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UNEMPLOYMENT EXPLAINED

What is Unemployment Insurance?

Unemployment compensation is a form of social insurance designed to provide income to people who have lost
their jobs through no fault of their own . While receiving unemployment benefits, individuals must make themselves
available for work and must actively seek a job . In most states, 26 weeks is the maximum payment period for an
unemployed worker . The system has two major goals: to prevent unemployed persons from undergoing severe
hardships and to get the unemployed back to work .
To be eligible for unemployment insurance benefits the worker must:

1 . Show a prior attachment to the labor force . Individuals who have recently entered the labor force will
not qualify .

2 . Not have caused his/her unemployment . Benefits are paid only to individuals who are unemployed
through no fault of their own .

3 . Maintain an attachment to the labor force while he or she is collecting benefits . Benefits are only payable
to individuals who are actively seeking work .

Under the Federal Unemployment Tax Act (FUTA) and state laws, employers are obligated to pay payroll taxes to
provide unemployment compensation to employees . Employers pay Unemployment Insurance (UI) tax based on
wages paid to each employee . As an employer, our unemployment taxes pay the entire cost of unemployment
benefits paid . Unemployment taxes cannot be withheld from employees’ wages . Each state sets a taxable wage
base . For example, Arizona’s base is $7,000 . Colorado’s is $11,300 . How much our restaurants pay for
UI is based on how many former employees have successfully filed claims . Understanding who is eligible for
unemployment benefits and who is not can go a long way toward keeping our unemployment insurance rates low .

Who is Eligible?

Generally, the state will first determine:
(1) The employee’s wages during a base period, (2) the employee’s reasons for leaving the company and (3) the
percentage of employer liability:
1. Determining the base period: State laws vary, and each state we do business in will handle eligibility
differently . For example, Arizona defines base period as the first four of the last five completed calendar
quarters prior to the filing of the claim . California omits the most recent four-to-six month period before a claim
is filed and looks back 16 to 18 months to determine the quarter in which the highest wages were paid .

2. Reasons for leaving employment: The restaurant ’s unemployment account will not be charged if the
employee:

a . Quit voluntarily without good cause .
b . Quit voluntarily for a better job .
c . Quit voluntarily to attend approved training .
d . Was fired for gross misconduct .
*Individuals may be disqualified, permanently or temporarily, if they refuse suitable work . State law may set
other disqualifying reasons .
3. Percentage of liability: You are 100% liable if you are the individual’s only employer during the base
period . Charges are prorated if the individual had more than one employer during the base period .

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2 2 Revised February 2014