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I. Introduction
II. The Unemployment System in a Nutshell
     A. Initial Claim
     B. Initial Determination
     C. Appeal Tribunal
     D. Commission Appeal
     E. Motion for Rehearing
     F. Court Appeal
     G. Evidence Needed for a UI Claim and/or Appeal
III. Important Case Areas
     A. Drug Testing
     B. Early Retirement / Voluntary Severance
     C. Late Protests or Appeals
     D. Poor Work Performance or Attitude
     E. Reduction in Hours or Pay Rate
     F. Severance Pay / Wages in Lieu of Notice
IV. Focus: Telephone Appeal Procedures
V. What Happens During the Appeal Hearing?
VI. Conclusion

I. INTRODUCTION    Top of Page

The Texas Legislature established the Texas Employment Commission in 1936 in response to federal legislation mandating unemployment compensation systems in all 50 states. In 1996, the Legislature created a new agency, the Texas Workforce Commission (TWC), rolled TEC into the new agency, and added several new programs, but TWC has retained the responsibility for the state unemployment compensation program. The agency is headed by a board consisting of three members appointed by the Governor to staggered six-year terms. One board member represents labor, another represents employers, and the third member represents the public at large. Although TWC administers several employment law statutes, the majority of the agency's resources are devoted to carrying out the Texas Unemployment Compensation Act (TUCA) (V.T.C.A. Labor Code, Title 4, Subtitle A, Chapter 201 et seq.).


A. Initial Claim    Top of Page

Once a worker is no longer performing personal services for pay, a "work separation" has taken place, and the worker is free to file an initial claim for unemployment benefits. Benefits are payable if the claimant shows that he is out of work through no fault of his own and is otherwise eligible. Immediately following the filing of the claim, TWC mails a notice of the initial claim (a "notice of application for unemployment benefits") to the "last employing unit", the organization or individual identified on the claim form where the claimant last performed work for pay. The employer has 14 calendar days in which to file a timely written response and make itself a "party of interest" with appeal rights. Claim responses may be filed by mail, fax, hand-delivery, telephone, or via TWC's new Internet claim response site at https://www.twc.texas.gov/employer-resources/ern.

Responding timely and well is a must. An employer will be denied chargeback protection in the event that it successfully appeals an adverse ruling, if TWC finds that the original payment of benefits to the claimant was the result of an untimely or inadequate claim response by the employer, and that the employer has shown a pattern of untimely or inadequate claim responses in the past. A "pattern" exists if at least two prior findings have been made that the employer filed late or inadequate claim responses. A claim response is "inadequate" if it "merely alleges that a claimant is not entitled to benefits without providing sufficient factual information, other than a general statement of the law, to support the allegation". Generally, an "adequate" response must include enough information about potentially disqualifying facts behind the work separation that TWC would be on notice that the claimant's qualification for benefits is in legitimate doubt. Thus, any claim response should be timely and contain something substantial and factual beyond a mere statement that the employer disagrees with the claim and does not feel that the claimant deserves benefits.

B. Initial Determination    Top of Page

The claim examiner at the local TWC office where the claim is filed makes an initial determination ("determination on payment of unemployment benefits"), and TWC then mails copies to all interested parties. If the employer has filed a late response, its initial determination will be a "late protest" ruling. If it has filed no response at all and the claimant begins to draw benefits, it will receive a notice of maximum potential chargeback ("wage verification notice"). No matter which form the initial determination takes for the employer, it should file an appeal and request for a hearing within 14 calendar days of the date that TWC mails the ruling. The wage verification notice is not itself an appealable ruling, but if the employer responds with a written appeal, it should receive a ruling it can appeal. In the case of any ruling that states that the employer filed a late protest, the employer should allege some problem outside its power to control as the reason for not protesting the claim notice in a timely manner, if it wishes a hearing on the underlying merits of the unemployment claim.

An appeal must be in writing and submitted via fax, mail, delivery service, in-person delivery to any TWC office, or the online appeal portal before the deadline. The appeal instructions are included with each determination and should be followed exactly. Keep documentation of the appeal.

C. Appeal Tribunal    Top of Page

Once an appeal has been filed, the Appeals Department will either dismiss the appeal, issue an on-the-record decision, or set up an appeal hearing. It will dismiss the appeal if it is filed outside the 14-day appeal period. It will issue an on-the-record decision affirming the late protest ruling if the employer fails to disagree with the fact that it filed a late protest to the initial claim notice. In all other cases, the Appeals Department will mail notices of the appeal hearing to the claimant, the employer, and any representatives they may have designated.

The hearing will usually be held by telephone. The employer should treat the occasion as if it will be the only chance it ever receives to explain its side of the situation. In general, firsthand testimony from witnesses with direct, personal knowledge of the events leading to the claimant's work separation takes precedence over all other forms of evidence. Documentary evidence may be entered as exhibits. When a hearing is by telephone, the employer must be careful to send copies of any exhibits to both the hearing officer and the claimant. Failure to send copies to the claimant may result in the hearing officer refusing the items as exhibits. The parties may offer direct testimony, conduct cross-examination, and make concluding statements. The hearing officer will issue, usually within one calendar week, a written decision either affirming, reversing, or modifying the determination that was appealed. If the ruling is not in the claimant's favor, i.e., reverses a prior decision that allowed the claimant to receive benefits, the claimant may be found liable for an overpayment of benefits and may have to repay any benefits received that were not in accordance with the latest decision.

