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Understanding How Unemployment Insurance Benefits Work for Both Employees and Employers

Updated on April 22, 2016
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Ms. Clark has managed the administrative duties of several small businesses as well as collected unemployment on occasion herself.

Having run the administrative end of several small businesses, I learned how to navigate the requirements for unemployment insurance for our employees. It seems to me there are a lot of people who do not understand how unemployment insurance works, and some people even want to equate unemployment benefits with welfare of some sort that is paid to recipients by the government with tax dollars. Hopefully this hub will help clear up some misunderstandings.


People who have many skills have more options when looking for a new job.
People who have many skills have more options when looking for a new job. | Source

How Unemployment Is Determined For Employers

Employers are required to pay into their state’s unemployment program for each of their employees according to the number of hours each employee works and the amount of wages or salary each of their employees earns. Some employers may be exempt from paying into unemployment insurance because of the type of business they operate or because they have very few employees. This varies from one state to another.

It is generally accepted that the wages and salaries of employees will be somewhat lower to offset this expense that is incurred by their employer for their benefit. If unemployment insurance were not paid by their employer, presumably their salaries/wages would be higher. For that reason, unemployment benefits are considered part of an employee’s wages.

Just as some employers pay into health insurance programs so that their employees will have access to healthcare when needed, they also pay into the unemployment insurance program to help their employees get through periods of unemployment. The difference is mainly that employers are required to pay into the unemployment insurance program, where they may have a choice of whether or not to provide health insurance benefits to their employees.

When employers pay into the unemployment program, they NEVER GET THEIR MONEY BACK even if none of their employees ever collects a penny from the program. Generally large employers like Verizon or Wal-Mart pay more into unemployment insurance than small companies, for the obvious reason that they employ more people.

Generally there are no tax dollars going into the unemployment insurance program. The market crash of 2008 changed that temporarily. Normally a person cannot collect unemployment benefits for more than 6 months, but because the economy was, and is so horrible, the federal government (and some state governments) subsidized the unemployment programs of various states so that people who could not find jobs within 6 months would receive benefits for longer than usual. The usual period for collecting benefits for 26 weeks was extended for some people for as many as 99 weeks. Again, this is a temporary measure and is not the case in every single state.

How Does a Person Qualify For Unemployment Benefits?

There are different conditions under which a person can collect unemployment benefits. Not everyone qualifies for unemployment benefits, and some people will receive no benefits even if they lose their job through no fault of their own.

First of all, there must be benefits available to the employee that is laid off. Here in Texas, a laid off employee’s benefits are determined by how many hours and how much pay they earned during the quarter 13 to 15 months prior to the time they are filing to collect benefits.

A quarter, in this situation is a three-month period. There are 12 months in the year, and the year is divided into quarters, or 3-month periods. Jan-March, April-June, July-Sept., and Oct.-Dec.

If you were to apply for unemployment benefits on April 3, 2012, the unemployment commission here in Texas would look back at your work record 1 year and 1 quarter back in time, or Jan-March of 2011. Your benefits would be based on your wages/salary in that quarter from 2011. If you did not work during that quarter, you would receive no benefits. If you were earning only $7.50 an hour for 20 hours a week, your benefit would be based on those earnings even though the job you have just been laid off from was 40+ hours a week at $15.00 an hour.

The benefit an unemployed person usually gets will be approximately one third of what their weekly check was during the quarter in which their benefits are based. In the above example, one third of the pay earned in the quarter Jan-March in 2011 would be the person’s benefit if s/he applied for and qualified for unemployment benefits on April 3, 2012.

Just as there is a minimum wage, so there is usually a minimum unemployment benefit in most states. The minimum unemployment benefit in Texas for qualified recipients is $243.00 a week. It may be more or less in other states.

If you live in a state other than Texas, check with your unemployment, or state employment agency, to see how benefits are determined in your state. There may be some differences.

More Qualifications For Unemployment Benefits

People who are terminated for cause cannot collect unemployment benefits in most states. People who quit their jobs cannot collect unemployment benefits in many states.

Here are the exceptions to those rules:

If an employee becomes physically disabled for some reason, and that prevents them from doing their job, and their employer refuses to make reasonable accommodations for their disability (give them a different job within the company that does not have the same impossible physical requirements, etc.), they may be able to collect unemployment benefits even though they have quit their job.

