Unemployment Claim Definition

What Is an Unemployment Claim?

The term unemployment claim refers to the request for cash benefits made by an individual after they are laid off from their job. Claims are filed through state governments for temporary payments after people lose their jobs through no fault of their own.

The United States Department of Labor (DOL) tracks the number of weekly unemployment claims. It provides both seasonally adjusted and seasonally unadjusted claims numbers and also lists increases or decreases of 1,000 or more claims by state. This data is reported in the media as an indication of national and state economic health.

Understanding Unemployment Claims

Unemployment claims are paid from state funds that are collected from employers in the form of an unemployment insurance tax. Unemployment benefits are payable for a limited number of weeks and are designed to replace a percentage of a worker's previous wages. Most states provide up to 26 weeks of benefits for unemployed individuals.

Individuals are required to file unemployment claims with the UI program in the state where they worked. Claims may be filed in person, online, or over the phone depending on the state. When a claim is filed, the following information must be provided:

• Social Security number
• Contact information
• Details about the former employment

Workers must also meet certain criteria in order to be eligible for claims. They must be actual employees of the business, receiving W-2 forms at year-end—not independent contractors or freelancers. They must also have been laid off rather than having quit or been fired for misconduct.

The initial date of an unemployment claim determines the benefit year during which claimants may file weekly claims as well as the base period of the claim. The base period determines the wages used to compute the weekly and maximum benefit amounts and for which employers will have potential chargeback or reimbursement liability for any benefits paid to the claimant.

Only base period employers are part of an unemployment claim. Non-base period employers have no such liability.

Special Considerations

The time you file an unemployment claim is very important. Consider, for example, an employer that hires an employee in March and lets that individual go after 30 days.

If the claimant files an initial claim before April 1, the base period would not include the first quarter of that year (the quarter in progress), nor the fourth quarter of the preceding year (the lag quarter). It actually consists of the fourth quarter of the year before the year preceding the current year, and the first three quarters of the year preceding the current year; however, since the employer did not report wages during that base period, it will have no financial involvement in the claim.

The same applies if the claimant waited until April, May, or June to file the initial claim—in that case, the base period would omit the second quarter of the current year, the first quarter of the current year, and consist of the four quarters of the preceding year.

If the ex-employee files an initial claim after June 30 of the current year, then the employer could be a base period employer, but its chargeback liability would be limited due to having paid only 30 days' worth of wages.

Unemployment Claims and COVID-19

The effects of the COVID-19 pandemic rippled through the global labor market. Millions of people found themselves unemployed as a result. The federal and state governments stepped in to help ease the financial burden by implementing a number of employment-related programs.

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act and the $2.3 trillion Consolidated Appropriations Act (CAA) signed by Donald Trump in March 2020 and December 2020, and the American Rescue Plan signed by Joe Biden in March 2021 created and expanded programs such as the Federal Pandemic Unemployment Compensation (FPUC), the Pandemic Unemployment Assistance (PUA), and the Pandemic Emergency Unemployment Compensation (PEUC). These programs officially expired on Sept. 5, 2021.

The IRS also adjusted the tax returns of anyone who filed early and declared all of their unemployment income for the 2020 tax year.

The Bottom Line

Unemployment claims are cash payments made to individuals after they have been laid off from their jobs. Unemployment claims help individuals cover expenses, such as rent, mortgages, and groceries, while they are unemployed and looking for work. Unemployment claims are not made to people who left their jobs voluntarily or to those who have been fired from their jobs.