A party who misses a hearing and loses the decision can file a request to reopen the hearing under Commission Rule 16, but must do so within 14 calendar days of the date of the decision. Regarding how many times a party can miss a hearing and still obtain a new appeal hearing, while there is no formal limit, the more hearings a party misses, the more difficult it becomes to obtain another one. A party who misses the first hearing can always get at least one new hearing opportunity by filing a timely request to reopen the hearing, but the first issue at the new hearing will be whether the party had good cause to miss the previous hearing, i.e., something that was outside the party's power to control happened to cause that party to miss the hearing. Most parties who miss two hearings and allege some kind of factor outside their control for missing both hearings can get a third hearing, but will have to prove good cause for missing each of the two prior hearings. Starting at three missed hearings, the risk of an "on-the-record" decision denying a further hearing goes up markedly. After such an on-the-record decision, the next appeal will be sent to the Commission, whose members will vote on whether the party will get a new hearing at that point. In the event of a new hearing granted by the Commission, the party will have to prove good cause to miss each of the prior hearings before getting a chance to testify about the merits of the case. That would be a difficult burden to meet.

For much more detail on appeal hearing procedures, see sections IV and V of this article.

D. Commission Appeal    Top of Page

Any party may appeal an adverse Appeal Tribunal decision to the three- member Commission, but must do so in writing (fax, mail, delivery, or online appeal portal) according to the instructions included with the decision within 14 calendar days of the date the hearing officer´┐Żs decision is mailed. In case of a timely appeal, the Commission may either affirm, reverse, or modify the Appeal Tribunal decision, or it may order a further hearing. The Commissioners review the records in the appeal and cast their votes in a weekly docket meeting. They do not take testimony from the parties, but may consider relevant written materials submitted after the hearing. In such a case, the Commission will order a rehearing to officially admit the new evidence into the record. The Commission's decision is in writing and signed by all three Commissioners. At this point, the losing party may either file a motion for rehearing or an appeal to a court. The Commission decision has no preclusive or evidentiary effect in any legal proceeding not involving the unemployment claim (see § 213.007 of the Texas Labor Code).

If criminal charges stemming from the final incident are pending against the claimant, include whatever information you have concerning the charges in your letter of appeal to the Commission and ask the Commission to hold the appeal pending resolution of the criminal charges. The outcome of the criminal proceeding may have a strong influence on how the Commission appeal turns out.

E. Motion for Rehearing    Top of Page

The final stage of the administrative appeal process is the motion for rehearing, which must be filed in writing (fax, mail, delivery, or online appeal portal) according to the instructions included with the decision within 14 calendar days of the date the original Commission decision is mailed. In order for the Commissioners to grant a rehearing, the motion must offer new evidence, give a compelling reason why it could not have been offered earlier, and show specifically how it could change the outcome of the case. The documents / exhibits previously submitted are already in the appeal file and would be available for review if you refer to them in your motion for rehearing. It is best to be as clear as possible when referring to a particular document, and also to describe its significance with respect to the points made. If the Commission denies the motion, it will mail to each party a written decision that is appealable to a court.

F. Court Appeal    Top of Page

After the Commission decision has become final, the losing party may file a court appeal within 14 calendar days. Since the Commission decision does not become final until 14 calendar days have passed from the date it is mailed, and the statute allows filing of an appeal to a court on or after the date on which the decision becomes final, the court appeal period begins on the 15th calendar day after the date on which the last Commission decision was mailed, and ends on the 28th calendar day following the mailing of the last Commission decision. Since the standard of review is that of the "substantial evidence rule", there is no right to a jury trial in an unemployment compensation case. However, because the law provides for a trial de novo, the parties may put on their entire cases again for the judge. The judge makes no formal findings of fact, but rather decides as a matter of law whether substantial evidence exists to uphold the TWC ruling. The court's decision may be further appealed as in any other civil case; as noted above in section II.D. of this article, the court's decision will not bind courts dealing with other employment issues raised by the ex-employee.

G. Evidence Needed for a UI Claim and/or Appeal    Top of Page

Different situations require different types of evidence in order for the employer to win, but there are some types of evidence that will always be required no matter what happened to cause the claimant's work separation:

  1. Firsthand testimony from witnesses with direct, personal knowledge of the events leading to the claimant's work separation, i.e., "the ones who saw it happen".

  2. Documentation of policies, warnings, complaints, attendance, timecards, pay-related records, or any other subjects relating to the claimant's work separation.

  3. In a discharge case, evidence relating to a specific act of misconduct that happened close in time to the discharge, i.e., the event that precipitated the discharge (the so-called "final incident"), as well as evidence showing that the claimant either knew or should have known that discharge could occur; in a resignation case, evidence relating to whatever motivated the claimant to resign.

If the appeal hearing concerns other important unemployment insurance issues, such as the claimant's ability to work, availability for work, whether the claimant refused an offer of suitable work without good cause, or receipt of other types of benefits that might affect UI benefit eligibility, the employer should be prepared with any witnesses or documentation that might help show that the claimant should not be considered entitled to benefits.


The vast majority of TWC cases deal with work separation issues involving resignations, layoffs, and discharges. Before any discussion of specific case areas, there are some basic principles to keep in mind concerning resignations and discharges.

As noted before, unemployment benefits are for those who are out of work through no fault of their own. The burden of proving "fault" is on the party initiating the work separation. A claimant who quit his last work must show that he had good cause connected with the work for resigning. TWC has long defined "good cause" as any reason, connected with the work, that would lead an employee who is otherwise interested in remaining employed to nonetheless leave employment. This, of course, is a "reasonable employee" standard. Good cause to quit has been found in cases involving drastic cuts in pay or hours, other substantial and adverse changes in the work, prolonged and unaddressed harassment of the worker by the employer or its agents, or egregious acts of misconduct by the employer toward the worker. In most cases, the claimant must also show that he gave the employer reasonable notice that he was so dissatisfied he was considering resignation.

