Advisory Council Meeting — 18 April 2013

At the Council meeting, the members took up the legislative proposals announced in an April 1st letter to the Council. The proposals contain endorsements of the DWD proposals as well as additional changes to the state’s unemployment system.

As part of that consideration, DWD prepared two documents. One document set forth a colored 11 page chart listing both DWD and legislative proposals, what action the Council had taken so far, and  estimated UI system savings for each DWD and legislative proposal.

The other document is a 20 page memorandum discussing the legislative proposals by item number. DWD briefly then went through the legislative proposals by item number that were separate from DWD’s own proposals.

#2 – DWD HANDBOOK FOR EMPLOYERS
The legislators want DWD to create a handbook for employers explaining unemployment for both employer and employee with a signature page to show employee receipt of that handbook (NOTE: the employer also signs, but that parallel feature offers illusory balance, since the employer is the one who will be presenting the handbook to the employee to sign and I doubt any employee has ever asked or could ask an employer if it knows and understands its UI obligations).

DWD said additional revisions to its already available employer handbook were not a problem, and a signature page on the DWD employer handbook for employees to sign to show that they received an employer handbook could be added as well. A common issue in hearings is an employee who denies seeing the employer handbook, and the employer has no signature page or other proof to counter the employee denial.

My concern here is there may well be two employer handbooks now: one written by the employer and one written by DWD. DWD seems to suggest that a signature page on the DWD handbook can count as proof for seeing both documents. I am not sure a single signature page for two documents can carry that evidentiary burden.

In any case, the Council approved this proposal.

#12 – EMPLOYER RE-OFFER OF EMPLOYMENT
The legislators propose that an employer receive contact info of claimants drawing on the employer’s account so that employment can be offered to those claimants.

DWD flagged this proposal as creating a conflict with Dep’t of Labor confidentiality requirements

The Council declined to endorse this proposal.

#17 – ALJ REFORM
The legislators want a database of ALJ decisions created and to mandate additional training and CLE for ALJs.

DWD explained that ALJs have issued ~25,000 decisions a year over the past few years, and so such a database would be a huge undertaking. DWD pointed out that ALJ decisions are not binding precedent while LIRC decisions are and that a database of important LIRC decisions are already available to ALJs and the public. DWD recommended that the legislation:

direct LIRC to update its already existing database of decisions and develop a list of commonly decided issues and then for each issue select LIRC decisions to include in a database of search-able cases and redact from these cases any information that would reveal confidential information about the parties to the decision.

At the suggestion of DWD, the Council modified this proposal to follow the DWD recommendation.

I’m perplexed at this development, as an unemployment law outline of UI issues by LIRC is already available. What else is LIRC supposed to do here?

There was no public discussion of ALJ training at the Council meeting, so here is some basic information. Each year in the fall, DWD and LIRC conduct a couple of days of training. The Dep’t of Labor also mandates standards for how hearings are conducted, and cases for each ALJ are randomly sampled to make sure that ALJs are meeting those standards.

I have also heard through the grapevine that DWD is reviewing ALJ decisions to determine if an ALJ is favoring one side or another. So, ALJs who have decided too many cases for claimants are being told, for
example, that 60% of claimants are winning cases decided by that ALJ and that is too high. There are no complaints about employers winning too many cases to ALJs that I have heard of, and the percentages of too many decisions favoring claimants have, as far as I have heard, not gone higher than 60%.

As any judge might explain, the percentage of cases one side generally wins is immaterial to how a judge decides the case in front of him or her (imagine if defendants were expected to win 50% of criminal cases). Bringing these percentages to the attention of ALJs and indicating the ALJs are biased and need to correct themselves suggests the kind of political pressure that raises very troubling due process concerns.  See, for example, this news from Maine.

#18 – END UI ELIGIBILITY FOR WORK RELEASE
The legislators want to end UI eligibility for those who are on work release.

This situation applies to individuals on work release who are transferred to another facility and no longer have access to the work release employer. Since the transfer is not the fault of the claimant, he or she can continue to collect benefits until a new work release job is found.

DWD explained that the proposal would require a modification of the definition of employment to add work release as excluded employment.

The Council adopted this proposal.