If an employee is terminated and the state workforce commission determines they were wrongfully terminated, they may be able to collect unemployment benefits.

Every unemployment claim is investigated to determine if an applicant is entitled to collect benefits or not. If it is determined that a person does not qualify for benefits, s/he can file an appeal. That process is explained in the booklet you should receive from your state unemployment commission in the event you file for unemployment benefits and you are denied.

Requirements For Continuing To Receive Unemployment Benefits Once You Qualify

Most states have requirements that a person receiving benefits must meet in order to get those benefits and keep those benefits. In order to know what your requirements are, you should check with your state unemployment commission or agency. This information should be included in the booklet you should receive if you apply for unemployment benefits, and should also be available on your unemployment commission’s website. Requirements may vary somewhat from one applicant to another, so you should receive a letter from your unemployment commission specifying exactly what your requirements are.

Here in Texas, a person receiving unemployment benefits may not turn down any job referral or any job offer unless that referral or job offer is for a job they cannot physically do, or are not qualified for. Also, if the pay is considerably less than they would normally earn, they may turn the job offer, or job referral down.

Here in Texas, after a certain amount of time has passed during which an unemployed person receiving unemployment benefits has not found another job, that unemployment benefit recipient is required to lower his/her wage/salary requirements based on their most recent job, by 20-25%. That means they can lose their benefits if they turn down a job because it does not pay as well as their most previous job. They must reduce their wage/salary expectations or requirements by 20-25% (exactly how much will be specified by their unemployment commission), but not lower than the state minimum wage.

Also, an unemployment beneficiary must make a minimum number of job searches every week. It is important to keep good records on the job searches because the unemployment commission will randomly request proof that these job searches or applications were done. Unemployment benefits can be lost because a person either did not do the job searches, or did not keep satisfactory records to prove they did the job searches. At some point you will be asked for proof of your job searches. It is not a question of if, but when. Be prepared with good records of your job searches.

There is one exception to these requirements. If an employee is laid off temporarily, often times their employer does not want them to search for another job. They want that employee to be available to return to work as soon as there is enough work to keep them busy. If their laid off employees were to search for a job during this slow time for some employers, they just might find a better job and then they would not return to their original employer. In a case like this an employer will inform the unemployment commission that no work searches are desired or required. They want their employees to collect unemployment benefits while work is slow, and they want to assure as much as possible that their employee will return to work when needed.

I have personally experienced this situation when I had a job that was seasonal and that required some special training. My employer was happy to provide unemployment benefits to help me get through those periods when there was no work, and even directly stated to me that they preferred I not search for interim work. They wanted assurance I would return when work resumed.

Remember, employers do not get any money back from the program even if none of their employees ever collect benefits. Unemployment insurance benefits both the employee when they lose their jobs through no fault of their own, and it benefits employers who do not want to lose good skilled employees because of a work slowdown.

Tax dollars do not usually contribute to unemployment insurance. The current situation is unusual and burdensome for many small employers, and that is the reason why the federal government, and in some cases state governments, have stepped in to pick up the slack in keeping unemployment benefits available to people who cannot find jobs.

Mistakes People Make Regarding Unemployment Benefits

The biggest mistakes laid off employees usually make:

1. Not applying for benefits in the first place, even if they quit, or have been fired.

2. Not following scrupulously, the requirements for keeping those benefits flowing, i.e., doing required job searches, or following through on job referrals from the unemployment commission, etc.

The biggest mistakes employers make:

1. Not understanding how the unemployment program works and thinking it is not worth their while to educate themselves about it. Most large employers know their responsibilities and how to make the program work for them. A lot of medium sized and small employers do not.

2. Not returning the inquiry forms their unemployment commission requests from them stipulating the reason for laying off, or terminating an employee, etc.

3. Not showing up for the hearing that may be set regarding a former employee who has filed for unemployment benefits. Just like many lawsuits, if you don’t show, you lose by default.

© 2012 C E Clark


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    • Robert Sacchi profile image

      Robert Sacchi 6 months ago

      Thank you. I appreciate you kind words. While I would have prefered to keep things as they were it worked out alright for me. The week after I got word I applied for and got a job offer with the company that canceled my contract. I started working at my new job, better pay and closer to home. I found it miraculous. May everyone who gets a pink slip this year do at least as well.

