When to Break the Rules – Oregon Unemployment Tax and HR Best Practices


Each state has its own unemployment tax system and each are slightly different but they generally operate within a similar framework.  Employers are assessed a tax that goes into a fund that is used to pay for unemployment claims.  The tax rate each business is assigned varies according to two primary elements.  First, how much your former employees take out of the general fund in the form of Unemployment Insurance (UI) benefits.  The second is the ratio of those UI benefit costs compared to the level of payroll.  In Oregon, the State Unemployment Insurance tax rate is based on a rolling three year average.

How UI Rates are Determined.

Thus the UI benefits that have been paid to former employees are charged against your tax rate for three years.

The state of Oregon has specific rules on granting or denying unemployment benefits.  Broadly these rules mirror the best practices of progressive discipline that HR professionals recommend to discipline or terminate an employee.  For example, an employee will be awarded unemployment if they made a one-time mistake and did not know they would be let go for that issue.  But if that same employee had been disciplined before, and been warned that if they do it again they will be terminated, then UI benefits would not be awarded. In the vast majority of cases it is best to mirror these Oregon Administrative Rules under Eligibility Factors.  Progressive discipline is a useful tool as your goal should be to get the desired outcome from an employee to benefit your business.

Progressive discipline is based on consistently applying the same steps and standards on all employees.  However each situation should be evaluated independently and there are exceptions to every rule.  Sometimes it is best to skip progressive discipline altogether and terminate an employee.    A great example of when to skip right to termination is workplace violence.  I remember an unemployment hearing where an employee had been in a fight with another employee in front of the employer’s front gate.  The judge seemed to be going down the road that ‘this was one-time mistake’ and asked about previous warnings.  There were no previous warnings but unbeknownst to me the client volunteered that he had to fire this employee in the past for bad behavior.  Then the client insisted that the former employee answer as to why he was fired.  The judge was unhappy that she was losing control of the hearing until the former employee admitted to biting the head off of a pigeon at work.  Regardless of whether you win or lose an unemployment claim you do not need a person on your crew who has moved from committing violence against animals to committing violence against people.

Winning an unemployment claim should not be your only goal.  There are many variables to consider beyond your UI tax rate.  In my role as Risk Manager I have often heard,” I was just going to let that person go before they filed a WC claim, call OSHA, claim discrimination, file a BOLI suit, etc.”  I am not suggesting that employees be terminated before they exercise their legal rights.  Nor am I suggesting that termination is always the answer. What I do suggest is that if you have an issue, address it immediately so that the employee has a resolution and an outlet when being asked to change behavior (contact Cardinal for guidance).  An employer should be proactive with progressive discipline but maintain a holistic approach to mitigate all potential risks.

Arin J. Carmack