I guess that the working assumption here is that those on work release are not spending much money in the first place, so the availability of UI benefits is not that important for these folks. As those in prison may have families, this assumption does not hold much water and seems little more than an opportunity to kick a few individuals who might qualify for UI in these circumstances off of the UI roles.

#19 – ON-LINE FRAUD COMPLAINT SYSTEM
The legislators propose that DWD create an on-line fraud complaint system for employers.

DWD pointed out that a web form for fraud complaints currently exists but adds that it will try to make the process easier.

The Council adopted this proposal with the understanding that fraud reporting applies to both employees and employers.

#20 – FUTA TAX CREDIT GUARANTEE
The legislators proposed that if on 9 November 2014, the loan fund balance that is owed is less than $50 million, DOA loan the fund the amount to cover that shortfall. With no negative balance then, the employer’s FUTA tax credit will return to the lowest rate of 0.6%.

DWD explained that the legislation to accomplish this goal has to be approved by the Dep’t of Labor (to avoid simply shifting debt around and actually reducing that debt) and that a fundamental requirement for this loan is that it be interest-free.

The Council adopted this proposal.

#21 – EMPLOYER RESERVE FUND BALANCE REPORTING
The legislators want improvements in how employers can find out how their reserve balance is changing.

DWD explains that it wants to give employers better and improved access to their account information.

The Council adopted this proposal.

#22 – MORE AUDITS OF UI CLAIMS
The legislators want DWD to conduct random audits of regular UI claims similar to the audits of EUC claims recently required in the 2012 Middle Class Tax Relief and Job Creation Act.

DWD explained these audits could be a massive undertaking, involving anywhere from 50 to 1500 claims a week if the same audit percentage for EUC benefits applies to regular UI claims. DWD also explained that it already has the authority to conduct these audits, and so no additional legislative authority is needed.

DWD added that planned changes claimants’ weekly claim certifications will make such audits easier. For instance, when the number of required job searches jumps from two to four, DWD will require claimants to report each week the four employers to whom they applied for work rather than just answering yes to the question that they searched for work.

The Council adopted this proposal.

#23 – TIMING OF DWD REPORTS
The legislators recommend changes to when DWD has to produce its fraud report, its financial outlook report, and its activities of the Council report.

DWD proposes March 15th, April 15th, and May 15th as the new deadlines for these respective reports.

The Council adopted this proposal.

#24 – EXTENDED TRAINING BENEFITS
The legislators recommend eliminating extended training benefits.

Extended training benefits are available to individuals who exhaust their eligibility to any and all other UI benefits (regular, EUC, EB, and various training benefit programs).

DWD indicates there is no conflicts with federal requirements for ending this program.

The Council adopted this proposal.

#25 – TEMP AGENCY EMPLOYMENT OFFERS
The legislators propose that employees who previously worked for a temp agency be required to contact that temp agency as part of their weekly job search.

DWD explained that federal requirements do not preclude this requirement but that it is administratively complex to implement, such as making claimants who might have worked for a temp agency a year ago aware of this contact requirement, how would temp agencies notify DWD about claimant compliance, and for how long would this requirement continue.

Additionally, this proposal would give temp agencies that want to game the UI system by disqualifying claimants an added mechanism and an incentive for doing so. First, when an assignment with a temp agency ends claimants currently are required to ask the temp agency for a follow-up assignment. So, temp agencies currently have the means to find new work for their employees when an assignment ends. This proposal essentially burdens temp agencies with additional assignment requests that the agency may not want to deal with. Second, this proposal essentially makes claimants indentures to temp agencies who keep offering job offers to claimants as a way to kick claimants off of UI. Claimants need to accept every job offer they receive or show that the job offer was unreasonable in some way to retain eligibility for unemployment benefits. Investigations for every declined job offer will not only use up DWD resources but delay benefit payments while the investigations occur. Third, after a year or two, temp agencies that get employees off of their UI roles will have a competitive advantage
over other temp agencies that do not jettison their employees.

The Council declined this proposal.

#26 – STANDARDIZED WITNESS FORM
The legislators propose that DWD create a standardized witness affidavit form that would be presumed admissible in UI hearings.