In any case involving discharge, the employer bears the burden of proving two main things. First, the employer must show that the claimant was discharged for a specific act or acts of misconduct connected with the work that happened fairly close in time to the discharge. Second, the evidence must indicate that the claimant either knew or should have known he could lose his job for the reason given by the employer. Those dealing with unemployment claims and appeals should keep these basic principles in mind when considering the following specific case areas.

A. Drug Testing    Top of Page

In cases involving drug testing, the employer should always be prepared to fully document its case. At a minimum, the evidence should include a copy of the employer's policy regarding drugs and drug testing and proof of the claimant's awareness of the policy and consent to testing. The employer should also submit a complete chain of custody document showing who handled the claimant's urine, hair, or blood sample at all pertinent times. Finally, specific test result documentation is needed that shows the types of initial and confirmation testing methods and the quantitative results achieved, preferably including a statement of what the test results mean. This kind of evidence should be supplied by any testing service the employer uses. The confirmation test should be of the gas chromatography/mass spectrometry (GC/MS) type.

Companies discharging employees on the basis of only one initial drug screen will almost invariably lose the case if the employee denies the drug use. By the same token, companies that fail to properly document their policies, the test results, and the chain of custody of the sample run a high risk of losing.

The employer's chance of prevailing will, of course, be enhanced by firsthand testimony from any witness who can testify that the claimant was acting impaired before or at the time of testing.

TWC has adopted several precedent cases in the area of drug testing, all of which affirm that the employer must prove that the sampling, sample handling, and testing procedures were reliable enough to allow a reasonable conclusion that the claimant had prohibited substances in his system at the time of testing and knew he could be discharged for such an offense. Once that proof is offered, the Commission has shown that it will disqualify such a claimant, even in the face of a sworn denial of any drug use by the claimant. In general, the employer's burden of proof includes full documentation of every aspect of the policy, consent, testing, and chain of custody procedures.

The leading unemployment compensation case in Texas involving drug testing is that of TEC v. Hughes Drilling Fluids, 746 S.W.2d 796 (Tex. App. - Tyler 1988, writ denied). Hughes involved a claimant whose employer, at some point after the claimant was hired, instituted a new policy prohibiting the use or possession of drugs on the employer's premises and providing that any employee who refused to allow a search or urine test for drugs would be subject to possible discharge. The claimant refused to sign a form consenting to the policy. A few months later, the employer asked the claimant to sign a consent form and submit to a urinalysis for drug screening. When the claimant refused to give his consent, the employer discharged him.

The claimant filed an unemployment claim and was initially disqualified, but appealed to the Appeal Tribunal and won. The employer appealed to the Commission and lost, with the employer representative dissenting. The employer then appealed to court and won a summary judgment. TEC appealed, and the Twelfth Court of Appeals in Tyler affirmed in the employer's favor.

The Court held that the employer's policy bound the claimant, reasoning that the claimant was an "at will" employee whose act of remaining on the job despite his disagreement with the new policy amounted to acquiescence in that policy. Since the claimant had "accepted" the new rule, his later refusal to abide by its terms was an act of misconduct connected with the work.

The Court also found that the employer's policy was a reasonable attempt to ensure the safety of employees and that it did not impermissibly encroach upon the claimant's Fourth Amendment right to be free from unreasonable searches, especially in view of society's compelling interest in promoting workplace safety by discouraging substance abuse. Although it did not stem from an unemployment claim, the case of Jennings v. Minco Technology Labs, Inc., 765 S.W.2d 497 (Tex. App. - Austin 1989, writ denied) upheld an employer's right to institute a reasonable drug testing policy under basically the same rationale as that set forth in Hughes.

Special Problems in TWC Drug Testing Cases

TWC has in recent years become stricter in interpretation of its drug testing precedents. Aside from failure to fully document the drug policy and the testing procedures and results, there are other avoidable problems that cause some employers to lose drug testing cases before TWC. Following are two examples of such problems.

One employer lost its case on an insufficient evidence basis because it fired the claimant based upon a single test of a sample of the claimant's hair. No GC/MS confirmation test was done. The employer maintained that the hair test was itself reliable enough to justify disqualifying the claimant. The Commission ruled against the employer, reasoning that the employer had presented no evidence to show that the hair analysis was so reliable that it needed no confirmation by the GC/MS method. In addition, the employer's documentation had no indication of when the drug usage may have taken place. Since hair analysis has the capacity to detect drug usage as far back as the hair is long, the problem was that the claimant may not have ingested drugs while employed with the employer, which would have meant that he was not guilty of any misconduct connected with the work for that employer.

Another employer lost a case because of the unreasonable manner in which it applied its policy. Its policy required "all employees involved in an industrial injury which results in a trip to the doctor" to take a drug test. The claimant injured himself in a job accident admittedly caused by the production foreman. The claimant did not see a doctor until 85 days later, at which time he was told to take a drug test. He refused to take the test unless the foreman was also tested. The employer did not require the foreman to take the drug test and fired the claimant for his refusal. At the Appeal Tribunal hearing, the employer explained that it required only the claimant to undergo testing because he was the only one injured in the accident.

The Commission unanimously ruled against the employer for two main reasons. First, the employer ignored the plain meaning of its own policy in attempting to argue that "all employees involved in an industrial injury" means "the one who was injured". Clearly, the foreman who caused the accident was "involved" in it and arguably was just as likely as the claimant to have been under the influence of drugs. Second, the employer did not explain how any drug test performed 85 days after the accident could have shown what substances affected the claimant on the day of the accident. The employer's policy did not require immediate testing or a prompt visit to a doctor, so the claimant's delay in seeing a doctor could not be held against him.

