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Hiring the Currently Employed Michigan Driver – Who’s on the Hook for Unemployment if it Doesn’t Work Out?

February 20, 2008

Neill T. Riddell

Article Originally Published: February 2008

The information contained in this article is not intended to be legal advice. Readers should not act or rely on this information without consulting an attorney.

Quiz time. Here are your facts:

Bob Smith has been an employee-driver for Old Job Cartage for a couple of years. One day, however, he hears about New Job Cartage which is offering better pay and benefits. So, he checks it out, receives a New Job offer, and quits Old Job.

Six weeks later New Job Cartage realizes that its labor costs are too high and lays off several drivers, including Bob who then files for unemployment.

Now the question: is Bob eligible for unemployment benefits and, if so, which employer’s account, if any, will be charged?

Some of you are saying to yourselves that this is easy – he does not get any benefits. He quit one employer and failed to satisfy a requalification with the other.

If that is your answer then ask yourself this: is it ever that easy?

Of course it isn’t. These same facts were recently presented to two Administrative Law Judges in two separate cases. One judge concluded that Bob is not disqualified, and that Old Job is chargeable for his benefits. The other judge concluded there was no disqualification and that New Job is chargeable.

As it turns out, although the ALJs disagreed on the issue of who is chargeable, they were both right on the issue of disqualification.

Typically, a voluntary quit is the kiss of death for an unemployment claim as the Michigan statute makes clear that an individual is disqualified from receiving benefits if he or she leaves work voluntarily without good cause attributable to the employer or employing unit. Indeed, Michigan presumes that any quitting is for reasons other than those attributable to the employer and shifts the burden of proof to the quitting employee to prove otherwise.

There is an exception to this general rule, however, and that exception is at the heart of driver Bob’s case. Although a voluntary quit for reasons unattributable to the employer is usually disqualifying, this is not the case when an individual leaves work to accept permanent full-time work with another employer and performs services for that employer. So, an employee can quit a good job with a good employer, take another job and, if laid off or terminated for nondisqualifying reasons before requalifying, still collect unemployment.

But back to the question which perplexed our two Law Judges: from whom?

Equity and fairness suggests that it should be New Job because, after all, driver Bob would likely have still had a job to this day if he had not quit Old Job and, thus, it would seem unfair to penalize Old Job.

And, indeed, under the statute, the answer appears to be New Job. Although Bob had not worked a full qualifying period with New Job (which was the factor apparently bothering one of the two ALJs), it is not necessary that he do so. Rather, the Michigan statute expressly states:

“Wages earned with the employer whom the individual last left …, for the purpose of computing and charging benefits, are wages earned from the employer with whom the individual accepted work …, and benefits paid based upon those wages shall be charged to that employer.”

Although not altogether clear from the orders issued by the ALJs, the divergence in the two cases may instead arise out of differing interpretations of “that employer,” with one ALJ relating the term to the former while the other related it to the subsequent employer.

Nevertheless, employers in the position of both Old Job and New Job should be mindful of this exception to the “voluntary quit” doctrine when assessing the potential associated costs of certain employment actions.