    • Au fait profile image

      C E Clark 6 months ago from North Texas

      Uriah Lendsey, thank you for stopping by and making an inquiry. My best advice here is to call your local state unemployment office and ask them this question.

      I'm just guessing here, but you have to have worked a certain number of weeks in the year (usually 18) before you can qualify for benefits and you have to have made at least $116 a week during those weeks. Possibly you haven't done that? Call you local office and get some definite answers. That's what our tax dollars are paying them for -- to answer your questions among other things.

    • Au fait profile image

      C E Clark 6 months ago from North Texas

      Robert Sacchi, I'm sorry to hear you're out of work. Hope you find something you will like soon. Seems like the economy is better for the time being and there are more jobs available. Not sure it will stay that way with the change of the guard, but I certainly wish you the best of luck in finding something you'll like and that will meet your requirements.

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      Uriah Lendsey 6 months ago

      What does it mean when they say I have to go back to work and earmarks at least 163 dollars or more in order to continue my claim?

    • Au fait profile image

      C E Clark 7 months ago from North Texas

      LouiseKristie, thank you for sharing your situation with me and my readers. You should not be required to take work that is vastly different from or that has a lower pay rate than what you were doing for this company before. Physical field labor sounds very different from office work for a variety of reason. I hope you let the people at your meeting know that when they questioned you. It is physically difficult compared to what you applied for and accepted from this company and you should not be required to accept this type of work. Definitely fight any effort to intimidate you into accepting the field work.

      You should not be disqualified from receiving unemployment benefits for turning down physical field work because it is extremely different from the kind of work you agreed to do and did do before. If you are turned down for unemployment you should seriously consider consulting with an employment lawyer. If you and your lawyer agree it’s worth fighting be sure to ask for attorney’s fees along with reinstatement of your unemployment benefits. You should not have to resort to hiring an attorney to get what is rightfully yours and if it comes to that, your employer should pay for that attorney as well as your unemployment benefits.

      If this issue has been settled I hope it was in your favor. If it wasn’t in your favor you should still consider consulting an employment attorney to make sure you can’t get a negative ruling reversed. If you consult an attorney, be sure to consult one that does a lot of employment law or who is certified in this area. A lot of people do not realize all lawyers do not know everything about every legal issue, it isn’t humanly possible and so most attorneys specialize in a few areas of law. An employment attorney should know employment law thoroughly and if s/he doesn’t, look for a different one.

      Best of luck to you!

    • Robert Sacchi profile image

      Robert Sacchi 7 months ago

      This Hub is more important to me now. I got word on Monday I'll be out of a job on January 1.

    • Au fait profile image

      C E Clark 7 months ago from North Texas

      Lori, I'm sorry to have taken so long to respond to your inquiry, but I very much appreciate your taking the time to explain your situation.

      Did the employee you refer to work for you for a long time? A year or 2 or more? It's likely that the way unemployment benefits are determined may be playing a part in this. I explained in this article how benefits are determined by going back a year and a quarter (referring to a 3-month period here such as Jan., Feb., Mar. as a quarter).

      When your former employee left her most recent job it's possible that when 'they' went back a year and a quarter, that you were still her employer and so benefits will be determined by how many hours and how much pay she received from you as her employer.

      For example, if she filed for unemployment in September 2016 'they' will go back to September 2015 plus the quarter Before the one that includes Sept. (April, May, June 2015). If this employee was working for you during the 2nd quarter of 2015 (in this scenario), her record as your employee at that time would be the one they base her benefits on.

      Even though her benefits are based on earnings when she was working for you (if that is the case), her most recent employer should be the one paying them — and that depends on whether she even qualifies for benefits. Whether she qualifies for benefits is a different investigation that will involve her most recent employer. If she qualifies for benefits it is possible they will be based on earnings when she still worked for you.

      Since I don’t know if this is the case, but it’s the only thing I can think of without more information, I would tell you to take advantage of what you are paying for. You have paid into the unemployment program as required by law, and so call your local state employment agency and ask them what is going on. Don’t be afraid to question what is happening or to ask them for an explanation. It may seem like a lot of red tape and very complicated, but I think you will find it much easier to get the information you want than you imagine.