B. Early Retirement / Voluntary Severance    Top of Page

More and more employers are adopting "downsizing" plans in an effort to reduce labor costs as part of an overall reorganization. These plans generally involve offering an incentive package to induce a number of employees to retire early or resign. The goal is to reduce the likelihood of layoffs. TWC deals with considerable numbers of unemployment claims from people who decided to take advantage of such incentives. Whether the employer will end up with increased unemployment costs in addition to paying out the incentives depends upon several factors:

  1. Probably the most important factor is whether the individual claimant was told by someone in authority that he or she was somehow targeted for layoff or was on some kind of "layoff list". Such a statement can literally lose the case for the employer, which makes it incumbent upon management to exercise tight control over who explains the program and in what way.

  2. Another extremely important factor is whether the claimant stood to lose any vested benefits by passing up the program and being laid off later. If any vested benefits are on the line, that will probably be good cause connected with the work to quit, under the rule in the case of American Petrofina Company of Texas v. TEC, et al., 795 S.W.2d 899 (Tex. App. - Beaumont 1990, no writ). In that case, failure to quit by a certain time would have led to a drastic reduction in pension benefits already promised. Conversely, if no reduction in promised or vested benefits is threatened, the employer is in better shape with regard to a TWC claim.

  3. Finally, TWC looks at the ways a claimant's job would have changed if the incentive package had not been accepted. If the job was certain to change in substantial and adverse ways, the claimant may be deemed to have had good cause connected with the work to accept the early retirement incentive.

Disqualification of claimants who voluntarily sign up for early retirement or resignation incentives usually occurs when it is clear that participation is purely voluntary, that no vested benefits are at risk, and that no one has been singled out for layoff or told they "had better take the incentive". Employers that allow employees to change their minds up to a certain point are even more successful in TWC claims. The rationale for disqualifying such claimants is that continued work was available when they left and that leaving a job to collect a short-term economic benefit is basically a personal reason not related to the work.

See also "Early Retirement - Voluntary Leave Incentives - Age Discrimination Issues".

C. Late Protests or Appeals    Top of Page

Sections 208.004, 212.053, 212.104, and 212.153 of the TUCA and Commission Rule 815.32 ("Rule 32") govern the issue of timeliness of claim protests and appeals. The statute provides no exceptions to the protest and appeal deadlines, but Rule 32 allows a few limited exceptions, mainly in cases where the failure to respond timely was arguably out of the appellant's control. Some exceptions are available if "credible and persuasive evidence" is given, but others require corroborating evidence.

Easiest to win are the timeliness cases involving late U.S. postmarks. If the party presents firsthand testimony from the actual mailer to the effect that the appeal was placed into the custody of the U.S. mail on or before the appeal deadline, the party will generally win on that point. There are three limitations. If too much time passed between the alleged date of mailing and the postmark date, the testimony on timely mailing may not be considered credible. If the internal date of the appeal document is later than the appeal deadline, or if the envelope shows a postal meter date later than the deadline, then the testimony of timely mailing will be insufficient. The party would need corroborating evidence from a credible, preferably disinterested, third party concerning the timely mailing.

Fairly difficult are the cases in which the appeal was late because of alleged non-delivery, delayed delivery, or misdelivery of the document from TWC from which an appeal must be filed. As the rule states, "a document mailed to a party is presumed to be received if the document was mailed to the complete, correct address of record unless there is tangible evidence of non-delivery, such as the document being returned to the Commission by the U.S.P.S., or credible and persuasive evidence is submitted to the Commission" concerning the delivery problem.

The most difficult cases to win in the area of late appeals are the ones in which TWC never received a copy of the alleged timely appeal. In such a case, TWC will not only require firsthand testimony from the actual mailer to establish timely mailing, but will also expect the late appellant to corroborate that testimony with testimony from a disinterested third party or credible physical evidence specifically linked to the appeal in question, such as a return receipt card from the United States Postal Service.

If TWC misaddresses a document, the appeal deadline runs from the date of actual receipt of the ruling or notice. If a decision fails to include a required chargeback ruling, it does not become final against the employer. Appeals that are filed late because of misinformation from a Commission representative will be held timely as long as it is shown that the appellant filed the appeal in a timely manner after receiving actual notice of the need to file an appeal.

D. Poor Work Performance or Attitude    Top of Page

Among the most difficult cases for an employer to win is the kind involving a discharge for poor work performance. The reason is that even if the employer presents the basic evidence for a discharge case, such as firsthand testimony about a specific final incident of misconduct and evidence that the claimant knew his job was in jeopardy, the employer can still lose if the situation looks like one of "inability" on the claimant's part.

Many employers are surprised to learn that under the law, mere inability to satisfy an employer's performance standards is not misconduct connected with the work. Disqualification is allowed only if the situation leading to the discharge was within the claimant's power to control. As long as the claimant was doing his best, failure to do even better was beyond his control.

Most employers lose these cases by loosely using terms such as "inability", "incompetence", "never was able to do the work right", "made constant mistakes", and so on. Terms such as these are like red flags to claim examiners and appeal hearing officers, who may get the wrong impression from the start and put all the evidence against the claimant into the "inability" category.

