Firms Make Money By Disputing Unemployment Claims
April 4, 2010, 10:01 pm
Filed under: Economics, Poverty | Tags: , ,

With unemployment still hovering around 10% and the prospects for recovery still uncertain, millions of Americans are really struggling and most of us who do have jobs still face some sort of economic uncertainty.

The economy is slowly finding its footing, but just barely.  Most economists predict that a so-called double-dip recession is not likely to occur.  The stimulus has had a positive impact.  However, despite the good news that’s slowly starting to come out, rampant unemployment is and will continue to be part of the equation for many more years to come.

The middle-class safety net – unemployment benefits, COBRA and the like – was designed specifically to work best in conditions like these.  Compared to many other industrialized nations, our programs are relatively ungenerous.  COBRA, which allows someone to keep their health insurance coverage after they leave their job, is important but also very expensive.  Health care reform legislation will fix some of these problems, but that will take some time.

Despite their shortcomings, we’d be in a much worse place without such programs.  However, keeping the net in place, expanding it during a recession and guaranteeing that the middle-class has enough to get by on has not come easily.  In the Senate, Republicans are delaying the extension of benefits, and in the private sector, the New York Times reports, companies are hiring firms that specialize in fighting to delay unemployment claims.

Claims can be denied if a worker is fired for some offense, say for example, sexual harassment or stealing.  That’s fair.  But these firms are not trying to keep the system fair.  They are exploiting the rules and disputing claims so as to compel workers who would otherwise qualify to not apply for benefits in the first place.  The fewer people who apply, the lower the tax on the company.  It’s the invisible hand and it’s ruthless.

With a client list that reads like a roster of Fortune 500 firms, a little-known company with an odd name, the Talx Corporation, has come to dominate a thriving industry: helping employers process — and fight — unemployment claims.

Talx, which emerged from obscurity over the last eight years, says it handles more than 30 percent of the nation’s requests for jobless benefits. Pledging to save employers money in part by contesting claims, Talx helps them decide which applications to resist and how to mount effective appeals.

The work has made Talx a boom business in a bust economy, but critics say the company has undermined a crucial safety net. Officials in a number of states have called Talx a chronic source of error and delay. Advocates for the unemployed say the company seeks to keep jobless workers from collecting benefits.

“Talx often files appeals regardless of merits,” said Jonathan P. Baird, a lawyer at New Hampshire Legal Assistance. “It’s sort of a war of attrition. If you appeal a certain percentage of cases, there are going to be those workers who give up.”

When fewer former workers get aid, a company pays lower unemployment taxes.

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