      If you plan to continue to be an employer I recommend you take every opportunity to learn all about unemployment benefits and the insurance program generally. Learn how to make it work for you. Always respond to inquiries fro the unemployment office and never be afraid to pick up the phone and ask questions. Like anything else, the more you learn about it the easier it becomes. Believe me, understanding unemployment will be a great relief to you and it will give you a new confidence.

      Another way to avoid paying unemployment is to have a plan for improving the behavior and performance of problem employees. When they exhibit that they are going to be a problem, have a talk with them and tell them you are going to put them on a program to help them improve their performance. Tell them this is for their own benefit (it’s really a benefit to both of you) because it will give them an opportunity to improve their productivity and performance because if they can’t bring it up to your requirements you will have no choice but to replace them.

      Before you talk to them make a plan with definite points of achievement that will show how well they are improving. Make sure they know you will be giving them a performance review and ask them to sign an agreement after you’ve explained it saying that you have explained what is required and that they understand what you said. They understand if they do not meet your requirements that they will be terminated.

      So make a plan of various things they can do to improve their performance. Make sure they know you’ll be monitoring their progress. If necessary put another employee in charge of helping them modify their behavior or learn how to do whatever part of their job they aren’t performing well at.

      Give them a reasonable time to make improvements and make sure they know that when the program is completed satisfactorily they will still be terminated if they go back to their old undesirable habits. Reasonable can be anywhere from 2 weeks to a few months depending on what the problem is and how severe the necessary change will be. Make sure to be reasonable in the time allowed and the steps they must follow as well as what you will accept as improvement.

      State unemployment offices like to see that you have taken reasonable steps to help your employee improve his/her performance, and if you do this in a fair minded way, you may end up with an exceptional employee — but if you must still terminate them, you can show that you made every effort to help them improve. When employees are severed for cause they rarely get benefits. One way they can get benefits is if you have no plan in place to help them improve their performance/behavior and that you have given them no warnings as they got closer to termination through undesirable performance/behavior.

      This is another subject you can discuss with an agent at your state unemployment office. Ask for their advice on creating such a plan and by doing so make sure it meets with their requirements/approval.

      I hope this has given you some food for thought and been at least a little bit of help. Please do call your state unemployment office, get to know them better, and ask them to explain what is happening so you will know exactly as it pertains to you and your business. Best wishes!

    • Au fait profile image

      C E Clark 7 months ago from North Texas

      Mike, thank you for sharing your experience with me and my readers. I think anytime a person is qualified to collect unemployment benefits they should do so. Unemployment insurance is part of the cost an employer bears for having employees and if it weren't required they might raise your wages/salary a little higher. It's part of the benefits package your employer provides you as their employee.

      Most people don't think twice about collecting on their health insurance if they incur medical bills, and there's no reason not to collect unemployment benefits if you qualify for them. After all, you pay for unemployment insurance just the same as you do medical insurance.

      Telling perspective employers that you planned to retire after a certain amount of time was certainly the considerate thing to do, but if the tables were turned it's unlikely they would have told you the position they were seeking to hold would be a temporary one. Some employers are up front about that, but not all. Of course there are never any guarantees a position will last or that a person will hold a job for any particular period of time. Things happen to employers and employees alike that can cut a job short. Accidents, family situations, company bankruptcies and the list goes on. Even if both you and your employer expected your job to last for 5 years or more, there are no guarantees that would happen under the best of circumstances. I think you were considerate to inform your possible employers of your intentions, but I'm not sure it was truly necessary.

      Thanks again for sharing your situation and your thoughts.

    • profile image

      LouiseKristie 8 months ago

      I was laid off full time work due to lack of work, but offered possible 8-16 hours of work out in the field physical labor, not guaranteed or hit the streets. Im a 54 year old woman who's done office work for 30 years. I said I needed to go find work and filed for unemployment. At adjudication I'm being questioned why I didn't take the work. Will I be disqualified.