True inability cases are relatively rare. In order to escape the "inability" label, the employer must show that the claimant was actually capable of doing satisfactory work and had in fact done so in the past. Evidence tending to show ability to do good work might include favorable performance evaluations, raises, promotions, and firsthand observations from supervisors. The employer must then go on to show that the claimant was failing to perform the work at levels he was capable of attaining. The best evidence along this line will be factors within the claimant's power to control that tend to explain why the work was so poor. That would include such things as:

In 1997, the Commission adopted a precedent case, quoted below, that deals with simple, straightforward tasks and whether the term "inability" really applies in such situations (source: Appeals Policy & Precedent Manual - Section MC 300.40(2) (online at https://www.twc.texas.gov/sites/default/files/appeals/docs/appeals-policy-precedent-manual-twc.pdf#page=356 (PDF))):

Appeal No. 96-003785-10-031997. The claimant, a cafeteria dishwasher, was discharged after warnings for poor job performance. The claimant's primary job duty was cleaning pots and pans and putting them away. Although claimant contended he performed the job to the best of his ability, food particles and mildew were often found on pots and pans after the claimant washed them and returned them to the storage rack. HELD: Where the work is not complex, an employee's failure to pay reasonable attention to simple job tasks is misconduct.

Specifically in the area of poor sales performance, many claimants win their cases by arguing that they tried their best, but it was just too difficult to make sales in tough economic times. The counter-argument from an employer might be that the sales employee's production was down due to things within the claimant's power to control, such as failure to make a required minimum number of calls, failure to keep appointments with potential customers, failure to follow established sales procedures, failure to properly document sales contacts, making inappropriate comments that result in customer complaints, and the like. In such a case, the focus should not be on the fact that "sales were down" (although it is legitimate to mention that), but rather on the specific acts of misconduct in violation of rules and procedures.

In addition to proving misconduct of the above variety, the employer would need to be able to show that the claimant was on reasonable notice that the problem or problems could result in termination. That is normally done with a formal, final, written warning, but can sometimes be proven with clear firsthand testimony regarding counseling / disciplinary sessions with the claimant regarding the issues and the effect that continued problems could have on his future employment.

Poor attitude cases can be even harder to deal with, simply because of the difficulty of proving some kind of tangible final act of misconduct on the part of the claimant. Too often, an employer's attempt to convince a claim investigator or appeal hearing officer that the claimant had a bad attitude comes off sounding like a personality dispute between the employer and the claimant, and such cases rarely result in a favorable ruling for the employer. In general, do not start off accusing the claimant of having a "bad attitude". Be specific about behavior or conduct that violated a rule or interfered with the work of others. Document the warnings that were given. Present firsthand testimony from those who were affected by the claimant's attitude problems. Their testimony should clearly explain how the claimant's poor attitude made it harder for them to do their jobs, adversely affected customer relations, or otherwise hurt the company. Specifics are extremely important. Depending upon the facts and how the employer explains them, the TWC decision-maker can independently arrive at the conclusion that the claimant had a bad attitude.

E. Reduction in Hours or Pay Rate    Top of Page

In deciding whether a reduction in earnings constitutes good cause connected with the work for quitting, the Commission starts out with a general guideline known as the "20 percent rule", which holds that a reduction in earnings, whether from a cut in hours or in rate of pay, of 20 percent or more will generally be good cause connected with the work for quitting, whereas a cut of less than 20 percent will not be good cause. The further away from 20 percent the cut is in either direction, the easier the decision will be for the Commission to make. When examining this issue, the Commission looks at the entire compensation package, so reductions in the rate of pay, hours, benefits, and perks all contribute toward the 20%. In addition, cuts of less than 20% can still provide a worker with good cause to quit when coupled with other changes in the hiring agreement, such as a demotion or the assignment of inappropriate duties. For example, in one case the Commission found the claimant did have good cause to quit after a 7.2% reduction in pay because it was combined with a reassignment from her job in electronics assembly to a more strenuous position as a janitor. Finally, employers should use caution: a retroactive pay cut will not only almost guarantee that TWC will find that the claimant had good cause to quit, but it very probably will also be held to be a violation of the Texas Payday Law (see "Pay Agreements").

Be very careful with disciplinary cuts in pay or hours. To avoid giving an employee good cause to quit, it is best to make cuts in the basic rate of pay a token amount (one or two percent at a time - certainly no more than five percent). If a smaller cut does not get the employee's attention, it can be increased a bit - eventually, the employee will notice. Such a cut should not be imposed until after the employee has been given a prior written warning that his or her hours or pay is in jeopardy for a specific reason, and of course, the employer should maintain documentation of the problem that led to the cut. If the basic rate of pay is reduced, give notice of the cut in a clear written memo to the employee in order to minimize the risk of a wage claim. A recent precedent case adopted by the Commission, Appeal No. 806011-3, AP&P VL 500.35, holds that a claimant who quits because of a disciplinary cut in hours does not have good cause connected with the work to resign if the cut is not more than 25% and the employer proves that the cut was due to work-connected misconduct on the claimant's part.

The Commission is sometimes flexible with reduction-in-hours cases. Such cases are arguably distinguishable from ones where the employer cut the rate of pay. Central to this idea is the realization that a claimant drawing partial unemployment benefits while working the available hours has a higher weekly income than he or she would as a totally unemployed person, and the reduction in work hours usually means a block of free time during which the employee could search for another position. Thus, it simply makes little sense to quit a job altogether and go on total unemployment, when a person could have more money and stay more employable by working whatever hours are available. Most hearing officers at least consider, if not adopt, this underlying rationale when ruling on cases where the claimant has quit due to a decrease in hours of work. The employer should at the very least raise this as an issue in a claim response or in an appeal hearing.