DWD explained that such a form would still not create the substantial and credible evidence for supporting a finding of misconduct in the face of a claimant’s denial of the misconduct in question. Still, DWD indicated that it could create such a form (and the form would need to be available to both employers and employees). What might be more useful, it was suggested by one council member, was that if DWD created a layman’s guide of evidence.

The Council adopted this proposal.

#27 – LOAN TO COVER UI INTEREST
The legislators propose that a loan of $19 million in 2013 and $7 million in 2014 to pay the interest on loan amounts so that employers are not taxed an additional amount to cover that interest.

Sen. Liebham has already had the LRB draft legislation — LRB 1636/2 — that provide a $26 million loan to cover any interest due prior to 1 July 2015.

For DWD, either proposal is doable.

The Council declined this proposal.

#28 – HOLIDAY LIMITS ON BENEFITS
The legislators propose that legal holidays not be available to claimants on their weekly claims.

It is unclear what the legislator mean with this proposal. DWD concludes after conferring with some of the legislators that the proposal concerns employees collecting unemployment benefits and who worked for an employer who is typically closed on legal holidays. The proposal then would essentially reduce the hours of work needed that week for the employee to be declared a full-time employee from 32 to 24 (typically, an employee who works 32 or more hours a week is considered to be full-time and disqualified from any unemployment benefits that week).

To implement such a proposal, DWD would need to determine what holidays are covered and for employers to notify DWD about the holidays for which they are closed.

For me, it is unclear why employee eligibility with another employer should be based on a work week with a prior employer. And, I fail to see how this proposal has any applicability to claimants who previously worked part-time positions.

The Council declined this proposal.

#29 – WORK SEARCH NOTICE TO THE EMPLOYER
The legislators want employers to be notified when a claimant lists that employer as one of their job search contacts/applications.

DWD explains that this proposal likely runs afoul of Dep’t of Labor confidentiality requirements.

The Council declined this proposal.

#30 – LINK ELIGIBILITY WEEKS TO THE STATE’S UNEMPLOYMENT RATE
The legislators propose that eligibility weeks for unemployment benefits be reduced when the unemployment rate declines and likewise that the number of benefit weeks increase when the unemployment rate increases.

DWD shows that Florida has already adopted such a change, and other states are in the process of developing a similar linkage. In Florida, the number of benefit weeks for a calendar year is set according to the unemployment rate in the 3Q of the previous calendar year. Because of the reduction in benefit weeks for regular unemployment compensation, there would also be comparable reductions in EUC and EB benefits if claimants were otherwise eligible for those benefits.

If this proposal has been in effect in Wisconsin in 2009, then the number of benefits weeks available that year would have been reduced. For example, with the number of benefit weeks available in 2009 set as in Florida according to 2008 unemployment rate numbers, claimants would only have been eligible for 12 weeks of regular unemployment benefits in 2009 rather than 26 weeks. There also would have been cuts to EUC and EB benefit weeks that claimants received in 2009.

There is also no known correlation with changes in the unemployment rate and employer hiring (see the state jobs report for November 2011,). Different surveys are done for the unemployment rate and for hiring because these numbers represent very different measures of labor market activity. So, the only economic basis for making this correlation is to reduce the number of available weeks for unemployment benefits without making an across the board cut.

The Council declined this proposal.

#31 – ADDITIONAL TAX BRACKETS FOR HIGH EXPERIENCE EMPLOYERS
The legislators propose that four additional tax brackets beyond -6% be created for employers with higher numbers of unemployment claims (rather than having their tax rates currently capped at the -6% rate). The result would lead to employers with higher unemployment claims paying more in unemployment taxes than they currently pay.

DWD presents charts showing how unemployment taxes for affected employers would rise and how much additional income to the unemployment trust fund is likely.

This proposal essentially creates an added incentive for employers to get their former employees off of unemployment. I also wonder how many employers with such high unemployment rates are economically viable. If an employer goes out of business, there no longer is any payroll to tax for unemployment purposes and so nothing to collect no matter what the rate is. Certainly with the last recession there was a steep decline in collections in 2009, and not until 2011 did tax collections begin rising.

The Council is still considering this proposal.

