A person is entitled to receive unemployment benefits if he meets the criteria set by his state for the receipt of these benefits. Although these criteria vary slightly depending on a state's rules, they're relatively consistent across the nation. A person who's paid in cash or who works "under the table" is no less eligible for benefits. However, verifying employment may be difficult, as the employer may not wish to admit he employed the person.
Unemployment benefits are checks provided weekly or biweekly to people who were fired from their jobs. The criteria for unemployment benefits is based on how much money the person was earning from his previous job and how much he's earning now that he's unemployed. The method by which a person was paid doesn't affect his eligibility, so long as he can prove he was indeed employed and was fired.
Payment in Cash
A person who's paid in cash may be paid this way because she's working under the table — i.e., her employment isn't reported to the federal government. In such a case, neither the employer nor the employee are paying taxes to the government. An employer who's not paying taxes may be unwilling to admit to an unemployment agency that he employed his former employee, as he'll be required to pay employment taxes on the amount paid.
For a person to collect benefits, he must show the unemployment agency that he did, in fact, work for his former employer; that he earned enough to qualify him for benefits; and that he was fired for a reason that renders him eligible for benefits. Unless the person has documentation or can get his former employer to not contest his assertions, this may be a difficult thing to prove.
Unless the person who was paid cash for her work was paying taxes or didn't earn enough to merit the payment of taxes, she may have concerns about filing for unemployment. This is because the unemployment agency may inform the state's tax collection agency that the person was employed in a paid position. If the person hasn't paid taxes on the amount she received in cash already, the state collection agency may expect her to.