    • profile image

      Lori 8 months ago

      I'm an employer who has been paying on a claim, that in my opinion should not have qualified since the employee was terminated due to the disruptive behavior she demonstrated towards coworkers and all levels of management, including myself. She was actually going to be fired 2 months prior, but I gave her 1 last chance because I'm a freaking softy sometimes. I want to know why the employee has starting receiving benefits again after a few months of not (she is working and earning more now). I thought I was done with this situation a few months ago, until I just got another employer questionnaire for UC.

    • profile image

      Mike 8 months ago

      Hi. I live in California and my position with a large international employer was eliminated when I was 63. I took retirement with a pension, and a severance package. I was eligible for and took Unemployment Insurance after 6 months (at 63 1/2).

      I did look for work and applied for similar positions on the internet every week, but did not WANT to get another job because I had planned on retiring at age 64 or at the very maximum at 66. In addition, I felt that I should not have taken another job with a new employer for only a year or two (and then resigned to retire) without being honest with them upfront--which obviously would have tampered their interest in me. If I did, this would have been dishonest and costly to the new employer. I flet I was due the unemployment insurance paid by my employer as partial replacement income because they eliminated my position.

      I would appreciate your thoughts and comments.


    • Au fait profile image

      C E Clark 11 months ago from North Texas


      Thank you for your enquiry. I’m sorry to hear about all the problems you are having with your current employer. I would recommend you contact your local state unemployment office and explain your situation to them and pose all of your questions to them. They will be able to give you absolute answers and those are the kind of answers you need so that you know what you must do to resolve this situation of slow paychecks and unsatisfactory employment.

      Mondays, especially mornings, are extremely busy at the unemployment office. The wait, whether in person or on the phone, can be very lengthy. Generally afternoons are best for contacting them, and the closer to Friday the better, as everyone has the idea to contact that office first thing Monday morning, or as near to it as possible.

      If your paychecks are regularly a week or more late, I would also contact an attorney who specializes in employment law. That attorney specializing in employment law will know if you have a cause of actin against your employer for any reason, and may be able to work out any issues with your employer without court action.

      A surprising number of employers, usually small businesses, are uninformed about laws that effect different facets of their business, such as employment law. They make mistakes as a result. Of course it is the responsibility of new business owners to learn what laws effect their businesses so to avoid breaking them.

      It is very difficult to provide a stable environment for oneself or children if a paycheck is undependable, and if one has earned that paycheck then it should be delivered on time. I hope you will contact your unemployment office this afternoon if you can find the time, and get the answers you need asap. I really hope you will be able to resolve these issues soon and improve your situation. Best of luck!

    • profile image

      3angelz 11 months ago


      I have a difficult sitiation, i work for a franchise in tx. I am a stylist who gets commission. I was injured in 2013 and did not return to work until 2015. I worked for one year left and was rehired at the same company but a new franchise owner making at least three times what I made before. My Workers comp claim has just ended with the previous franchisee (in case that matters). I started working with a new owner Feb this yr. We are supposed to be paid the 1st and 15th of every month however over half of my paychecks have been paid late to me by 2 days or more. I only work 8 days a pay period and hours vary, If it's slow I can leave early, all my wages are commissions and tips. I work about 24 hrs/wk. However this job pays my bills. I know the laws regarding Fair Labor and wages and employment, so my question is this, does Texas consider it fair ground to quit a job due to the constant lack of on-time payments?

      There's more, I am also currently part-time employed. Scheduled 30 hours a week at a new job I just started 3 weeks ago however this job will pay 2 - 3 times LESS then what I make at the other job. (I have not received my first check, but it will not be a "normal paycheck" as it provided paid training)

      Can I recieve unemployment from the first job while I search for another job? With equal pay? (There is at least one complaint filed against him for this, I plan on filing and a coworker quit today and said she would, even if she doesn't) if there's proof could this change things?

      There's still more... I have actually now worked for three franchise owners. The first owner was in a class action lawsuit for non-payment of overtime wages, which I was a part of (circa 2012). I thought nothing of it. But now this franchise owner is doing the same thing.

      Is there any way to hold the company/corporation as a whole responsible and not just the individual franchise owners? It appears they are careless in the way they treat employees and corporate doesn't seem to mind them doing business this way.

    • Au fait profile image

      C E Clark 12 months ago from North Texas

      Robert Sacchi, thank you for your insight. I agree!