Some common threads run through the cases won by employers in this subcategory. The new reduced schedules allow the employees convenient blocks of time during the day which can be used to search for other work. The overall reductions in hours do not total much more than 20 percent. The reductions are across the board and generally the result of a slowdown in business. Finally, it is apparent that the employers have gone to some trouble to keep as many employees working for as many hours as possible. In view of these arguments, any employer receiving an unfavorable decision from the claim examiner or the Appeal Tribunal should consider a further appeal.

The above cases should be distinguished from "partial unemployment" cases, i.e., those in which the reduction in hours does not cause the employee to quit, but rather leads the employee to file what is known as a partial-unemployment claim. Partial unemployment is, for the most part, a question of arithmetic: the test is whether a reduction in hours has caused the claimant's weekly pay to drop below 125% of the weekly benefit amount that the claimant would receive if she were totally unemployed. As an example, if the claimant's prior earnings entitle her to a potential weekly benefit amount of $392, 125% of that figure is $490, and if her pay drops below that amount, she is eligible to draw the difference between the lower pay and the 125% figure. Thus, if her pay for a particular claim week is $400, she would get $90 in partial unemployment benefits. That having been said, it is still possible for a claimant who meets the mathematical test for partial unemployment to be disqualified, and that would be in the situation of someone who is partially unemployed by choice or by fault, i.e., they voluntarily chose to reduce their own hours, or else their hours were cut due to misconduct that can be proven. An estimate of partial benefit amounts may be obtained by using the fields below (enter numbers only - no dollar signs, commas, or decimals - weekly benefit amounts for 2023 - 2024 range from $73 to $579 per week).


Take care with any reduction in the amount of any component of pay, lest the reduction give an employee good work-connected cause to quit under the 20% rule explained above. Remember, bonus and commission pay agreements should always be in writing for the company's own protection, and any changes should be in writing as well. Communicate things as clearly as possible: do not let employees think they are being promised a raise in base pay, if all they are being told is that there might be a bonus if the company is doing well. One unemployment case went poorly for an employer that failed to make that clear to the claimant.

Another way to minimize the impact of unemployment claims following an across-the-board cut in hours would be to use a shared work plan, an alternative to layoffs that allows employees whose hours have been reduced by a standard amount between 10% - 40% to remain employed and receive a percentage of their unemployment benefits equal to the cut in hours. The advantage is that the employer has a better chance of keeping good employees if they remain employed that way. Program requirements are online at https://www.twc.texas.gov/employer-resources/shared-work.

F. Severance Pay / Wages in Lieu of Notice    Top of Page

Employers sometimes make termination payments of various kinds to departing employees. The only termination payments that affect a claimant's benefit rights are severance pay (only the kind that is unilaterally promised by the employer) and wages in lieu of notice. This disqualification extends throughout the period represented by the payment. Other payments, such as incentives to sign a release/waiver agreement or payments made under negotiated contracts, are not severance pay or wages in lieu of notice and have no effect on a claimant's unemployment benefits.

Generally, severance pay is a payment that the employer has unilaterally obligated itself to give upon an employee's work separation (such as severance pay promised in a job offer letter or policy handbook). It is often based upon a set formula such as length of prior service. Wages in lieu of notice, on the other hand, is a payment that the employer has never obligated itself to give, either verbally or in writing. It is not based upon any particular formula, but rather upon whatever amount the employer deems appropriate. Just as the name implies, it is given to make up for the lack of advance notice of termination. It disqualifies a claimant because it is basically wage continuation, and the claimant can be regarded as still on the payroll for the period covered by the payment. The effect of such payments is to delay payment of benefits -- during the period of coverage of such wages, the claimant is on "hold", and the benefits will not start until the wage period runs out.

Employers may run into some issues in termination payment cases if the payment was negotiated in some way (such as with a union agreement, a bilateral employment contract, or certain claim or lawsuit settlements, for example). Severance pay does not include a payment that was made to settle an existing claim or litigation, or was required under a negotiated contract. Neither term applies to other types of post-termination payments made for special reasons, such as an early leave incentive (which can result in a voluntary leaving disqualification), or an incentive paid to obtain a release or waiver of liability from the departing employee with regard to the Civil Rights Act of 1991, or to settle a claim or lawsuit that has already been filed, or in connection with a written contract that was negotiated between the employer and employee prior to the date of the work separation. There has been no clear position yet regarding the treatment of wages paid in lieu of the notice required under the WARN Act. Such payments are not the same as traditional wages in lieu of notice, which are purely voluntary, since the WARN payments are obligatory if the employer does not give the required notice. Despite variations over the years in the agency's rulings on whether WARN payments constitute disqualifying wages in lieu of notice, employers should mention any such payments when responding to an unemployment claim. Conversely, an employer will likely have no problem if the above factors are not present and if the check by which payment is made describes the payment as "[severance pay] / [wages in lieu of notice] from (date) to (date)". Since this can be a tricky area of unemployment law, employees and employers considering any kind of severance pay or release agreement in conjunction with unemployment claims should consult legal counsel prior to any final action.


