(2nd in a 3 part series)
Household employers pay unemployment taxes to fund benefits administered by their state's unemployment compensation system. Very few household employers, or their nannies, housekeepers or other household employees really understand how the unemployment system works.
We recently posted information about how unemployment benefits payments are determined and charged. Today we will look at how state unemployment compensation systems determine eligibility for benefits.
Unemployment compensation systems are established in every state, under Federal guidelines, to pay benefits to those who are temporarily unemployed through no fault of their own. These Federal guidelines insure that from state to state the eligibility determinations are quite similar.
The following are some eligibility guidelines:
- Monetary eligibility: The unemployed worker must have minimum earnings reported to the state in the "look back" period (typically the prior 4 calendar quarters) for eligibility. This is the area of risk to employers who pay their workers "cash" and do not make their necessary state and Federal employment tax payments.
- Continuing eligibility: The unemployed worker must be available to work full time, must be legally eligible to work, and medically able to work. Additionally state regulations for filing of claims and registering as available to work with the appropriate state resources must be satisfied. Aliens without US work authorization are ineligible for benefits under the "continuing eligibility" test.
- Qualification eligibility: An nanny who is discharged through no fault of her own (children go to school, child care center slot opened up, etc.) of course passes the qualification test. However, many employers are surprised to learn that in some circumstances the employee can quit and remain qualified for benefits. Some examples include the nanny quitting for another job which then falls through, quitting because of the illness or disability of the employee or an immediate family member, quitting because pay or hours were reduced 25% or more, and quitting because the worksite moved (the family moved).
Families sometimes dismiss a nanny because of compatibility, attendance and job fit issues. The nanny stands a good chance of getting benefits awarded UNLESS the family has excellent documentation that demonstrates to the unemployment claims administrator that the employee had been fired for misconduct. “Misconduct” is defined as a willful or wanton disregard for employer’s business or performance standards. Misconduct includes insubordination, dishonesty, violation of reasonable household rules, and repeated inexcusable absences or tardiness. Generally speaking this must be a pattern of behavior, unless the specific behavior was so egregious (not using a car seat when driving the children for example) as to create a real risk of harm to the children or household.
It is important to note that a nanny who accepted a cash wage nanny job, off the books, can still file for unemployment benefits. In this situation, the former employer becomes responsible for the filing and payment of all Social Security and Medicare, Federal and State unemployment taxes. This includes the employee portion of Social Security and Medicare! This is the most common way a family skipping the "nanny tax" gets caught. Discharged household employees often feel they have little choice but to apply for benefits when they need some income between jobs for groceries, rent, etc.
Questions? Leave us a message below!