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An introduction to North Carolina Employment Security Law

by on
in Employee Benefits Program,Human Resources

The North Carolina Employment Security Law provides unemployment compensation benefits for some employees who lose their jobs. To qualify, unemployed workers must have registered for work and periodically report to an unemployment office. They must be able and available for work.

Common litigation issues

Occasionally eligibility disputes find their way into court. (See box below for an overview of how the process works.) The most frequently litigated issues involve questions about whether the employee:

  • Was terminated for misconduct
  • Was terminated for substantial fault in connection with his or her work
  • Left work on his or her own, but with good cause attributed to the employer.


The law defines misconduct as “conduct evincing such a willful or wanton disregard of an employer’s interest as is found in deliberate violations or disregard of standards of behavior which the employer has the right to expect of his employee, or in carelessness or negligence of such degree or recurrence as to manifest equal culpability, wrongful intent or evil design, or to show an intentional and substantial disregard of the employer’s interests….”

Examples of misconduct include alcohol or illegal drug impairment, certain unexcused or unauthorized absences from work, fighting (unless acting in self-defense), gross insolence and theft of employer property. A misconduct finding disqualifies the employee from receiving unemployment benefits.

Substantial fault

The law defines substantial fault as an employee’s acts or omissions over which the employee exercised reasonable control and which violated reasonable job requirements. Substantial fault does not include:

  • Minor rule infractions, unless the employee repeated the infractions after the employer issued a warning not to
  • Inadvertent mistakes made by the employee
  • Failure to perform work because of insufficient skill, ability or equipment.

Employees discharged for substantial fault receive only partial benefits; the employer’s account will be charged for any benefits paid.

Voluntary, with cause

The third most-often litigated issue is whether the employee left work voluntarily and with good cause attributable to the employer.

Good cause means a reason for leaving work that a reasonable person would find valid. In order for an employee who voluntarily leaves to receive benefits, the employee must prove both: (1) there was good cause to leave and (2) the cause was attributable to the employer. For example, leaving work due to discrimination or harassment may constitute good cause.

In analyzing this issue, the relevant facts are generally whether the:

  1. Employer knew of the employee’s concerns and had time to address them.
  2. Employee’s concerns were valid.
  3. Employee’s concerns were within the employer’s control.
  4. Employer made any effort to address the concerns.
  5. Employer violated a policy or procedure.

Beyond unemployment comp

Often the issues an employee raises at an unemployment comp hearing portend future litigation. If this is the case, there are several tactical issues that may affect how an employer approaches the unemployment benefit claim.

For example, does the employer want to use the unemployment proceeding as an informal discovery process? Does it want to attempt to discourage other potential claims by vigorously defending this unemployment claim? Does the employer want to allow the unemployment claim with the hope that the employee won’t make other claims?

Employers should individually evaluate each case and base their strategies on the unique facts of each case.

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