It has long been common for claimants and employers to criticize TWC appeal hearing procedures as being long on convenience for the agency, but short on consideration for the concerns of the parties. Every once in a while, changes come to those procedures, either through evolutionary change within the agency, statutory change, or through court action. Into the latter category falls the 1998 case of Narcisso Gutierrez, et al v. TWC, Civil Action H-96-2308 (U.S. District Court, Houston, Texas - not published). Four claimants for unemployment benefits had lost their appeal hearings for one reason or another, but had banded together with the assistance of Gulf Coast Legal Aid and Texas Legal Services to file a lawsuit against TWC charging, among other things, that the agency's appeal hearing procedures were so flawed that they effectively robbed claimants of due process. Specifically, they took exception to hearing procedures that allowed employers to refer to documents that the claimants did not have, that required claimants to call in for hearings, rather than be able to present their cases in person, that required claimants to spend money to send copies of evidentiary documents to both the hearing officer and the employers, and various other procedures that allegedly made it difficult for low-income parties to effectively participate in unemployment benefit appeal hearings. The district court was sympathetic, even questioning the underlying sufficiency of telephone hearings, leading TWC to enter into negotiations with the parties and their representatives that resulted in very broad and sweeping changes to the way the entire appeal process within TWC is handled. The changes went into effect on August 13, 1998, and include the following:

  1. TWC will mail copies of documents that are relevant to the hearing and to the determination under appeal to all parties. "Parties" include the claimant; the claimant's representative if there is one; any employer involved in the claim, regardless of whether the employer happens to be a "party of interest" with respect to the initial claim; and the employer's representative, if there is one.

  2. The above documentation will be mailed to the parties in the same envelope that contains the notice of hearing.

  3. The packet includes the following:

    1. the date of the claim notice

    2. any claim protests

    3. any information received by TWC in response to a claim

    4. fact-finding statements taken by TWC during the claim investigation

    5. any appeal letters or forms

  4. The documents contained in the packet will be formally entered into the record of the case.

  5. The procedures for hearings, including the Gutierrez settlement procedures, will be outlined in a variety of documents sent to parties in connection with claim filing, determinations, and hearing notices, as well as posted on TWC's Web site at https://twc.texas.gov/programs/unemployment-benefits/appeals-process-employers.

  6. Parties who need access to a telephone, speakerphone, or fax machine in connection with the hearing need only call the TWC Appeals Department to have arrangements made, up to and including private space in TWC local offices.

  7. Witnesses giving testimony will first have to give identifying information to verify their identity. The nature of such information is explained and, if necessary, modified by the hearing officer.

  8. The hearing officer will inform the parties that they have the right to request that witnesses be placed "under the rule" (sequestered somewhere else where they cannot hear the testimony of others). Of course, a party may not be excluded from any portion of the hearing.

  9. The hearing officer must also remind parties that they may not prompt their witnesses or refer to documents not previously disclosed to the other party.

  10. Documents sent in by the parties to the hearing officer will be entered into the record only if relevant and must be disclosed to the other party. Irrelevant documents will be excluded from the record and not considered in any way.

  11. If the hearing officer has a relevant document from one party that is not in the possession of the other party, the hearing officer will first attempt to fax a copy to the other party. Failing that, the hearing officer will ask the other party if the party is willing to waive receiving a copy of the document. If a waiver is not granted, the hearing officer must grant a continuance to allow the other party a chance to receive a copy of the document.

Pay close attention to the hearing notice. Call in during the half-hour prior to the start time using the toll-free number highlighted on the notice, leave your name and number, and wait for the hearing officer to return the call. Make sure to get the name of the TWC employee who takes your first call. Ensure that the incoming call line stays clear and that your staff knows to put the hearing officer's call through. Have all of your witnesses ready to go, complete with phone numbers of witnesses at other locations. Be sure to have your notes with you in case you have to call from a location other than your office.

If you miss a hearing and lose the case, you may request a reopening of the hearing, but the first issue at the new hearing will be whether you had good cause to miss the previous hearing. To have a better chance of doing that, you should call the hearing officer beforehand if you know you cannot participate. Ask for a postponement, even if you feel there is little chance one will be granted, and document the call. Good cause to miss a hearing is generally something that was outside the party's power to control.

The Gutierrez settlement led to a positive development. A strategy largely untapped by employers has been to carefully review the claimant's statements to TWC at various levels of the claim and appeal process and to bring any discrepancies to the attention of hearing officers and the Commission. With the procedure that automatically brings to the employer copies of the fact-finding statements of the claimant, employers can use those claim statements in the appeal process.


This is the first level of appeal. If you lose the initial determination, the appeal you file is to the Appeal Tribunal. A hearing officer will be appointed to hear your case. The Appeals Department will send you and the claimant a hearing notice, usually about 10 - 14 days in advance of the hearing. Most hearings are held by telephone. Follow the instructions on the hearing notice exactly, including the correct number to call (it is the toll-free number in bold print beside the telephone icon in the black-bordered box - do not call the hearing officer's number shown below the hearing officer's name unless you are calling for some reason other than to participate in the hearing). You should call in during the half-hour before the start of the hearing and leave your phone number with the receptionist. Be sure to take down the name of the person who handled your call, and note the time of your call for your records. The hearing officer will then call you and the claimant and any witnesses at other locations and hold a "teleconference".

Ensure that when the hearing officer calls, the incoming phone line is clear, and that your staff expects the call and is ready to properly handle it.

It is vitally important that you have all of your evidence ready to present at the AT hearing. If you have written documentation to offer as exhibits for your case, you must send copies to both the hearing officer and to the claimant in advance of the hearing. Send the copies to the claimant by registered mail, return receipt requested for your own protection. If you will not be at your office when you call, have copies of your important documents with you.

Have any witnesses ready to go, complete with phone numbers of witnesses at other locations. Nothing is worse than to claim you have somebody who can support your version of the facts, only to have to confess that you do not have that person ready to testify or do not know where the witness is. The very worst thing is to have to admit that you did not know that witnesses were necessary. Of course, witnesses are necessary. This is the United States; under our legal system, an accused has the right to face his or her accusers. If you allege that the claimant was fired for some type of misconduct, but have no eyewitnesses, and the claimant is giving what sounds like a credible denial, your company will lose the case. It is as simple as that. To have a good chance of winning a case, you need what are known as "firsthand" witnesses. Firsthand witnesses have direct, personal knowledge of what the claimant did to bring about his discharge or of what happened to cause the claimant to quit.

