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Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

Unemployment Compensation for Owners

A person who owns a business is generally not considered to be eligible for unemployment compensation benefits if there is a lay-off or decline in revenue, or even closure of the business.  But, in some circumstances, an owner may be entitled to unemployment compensation benefits.  Since 2004, Minn. Stat. §268.035, subd. 20, has defined a “corporate officer if the officer owns 25 percent, or more, of the employer corporation” to be “non-covered” for purpose of unemployment compensation unless the company files an election under §268.042, subd. 3(a). The election must be filed with the Department of Employment & Economic Development (DEED), which must prove the election and establish a benefit account paid into by the employer.  The statute is construed strictly and failure to file an election and obtain approval by DEED bars any person owning 25 percent or more of the company from subsequently obtaining unemployment benefits.  A 2010 ruling by the Minnesota Court of Appeals, Podratz v. Built By Design, Inc., A09-1315 (Minn. App. 2010) (unpublished), www.lawlibrary.state.mn.us/archive/ctapun/1005/opa091315-0525.pdf reenforces the plain statutory language. In this case, even though the company had consistently paid unemployment taxes, the owner was not entitled to benefits because the statutory requirements for his coverage had not been met.  Although the claimant asserted that the failure to file an election was due to clerical error and asserted “equitable” arguments, the claim was rejected under the “plain statutory language.”  Business owners who contemplate seeking unemployment compensation benefits must file an election, which must be approved by DEED, and pay into a benefit account to preserve eligibility for future unemployment compensation.

Marshall H. Tanick

Mansfield, Tanick & Cohen, PA

Minneapolis

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