I Am Tired of Paying for People's Vacations

Unemployment insurance is a disaster for a seasonal business like mine.  As background, most of my employees are retired, and don't really need to work.  They work for me in the summer, and then frequently take the winter off.  Unfortunately, some of the more unscrupulous ones will file for unemployment over the winter, telling the state office they are looking for work (usually a requirement) when in fact they have no intention of working.  I had two employees last year for whom I received a notice of their unemployment filing the very same day they called me to tell me what a great time they are having over the winter fishing in Mexico.

For those who don't know how it works, if I get a lot of unemployment claims I am punished with a higher rate the next year, despite the fact that by the nature of the business I have absolutely no work I can offer people in the winter.  Not surprisingly, I guess, my worst problems with such behavior are in the three Pacific coast states (CA, OR, WA) where the prevalent culture of big government benefits and limited individual responsibility combine to make people feel totally OK about such malfeasance  (this behavior is 20 times more prevalent for me in these three states vs. the other ten we operate in).  In fact, I have challenged several people who I knew were not looking for work and cheating me and the unemployment system and, rather than deny the charges, they threatened me with a lawsuit if I either reported them to the state or disciplined them in any way.

I'm not really going anywhere with this -- this is just my annual rant I post every year when I get my unemployment insurance rates for CA and OR.  I pay over 6% of wages as premiums in CA, and there is not a thing I can do about the fact that all the facilities we run are under 10-20 feet of snow in the winter and don't need employees.


  1. Jim Collins:

    You can start by blaming the building and construction companies for one. I live in Pennsylvania and have several friends in the construction business who's companies layoff all of their employees right before Thanksgiving and then call them back the first week of March. The State seems to have no problem with this. I have talked with the owners of some of these businesses and they say that their savings in liability insurance and employee medical benefits more than makes up for the cost of the Unemployment Insurance.

  2. Josh:

    That's ridiculous. It's like they want you to hire illegal immigrants to do the work... There should be some provisions for seasonal workers or something.

    Also, would you be able to hire them as independent contractors instead of actual employees?

  3. joe:

    were the threats at all credible? How could they make that stick? If they claim unemployment do you have to take them back?

  4. Binh Tran:

    Dear Sir,

    I read your post about "How to buy a business, or how you got into it". It was informative and helpful. Thank you for your precious time.

    I think a comment was posted by Josh above that you can hire your "retirees" as independent contractor. However, I am not sure if that's applicable in your business; perhaps if you can prorate their wages so that they will earn wages just like the teachers then it would probably reduce the "unemployment rate" from your business.

  5. Craig:

    I say report them to the state, discipline them and dare them to sue.

  6. civil truth:

    I'm afraid you're right, Coyote, the unemployment compensation scam is just another cost of business that's more expedient to go along with than to fight. On the other hand, you don't have to hire the egregious offenders next season; if they object, you can just tell that them that you expected they would have found other work during their unemployment "job search".

    Normally, you might be able to lower wages (or at least modify wage increases) to offset the unemployement costs except that, as you've blogged previously, you're probably going to have your hands tied by the announced plans by the Democrats to raise the minimum wage. Another of the "simple joys of employer-hood" I guess.

    Josh, you evidently aren't familiar with employer tax laws. For starters, check out the IRS tests for an employee versus an independent contractor. The government is very strict on this - big penalties and possibly worse if you call someone an independent contractor who should be categorized an employee.

  7. Matt:

    Can't you dispute the claims through an administrative procedure? Don't they have to declare, under penalty of perjury, that the job they were fired from wasn't seasonal, before they can even apply?

  8. markm:

    Matt: That would depend on the state. I know that in Michigan, seasonal workers don't get unemployment if they were told in advance that the job was seasonal with a specified season of no more than 26 weeks a year, if they actually worked only that season, and if the employer invites them back for the next season. But other states can have different rules.


  9. T J Sawyer:

    Well, don't just sit there, contest the claim! Probably you will find that in each state, as in Minnesota, there is a process to contest each claim that is filed against your account. Contesting the claim may require your time (or a local representative) in person to appear at a hearing but contesting a claim saying the claimant has gone to Mexico should be pretty effective especially when they don't show up at the hearing. These things can get into a real "he said, you said" but when the claimant doesn't show up the ruling usually goes in your favor. More importantly, word gets around quickly about employers who contest claims and fewer claims are filed.

    Of course you have different procedures for each state and you need to develop a financial model for each state using your own experience factors to determine the cost effectiveness of this strategy. This can be a big job for a multi-state small employer with a seasonal business but that is life in our country. It also provides recreational benefits to you during the slow season!

  10. Teri Pittman:

    My husband is one of those folks on unemployment in WA state. He works for the county and was told that his oncall position would result in some busy months and some slack months. In reality, it's working out to a couple of days a month. He would love to find another job but they are few in this area, even for trained janitors. The county decided not to replace a full time person who retired and wants to outsource this to a company in Oregon. In the meantime, they basically lied to him about the amount of available work.

    It's one thing if you have people who are literally violating the law by claiming to want to work and running off to play in another country. Let's not forget that companies benefit from being able to hire people seasonally. Why shouldn't we make use of these benefits if we are eligible for them? It's not like I make enough at my full time job to cover our expenses without some additional money coming in. If my husband left, they would not have any available people to call in if someone is out. It benefits them both.

  11. Dan:

    "Let's not forget that companies benefit from being able to hire people seasonally. Why shouldn't we make use of these benefits if we are eligible for them?"

    How about because you're stealing from taxpayers and raising your employer's insurance costs? Did you not read the original blog post at all?

  12. triticale:

    My work is sort of seasonal, in that I participate in technical projects which are scheduled for the outdoor work season. This year, due to delays at the construction end, I will be doing verification drives till the end of the year. Altho there are only half a dozen clients for my skill in my part of the state, I am required, in order to claim unemployment, to document that I have contacted two prospective employers every week, which means I apply for every computer tech job which comes along. I've only been asked to interview for two since I moved into cellular. The state isn't very happy with the fact that I do this by email, but last year's contract came from posting my resume at an industry site and I never met anyone from the firm I worked thru.

  13. Noumenon:

    Your perspective on unemployment insurance and sick days is certainly different from people who actually use them. In most cases that's a good thing, because there aren't a lot of entrepreneurs blogging, but in this case it's not. Sick days are barely abusable (you still get points, you have to pay $50 for a doctor's visit) and certainly not a ticket for free four-day weekends the way your link describes. Unemployment insurance rarely kicks in and it's a big hassle. I'm in Wisconsin, so maybe the situation is different, but I'm not convinced.

    I think your post is basically the rich-person version of those offshore tax-evasion schemes that get poor people all worked up. The very few who cheat the system make the other side think the whole system is a big giveaway.