EXAMPLE OF LOSING TESTIMONY: "We fired the claimant after his supervisor told us he saw the claimant removing company property without permission." The claimant then wins by stating "No, I didn't."

EXAMPLE OF WINNING TESTIMONY: "I was the claimant's supervisor. I saw him removing boxes of company property, and he did it without my permission." At this point, the claimant either knows he is going to lose, or else tries a last-ditch excuse by stating that he had permission from someone else, whereupon the well-prepared employer immediately offers to let the hearing officer take testimony from that person as well.

It is not a sufficient excuse for failing to present firsthand testimony that you cannot believe the claimant would deny the charges of misconduct; that you thought written statements or even notarized affidavits would be "good enough"; that the eyewitnesses no longer work for you; or that you thought testimony from people who only heard the reports was "firsthand". Claimants have been known to deny misconduct when their UI benefits are on the line. The problem with written statements and affidavits is that they cannot be cross-examined; sworn testimony subject to cross-examination carries by far the greatest weight in a case. If the eyewitness is a former employee, call him or her and ask for their testimony. If they refuse to cooperate, contact the hearing officer and ask that the person be subpoenaed. If they cannot be located in time for the hearing, then and only then will you have a decent argument that a rehearing should be granted if and when you locate them.

Remember, testimony based on reports from others is secondhand. The person who made the original report is the firsthand witness.

During the hearing, remain calm. It might help to make an outline of your testimony to assist you in hitting all the important points. However, do not read from a prepared statement. It will sound obviously scripted and artificial and might create an unfavorable impression in the mind of the hearing officer.

In addition, hearing officers appreciate brevity. Employers who sound well-organized and in command of their facts always appear more credible. In a close case, that might well tip the balance in your favor.

If the claimant seems to be trying to provoke a confrontation, do not accept the invitation. How the parties conduct themselves during the hearing has at least a subtle effect on how the hearing officer evaluates the relative credibility of both sides. Again, if the case is a close one, that can make all the difference.

AT hearings are meant to be informal hearings and are designed to bring out all the important facts without getting bogged down in courtroom-style procedures. Here is the way a normal hearing proceeds:

  1. Identification of the parties and witnesses; confirmation of addresses; explanation of the law and basic hearing procedures; oath or affirmation given by witnesses; designation of who the parties' primary representatives will be.

  2. Brief statement of case history.

  3. Determination of whether the work separation was voluntary or involuntary; if voluntary, the claimant testifies first; if involuntary, the employer testifies first.

  4. Whoever testifies first gives their explanation of the work separation; the party representative then presents testimony from each witness in turn; after each witness testifies, the representative can ask them questions and the other party's representative can cross-examine them.

  5. The other party then presents its side of the story and presents any witnesses in turn; the party representative can ask questions and the other party's representative can cross-examine those witnesses.

  6. The parties are asked if they have anything to add, and a final opportunity for cross-examination is given if more new testimony comes up.

  7. The hearing officer tells the parties to expect a written decision and closes the hearing.

All hearings are recorded. If a further appeal is necessary, it can sometimes help to order a copy of the recording so that the party filing the appeal can determine what might have gone wrong. Do not be concerned about being under oath and about being recorded. Presumably, you followed your own policies and were fair with the claimant, and thus you have nothing to worry about. In the absence of a court order, the recording of the hearing cannot be released to anyone but the claimant and employer, or their representatives.

Most employers do not hire attorneys to represent them during appeal hearings. As noted before, the hearings are designed to bring out the facts, not to subject ordinary people to strict courtroom procedures. However, if the situation involves a disgruntled former employee who has threatened a lawsuit over the discharge or related matters (see the following paragraph), it might be a good idea to hire an attorney. This is especially true if the claimant hires an attorney and is represented by the attorney at the hearing -- there is always the risk of saying the wrong thing with a hostile attorney listening to every word. If you hire an attorney, be sure that the attorney is at the very least an experienced employment law attorney; it would be preferable if the attorney also has experience with TWC claims and appeals. If the attorney serves as the party representative during the hearing, that person can be the one to cross-examine the claimant. To be effective, the attorney will of course have to be very familiar with the facts of the case and with the employer's "take" on the events leading to the work separation.

Although the TUCA provides in Section 213.007 that the doctrine of collateral estoppel does not apply to rulings of TWC and courts in unemployment claims, i.e., rulings made on unemployment claims have no preclusive or evidentiary effect in legal proceedings unrelated to the unemployment claim, employers should still be careful about how they handle unemployment claims and appeals. There are two main reasons for caution: first, unemployment claims are known as good ways to get information that can be used in other types of legal actions, and second, inconsistencies between what an employer says to TWC and what it says in another type of claim or lawsuit can give an ex-employee's attorney a way to attack the employer's credibility in the other proceeding.

Once the hearing is completed, the hearing officer makes the decision as promptly as possible, usually within a day or two. The decision is always made in writing and is signed by the hearing officer. If a further appeal is necessary (the so-called "Commission appeal" - the second level of appeal), there is a 14-day deadline from the date the Appeal Tribunal decision is mailed.

VI. CONCLUSION    Top of Page

By keeping certain basic principles in mind before, during, and after employees are employed, an employer can prepare itself against the day when an unemployment claim is filed. It can also know which claims are likely to be winners, which ones run the risk of being losers, and which are simply timewasters. By developing sensible workplace policies, documenting problems as well as successes, being consistent in employee relations, and keeping on top of developments in the law, an employer can approach TWC claims and appeals with much greater confidence.

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