will automatically apply the protection.

Remember, the burden of establishing that any kind of exclusion from chargeback is applicable to an unemployment claim is on the party so claiming the exclusion. In other words, if the employer believes that the job separation was the result of one of the above-mentioned exclusions from chargebacks (or any other) the employer should clearly state that in its response to the unemployment claim. Remember to respond timely as well!

Conclusion

Sometimes an unemployment claim can result in benefits for the claimant and chargeback protection for the employer. This ?pay and protect? scenario can emerge from the employer successfully establishing that the job separation was the result of an exclusion from chargeback found in Section 204.022 of the Texas Labor Code.?