Unemployment Benefit Insights for Contingent Workers | DCR Workforce Blog

Unemployment Benefit Insights for Contingent Workers

unemploy benefitsOne of the concerns for someone embarking on a contingent work assignment is the question of whether unemployment insurance benefits can be claimed between jobs. The answer depends on the contingent worker classification. Contingent workers are engaged by a company to perform a service or complete a project for a specific period of time. Of course, contingent workers come in many flavors – freelancers, small teams to whom a project has been outsourced, college interns, and agency-supplied contract employees. Unemployment benefits apply only to agency-supplied contract employees. Why? Because they are in fact employees of the staffing agency that has placed the worker on the assignment. When staffing agencies employ someone as a contract worker, they are in fact taking on the role of an employer of record for that worker – even if the worker is based at another company and managed by that company’s staff.

Workers can claim benefits when the agency fails to find them another assignment after the end of a previous one. In some states, they may also claim unemployment while on an assignment, depending on the payment on that job. A worker can contact the state unemployment security commission to find out how much they are qualified to receive while on their contingent job.

Many people and companies are not aware of the fact that contingent or seasonal employees may become eligible for unemployment benefits at the end of their assignment. Qualifications vary by state, with many states specifying the minimal required length of employment or amount paid to qualify for unemployment compensation benefits. Some states exempt casual workers – who take up assignments for a day – from unemployment benefits. When local authorities hire students to help with emergency situations like natural calamities, they are not considered eligible for unemployment compensation once their assignment ends.

Influencing Factors:

Generally speaking, when a worker who was performing services for compensation finds that the work is not available to them anymore (in other words, they successfully completed the assignment or the engagement was canceled by the client for reasons other than dissatisfaction with the worker’s performance), the worker may file a claim for unemployment benefits, provided they earned a minimum compensation during the base period of their employment.

  • To collect unemployment benefits, a worker has to diligently establish the fact that he or she is available and willing to take on a new assignment by regularly calling the agency (at least weekly) to ask for a work assignment. The worker should document this information, by making a note of the date and time on which the call was made and the name of the person who responded. This will be useful to establish willingness to find employment.
  • The base period for calculating the amount of unemployment benefits received by a worker depends upon the worker’s earnings during the first 4 quarters of the last 5 quarters (in essence, discounting the quarter in which the claim is being filed), called the base period, prior to unemployment. If the contingent assignments are irregular, the worker should file for unemployment benefits or the amount of earnings in the base period will turn out to be so low that the worker fails to qualify for benefits.
  • A worker who was claiming unemployment before a contract assignment may find by taking up a contingent assignment which pays a much lower compensation when compared to their previous job, their unemployment compensation is drastically reduced. So, the worker will have to ensure that their compensation is comparable to previous earnings.
  • Every state has its own definition of what constitutes involuntary unemployment. An application for benefits would be typically rejected if the worker quit voluntarily, or refused suitable work or was fired for misconduct. However, if the worker chose to quit due to extenuating circumstances, the worker bears the burden to show good cause for doing so before a claim for unemployment will be approved.
  • If the worker is fired or laid off, the employer must prove that the separation occurred due to the worker’s misconduct, or refused work without good cause, to successfully oppose the claim. The claim may be contested if the employer paid wages in lieu of notice, worker’s compensation or retirement pension.

To ensure compliance, employers will need to know the rules in each state, as they differ significantly from each other. States differ in their calculation of alternative base periods to measure minimum earnings. However, all states are consistent when insisting that the worker being available and actively in search of work.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.