How Unemployment Works

Unemployment Insurance

Each state has its own system of Unemployment Insurance (UI) that provides benefits to those who qualify. The main rule with collecting UI benefits is that you must be ready, able and willing to work. Most states allow you to apply online or by phone as well as in person. If you’re in a union, they may be able to help you or assign you a representative dealing with Unemployment Insurance. Generally, you should apply for UI benefits immediately after losing your job. Usually you won’t be able to collect benefits retroactively -- despite your unemployment status and UI eligibility -- so it’s best to apply as early as possible [source: Workplace Fairness].

The UI application will require you to fill out a variety of personal information, including contact numbers, home address, social security number and contact information for employers during the previous 18 months.

In the application, be honest about why you are unemployed. If the unemployment commission determines you lied, you can be face penalties or even criminal charges [source: Workplace Fairness]. Truthfully state why you lost your job, and if possible, mention how you tried to correct the situation or to maintain your job. If you disagree with the reason why you were fired or with some accusation your employer made, specify that in your initial application. Someone from the Unemployment Insurance system may ask you more detailed questions after they receive your initial application.

Unemployment Insurance is primarily designed for those who were laid off or lost a job through no fault of their own. Your company should present you with a severance letter that states the reason for termination and any severance payment you have been given. Bring this letter with you to your unemployment office. If it states the reason for termination as "lack of work" (i.e. laid off), this will help you start collecting benefits sooner, since the office won't have to go back to your former company for verification. However, if you worked for a nonprofit and got laid off, there is a chance that you won't be able to collect unemployment, but you may be able to get “direct reimbursement” from your former employer [source: Russell].

If you quit your job, you are not usually eligible for UI benefits, unless you quit for “good cause.” Unsafe working conditions, an employer refusing to pay wages, abuse or harassment, or a request by an employer to do something illegal may all constitute good cause, but you must give the employer a chance to remedy the situation before quitting. If covered by a collective bargaining agreement (CBA), you should ask your union whether refusing to work under those conditions is allowed under the agreement and if they can help with the situation [source: Workplace Fairness].

If you quit for certain personal reasons, such as taking care of a baby or sick relative or moving to a new city to be with a spouse, you may be eligible for UI benefits, but you still must be ready, willing and able to work. If medical problems caused you to quit, you may still be able to collect UI benefits if you are able to do light work or to work in a related field.

Once you are receiving UI benefits, continue filing the necessary paperwork and claims weekly or bi-weekly, depending on what your state's unemployment commission requires [source: Workplace Fairness]. You will have to show that you’re actively seeking work, usually by checking in with a UI representative or online system. Keep copies of your resume, job applications and interview schedule as proof that you’re actively job-hunting. If you have any questions about your UI benefits or the application process, contact your state’s unemployment commission.

For more information about unemployment and related topics, check out the links below.

Related Articles

More Great Links


  • American Civil Liberties Union. "Legislative Briefing Kit: Wrongful Discharge." December 31, 1998. (September 15, 2011)
  • Bruce, Mary. “White House Estimates 9 Percent Unemployment Through Next Year's Election.” ABC News. September 1, 2011. (September 15, 2011)
  • COBRA Insurance. "Cobra Insurance FAQ's." (September 15, 2011)
  • Cover, Matt. “CBO: Jobs Created and Saved by Stimulus Cost at Minimum an Average of $228,055 Each.” February 24, 2011. (September 15, 2011)
  • Economagic. “Series Title: Civilian Unemployment Rate: Percent: SA.” (September 15, 2011)
  • Federal Reserve Bank of Philadelphia. “Third Quarter 2011 Survey of Professional Forecasters.” August 12, 2011. (September 15, 2011)
  • Financial Times. Eye-popping Severace Packages for CEOs Continue to Thrive. (Sept. 30, 2011)
  • FindLaw. "Illegal Reasons for Firing Employees." (September 15, 2011) employment-employer-ending/employment-employer-ending-wrongful-reasons.html
  • FindLaw. "Wrongful Discharge." (September 15, 2011)
  • Francis, David R. "Unemployment Insurance." Library of Economics and Liberty. 1992. (September 23, 2011)
  • Howard, Clark. “Executives Who Refuse Bonuses and Golden Parachutes.” January 26, 2009. (September 15, 2011)
  • IRS. “Tax Impact of Job Loss.” August 2009. (September 15, 2011)
  • Lee, Don. "Economoic 'recovery' leaves jobs behind." Los Angeles Times. June 4, 2011. (September 23, 2011)
  • Levit, Alexandra. "The Right Way To Quit Your Job." Jobseekers Advice. (September 15, 2011)
  • Mason, Edward. "Gillette's Kilts defends sale, takes on media." Boston Business Journal. Sept. 8, 2005. (September 15, 2011)
  • Matuson, Roberta Chinsky. "What You Need to Know Before You Quit." (September 15, 2011)
  • New York Life. “What Do I need to Know About Severance Packages?” September 29, 2006. (September 15, 2011)
  • New York Times. “Economic Crisis and Market Upheavals.” September 9, 2011 (September 15, 2011)
  • Nolo. “Chart: Final Paychecks for Departing Employees.” (September 15, 2011)
  • Reuss, Alejandro. “Why is Unemployment Still so High?” Dollars & Sense. 2011. (September 23, 2011).
  • Romer, Christina. “ The Job Impact of the American Recovery and Reinvestment Plan.” January 9, 2009. (September 15, 2011)
  • Russell, Scott. "One more way nonprofits can save a little money." MinnPost. February 5, 2009. (September 23, 2011)
  • SHRM. “State Service Letter Requirements.” (September 15, 2011)"service+letter"&hl=en&gl=us&pid=bl&srcid=ADGEEShwDwbOqDhQesYQVUapYKTN8D5ok0DsTv0AwsYJDaD3RfkXHzo552MSHKpINxjLAsyqKrY3S4Lz-ehCoIgNxx5a3cu03G5qgpvcfFCEAwYRkxjYeLPwjUPZYXR-0NSNNbilvx26&sig=AHIEtbSkSwl5s-Jsu-EtB0smSKen2mif8A
  • Smitherman, Laura. "'Golden parachutes' tarnished." Baltimore Sun. April 15, 2006.
  • Tasci, Murat. “High Unemployment after the Recession: Mostly Cyclical, but Adjusting Slowly.” Federal Reserve Bank of Cleveland. January 31, 2011. (September 23, 2011)
  • Thornton, Emily. "How Golden Parachutes Unfurled." Business Week. Dec. 12, 2005. (September 15, 2011)
  • United States Senate Committee on Banking, Housing, and Urban Affairs. “Brief Summary of the Dodd-Frank Wall Street Reform.”
  • U.S. Department of Labor "Employment Situation Summary."Bureau of Labor Statistics. Feb. 2, 2007. (September 15, 2011)
  • U.S. Department of Labor. "Unemployment rate (seasonally adjusted)."Bureau of Labor Statistics. (September 15, 2011)
  • Workplace Fairness. "General Information About Unemployment Insurance." (September 15, 2011)
  • Workplace Fairness. "Health Benefits/COBRA." June 24, 2010. (September 15, 2011)
  • Workplace Fairness. "Sample Letters of Appeal for the Recently Terminated Employee." (September 15, 2011)
  • Workplace Fairness. "Severance." (September 15, 2011)
  • Workplace Fairness. "Wrongful Termination." (September 15, 2011)
  • Workplace Fairness. "Worker Classifications." (September 15, 2011)