    • Robert Sacchi profile image

      Robert Sacchi 12 months ago

      Thank you. Yes, the easiest way to avoid flack or discrimination trouble is to use the "need not apply" phrase. This doesn't stop an employer from throwing away a resume with an employment gap or other information that has things they don't like.

    • Au fait profile image

      C E Clark 12 months ago from North Texas

      Robert Sacchi, thank you for your inquiry. I'm sorry to be so long getting back to you. For a while many employers said right in their job listings that if you were not currently employed they would not even consider your application. Others said if you had been unemployed for 6 months or longer they would not consider your application. I personally was told by a recruiter who called me that I would not be considered (2008) since I was not currently employed. Employers no longer put these things in their listings because some of them experienced some flack as a result. Not placing it in their listings doesn't prevent them from having a policy not to consider applications from unemployed people.

      Homeless people have little chance of digging themselves out of the situation they're in because most employers won't even consider them for work. Yet everyone feels obligated to spit on them and sneer at them because they are without a job and homeless.

      I'm sure every employer has their own attitude about unemployed applicants. Some may be willing to consider them while others do not. Those who will consider an unemployed applicant may punish them in other ways such as you mention, by offering lower compensation, etc.

    • Robert Sacchi profile image

      Robert Sacchi 12 months ago

      Good points. Does a longer period of unemployment make you more unemployable? When I got a permanent job it paid 60% less than what my previous job paid, and the benefits were much less also.

    • Au fait profile image

      C E Clark 12 months ago from North Texas

      Robert Sacchi, thank you for reading and commenting on this article! You should have been able to collect unemployment benefits while you were working your first part-time job. Generally unemployment will make up the difference between your actual earnings from a PT job and your usual earnings from a full-time job.

      Generally people who quit their jobs or who are fired (especially for cause) will not get benefits, however every claim is investigated and you may be one of the exceptions. Always file for benefits so that the reason you don't get them won't be because you didn't file.

      Unemployment is an insurance program run by the government and employers must pay into it for every employee whether they like it or not. They will not get a penny back even if none of their employees ever collect.

      If employers weren't required to pay into this program they would be able to pay employees higher wages/salaries. Therefore this benny is part of your compensation and should be utilized when needed just like you utilize your health insurance when needed.

      It really makes no sense to accept a job that won't begin to pay the bills just so the neighbors and other busybodies will be happy you accepted a job over unemployment benefits. Keep in mind that most heroes are dead. Is it worth it to undermine your own best interests and those of your family just to impress the neighbors who don't have to live on the limited income or any results of your decision? Does that pat on the back from them really mean that much? Can you eat it?

      The quickest way to lose burdensome weight is to stop caring what other people think. People who don't have to walk in your shoes, live in your skin, or deal with your experiences, and who really don't know even half of the details of your situation always have an opinion about what you should do and often like to share that opinion. People who are overly concerned with your character and your lifestyle don't have enough to do and should get a life of their own. Why do you care about impressing them? And if you're honest, are they ever truly satisfied with your decisions?

      Never be afraid to collect unemployment benefits that you are entitled to. They are there to help you and your family get through a difficult jobless period. Always file for them when applicable -- and that is when you have lost your job for any reason, or quit your job for any reason..

      Make job decisions based on yours and your family's needs, not on what people who don't have to live with the decision think. Collect on your health and life insurance the same way. :)

    • Robert Sacchi profile image

      Robert Sacchi 12 months ago

      Very informative. I made a big mistaske the last time I was unemployed. After a couple of months unemployed I got a part time job as a product demonstrator. Invariably I would make less money than unemployment was giving me. From a practical standpoint I was working for nothing. In desparation I took a job as a car salesman, which meant I had to quit the part time job. A couple of weeks into the car salesman job I got terminated, I wasn't able to sell any cars. Since I had previously quit the part time job I was ineligible to collect unemployment.

    • profile image

      Au fait 13 months ago

      Sammy, thank you for coming by! If your hours have been cut back considerably you can collect unemployment without quitting. Unemployment will make up the difference between what you earned before your hours were shortened and the present time.

      There's a possibility you could collect unemployment if you quit, but if cutting your hours is causing financial difficulty, cutting them out completely is bound to cause even more distress. Better to stay put at your job, collect unemployment for the lost hours, and look for another job.

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