#32 – INCREASE FRAUD WORKERS
The legislators want to fund three additional DWD employees from the state’s general funds for fraud investigation (the costs for administering the unemployment system is covered by a federal/FUTA tax).

DWD indicates that it is committed to finding and stopping fraud and that the total cost for these three positions is $314,560.

The Council adopted this proposal with the understanding that the fraud at issue is both employee and employer fraud.

#33 – END ELIGIBILITY FOR THOSE THAT LOSE A LICENSE
The legislators want to end all eligibility for unemployment benefits to those that lose a license needed for their job.

At present, an employee who is at fault for the loss of his or her license and so cannot do the job is disqualified from benefits for five weeks.

Instead of this blanket denial of benefits, DWD explains that the proposal would tighten up standards for determining fault, increase the penalty weeks from five to six, and keep the wages from the employer
from being used to calculate the former employee’s benefit year.

Wis. Stat. § 108.04(1)(f) — the loss of license provision — already provides for much of what is being asked for:

If an employee is required by law to have a license issued by a governmental agency to perform his or her customary work for an employer, and the employee’s employment is suspended or terminated because the employee’s license has been suspended, revoked or not renewed due to the employee’s fault, the employee is not eligible to receive benefits until 5 weeks have elapsed since the end of the week in which the suspension or termination occurs or until the license is reinstated or renewed, whichever occurs first. The wages paid by the employer with which an employee’s employment is suspended or terminated shall be excluded from the employee’s base period wages under s. 108.06(1) for purposes of benefit entitlement while the suspension, revocation or nonrenewable of the license is in effect. This paragraph does not preclude an employee from establishing a benefit year using the wages excluded under this paragraph if the employee qualifies to establish a benefit year under s. 108.06 (2) (a). The department shall charge to the fund’s balancing account any benefits otherwise chargeable to the account of an employer that is subject to the contribution requirements of ss. 108.17 and 108.18 from which base period wages are excluded under this paragraph.

So, the only real change in this proposal is an additional penalty week and a un-described change in the fault standard. To understand how fault in these circumstances is currently handled, see Ellefson v. Marathon Mail Service Inc, Hearing No. 11005186MW (13 June 2012). I cannot discern how the fault standard might be changed unless some kind of strict liability standard or simple negligence standard regarding loss of license is being introduced here.

The Council adopted this proposal only to the extent that any benefits paid to a claimant who loses a license but otherwise regains eligibility are paid out of the balancing account rather than an employer’s  account. As noted already, this issue is already in current law. So, I am unsure of what the Council concluded here.

Advisory Council Meeting — 1 April 2013

It was a busy day.  Council members pretty much went into caucus mode from 10:15 until 3 in the afternoon, when they emerged with a deal on the remaining DWD proposals.

D12-01 — revised misconduct and new substantial fault
The council declined to adopt the proposed substantial fault standard but did recommend adding examples of misconduct relating to:

– alcohol and illegal use of drugs
– larceny of property or services
– conviction for a crime substantially related to the job
– intentional acts that jeopardize an employer license or certification of some kind

For the most part, it appears that these provisions codify current LIRC case law.  Until actual language is drafted by LRB and DWD, however, the specific impact is hard to predict.  The alcohol and drug testing provision, for example, may not include employees being under the influence of legal drugs while at work.  Furthermore, the conviction provision could be problematic, especially since Wisconsin specifically prohibits discrimination of employees because of arrest or conviction. As a result, employers may still be liable for back pay awards for discrimination when acting in ways that they think are covered by this misconduct language.  This conviction provision may lead employers to think, for example, that a discharge based on arrest is covered here. And, determining whether there is a substantial relationship between a conviction and a discharge is probably something an employer should not make without solid legal advice, lest the employer open itself up to a discrimination charge and potential backpay damages.

The absence and tardy provision in § 108.04(5g) remains in place, though there are a few modifications.  The triggers are reduced, from 6 tardies in 12 months to 4 tardies in 120 days and from 5 absences in 12 months to 2 absences in 120 days.  There is also new language about how an employer’s policy must, in regard to tardies but not absences, set forth reasonable notice requirements that allow for notice as soon as practical (in any case, the employer’s policy must still set forth what is adequate notice for tardiness and absences).  It is not clear why this requirement only applies to tardies and not absences.  I’ve had cases, for instance, where the claimant missed work because of a car accident, called the employer on her cell while firefighters were using the jaws of life to free her, and the employer still fired the employee for missing work.  In this scenario, the employee’s phone call, while done as soon as possible, may still not satisfy the employer’s requirements for adequate notice.

D12-19 — Quit exceptions
Most of the proposed eliminations of the quit exceptions were rejected.  Two modifications are adopted.  First, exception (7)(e) — quitting a job that an employee could reasonably refuse to accept when offered — is modified.  Instead of ten weeks for an employee to decide whether to quit the ill-suited job, the employee will have 30 days.  Second, exceptions (7)(L) and (p) are combined so that an employee who leaves one job for better prospects in another still qualifies.

One exception is eliminated by the council: (7)(m) — loss of union employment.

Finally, the council agreed that the number of re-qualification weeks be expanded from four to six.

D12-30 — Declining suitable work offers
As with quits, the re-qualification weeks are expanded from four to six.

D12-31 — Benefit rate change
The maximum weekly benefit rate increased to $270, but the minimum WBR unchanged

D12-03 — claimant PINs
Adopted by the council.  If passed by the legislature, claimants will be strictly liable for any overpayments of benefits if they disclosure their PIN numbers or fail to provide adequate safekeeping of their PIN numbers.

The council declined to adopt the following proposals:
– D12-06 — Dep’t error redefined to exclude computer error / new COA for collection
– D12-08 — Claimants providing DWD with information
– D12-20 — Weekly filing via telephone

One Department proposal —  D12-09, Technical change: correction of prior drafting errors — has yet to be considered, as there was no mention of that proposal by the council or DWD.  It seems likely that the council wiil approve of this proposal at a subsequent meeting.

Finally, there was continued discussion of proposal D12-05 — SSI disability and UI benefits.  DWD complained to the council that its decision to allow UI benefits and SSI disability at the same time was raising problematic drafting issues and concerns from LRB.  The council emphasized to DWD that the tests for whether someone is able and available for unemployment purposes is different from the disability criteria for social security disability (ed. note here: this issue of different laws having different tests is not new in employment law; for example, there are different tests for independent contractor status in tax law, labor law, common law, and Wisconsin UI law — to name a few, and there are different tests for showing discrimination in federal law, state law, or in the City of Madison).

For the council, it makes no sense in light of those different tests to prohibit receipt of unemployment benefits when someone has simply applied for social security disability and does not know if or when that application for disability benefits will be approved.  The only change in the law adopted by the Council is that if the individual eventually succeeds in obtaining social security disability, then that individual can no longer receive unemployment benefits, and the Department can recover any benefits paid to that individual after the time when the disability application is granted.  Because of federal law that prohibits states from recovering debts against social security benefits, the Council explained, DWD cannot seek to recovery UI benefits that were paid for the time from when the application was filed to when it was finally approved.

The legislators’ letter regarding their support for the Department’s proposals and additional changes to unemployment law was formally given the council after they came out of caucus.  So, there was no opportunity to consider the letter in detail.

The council next meets on April 18th.

The Advisory Council met today, and several legislators sent a letter to the council about the deliberations. More on what the Council did in a follow-up posting.

One thing to point out in this letter is that the proposed increase in benefit levels is minimal: increasing the maximum from $363/week to $370/week. See proposal D12-31.

Only those currently at $363 would get this increase. Folks at lower weekly benefit rates would not see any change in their UI benefit checks, and those at the lowest qualifying benefit level — $54/week — would be cut off from benefits entirely, because the quarterly income needed to qualify for benefits is being raised to $1374.99 (from $1350). By removing these individuals from the unemployment rolls, the minimum weekly benefit level under D12-31 would rise to $55.

Note that in 2012 Wisconsin’s median WBR of $271.07 was below Illinois, Minnesota, Michigan, and Indiana (as well as Ohio and Iowa). In fact, only a few states, such as Alabama, Alaska, Arizona, South Carolina, Mississippi, and a few others, are below Wisconsin’s WBR.

In short, the proposed increase in the WBR in D12-31 is hardly something to get excited about.