Gov. Walker’s budget proposals for unemployment

There are three main proposals for unemployment contained in Governor Walker’s proposed budget: (1) new drug testing requirements, (2) increased concealment penalties, and (3) job search changes based on suitable work requirements. Here is a quick run down of the latter two. The drug testing will be described in another post.

Increased concealment penalties
At present, those charged with concealment have to repay all weekly unemployment benefits for each week of concealment at issue and are subject to a 15% administrative fee on top of the amount owed. In addition, Wis. Stat. § 108.24(1) has provided that those guilty of concealment “shall be fined not less than $100 nor more than $500 or imprisoned not more than 90 days, or both.”

Governor Walker is proposing increasing the administrative fee charged to claimants for concealment to 40%. In addition, the criminal penalties are being substantially increased: Sections 3131 and 3132 substitute the following penalties:

1. If the value of any benefits obtained does not exceed $2,500, is subject to a fine not to exceed $10,000 or imprisonment not to exceed 9 months, or both.
2. If the value of any benefits obtained exceeds $2,500 but does not exceed $5,000, is guilty of a Class I felony.
3. If the value of any benefits obtained exceeds $5,000 but does not exceed $10,000, is guilty of a Class H felony.
4. If the value of any benefits obtained exceeds $10,000, is guilty of a Class G felony.

There are two issues in play with these changes. First, the Department lately has been pushing in numerous cases that mere mistakes in claim filing serve as evidence of claimant fraud. The Commission has been overturning some of those decisions, but the Commission can only act on cases that reach it. Folks who do not appeal their cases to LIRC remain charged with concealment and have to repay benefits that very well could be from nothing more than making mistakes on their weekly claim filing.

As noted previously (see the discussion of over-payments in this post), the Department takes way too long to investigate claimant mistakes and there are avenues available for tightening up oversight of claimant filing with employer’s wage reporting that could catch problems much sooner. It appears that no one is interested in actually making Department operations on this front more efficient.  Rather, the focus seems simply to squeeze more money out of those who do not understand or cannot afford the time and expense of getting help on these issues.

Right now, too many cases are appearing in which the claimant is accused of fraud that has been going on for years. So, a claimant who might owe $10,000 because of two years of alleged fraud will see an administrative penalty increase from $1500 to $4000. The Department collects this money from future unemployment benefits and also from intercepting state and federal tax returns. As a result, folks charged with concealment will find themselves indebted to the Department for even longer periods of time as these nearly tripled administrative fines get repaid.

Second, in this light the enhanced criminal penalties are even more startling.  The penalties literally create a modern debtor’s prison for those charged with unemployment fraud.  Because the Department is taking one to two years to catch alleged concealment, the monies at issue almost always amount to more than $5000 or $10,000. If prosecutions actually happen and succeed under this proposal, Wisconsin’s prison population could sky-rocket even in an low-unemployment climate (the latest WorkNet quarterly report shows that in the 4th quarter of 2014, there were 110,614 initial claims for benefits, substantially higher than the 65,067 initial claims made in the 3rd quarter of 2014, and the latest Advisory Council fraud report shows that more than 14,000 concealment cases have been pursued by the Department in 2012 and 2013 each year).

Of course, criminal penalties already are available for concealment, but few prosecutions by local district attorneys or DOJ attorneys (the prosecutors responsible for these criminal cases) have taken place.  Department representatives have complained to the Advisory Council about this reluctance to take on these cases.  The proposed increase in penalties appears to be an avenue for making these concealment cases seem more important to prosecutors.

The problem, however, is that prosecutors still need to prove beyond a reasonable doubt that the concealment at issue is intentional. The Department may be determining that confusion warrants a finding of intentional concealment when issuing an initial determination, but a prosecutor will not have the luxury of asserting that a person should have known better when mistakenly reporting weekly income because of learning disabilities or actual lack of knowledge about the exact amount of wages earned (e.g., from an employer who does not provide information about wages from tips or commissions until weeks later).

Job search changes based on new suitable work requirements

The Legislative Reference Bureau describes this proposed change:

Current law places various conditions upon the receipt of UI benefits, including that claimants conduct a reasonable search for suitable work and that claimants accept suitable work when offered. Current law does not define suitable work, but DWD has defined it by rule to mean work that is reasonable considering the claimant’s training, experience, and duration of unemployment as well as the availability of jobs in the labor market. This bill specifically requires DWD to define by rule what constitutes suitable work for claimants, and requires that the rule specify different levels of suitable work based upon the number of weeks that a claimant has received benefits in a given benefit year.

This description is apt, as the specific provision contained in Section 3117 pf the budget bill simply creates a new Wis. Stat. § 108.14(27) that directs the Department to create a rule for specifying “different levels of suitable work based upon the number of weeks that a claimant has received benefits in a given benefit year.”

At present, there are two levels of availability for claimants (the work search regs are in DWD 127).  During the first six weeks of unemployment — what is called a canvassing period — a claimant can restrict his or her availability based on prior training, education, and job experience. See Wis. Stat. § 108.04(8)(d). After those six weeks are up, no restrictions are possible.  So, an engineer can decline an offer to work the fry machine at McDonald’s during week two of her unemployment because that job is not suitable work for her.  But, the claimant has to accept that job offer on week seven.

At present, there is no requirement that claimants apply to any and all jobs after their six-week canvassing period is over. A claimant might have to accept a job offer from McDonald’s on week seven, but she does not have to apply for a job from McDonald’s on week seven

It appears that this proposal is meant to pressure claimants into broadening their job search efforts in some kind of systemic manner. The problem is that it is nearly impossible to come up with such a system: this requirement is asking the Department to categorize the relevant job markets by geography, local business climate, and employees’ relevant educational and work background. While the Department has geographic labor market data, it is still not at all clear how that data can be linked to claimants into some kind of comprehensive scheme for establishing how a particular claimant should expand his or her job search.

To get an idea of just how complicated creating such a scheme is, look at the current requirements in DWD 127(1):

The reasonableness of a search for work will, in part, depend on the employment opportunities in the claimant’s labor market area. A work search which may be appropriate in a labor market area with limited opportunities may be totally unacceptable in an area with greater opportunities. Unreasonable limitations by a claimant as to salary, hours, or conditions of work indicate that a claimant is not making a reasonable search for suitable work. The department expects claimants to conduct themselves as would a prudent person who is out of work and seeking work.

A laid-off welder will certainly be expected to apply for welding jobs here. But, if no welding jobs are available, what kinds of jobs should that welder be required to explore? Machinist? Plumber? Pipefitter? And, what if the welder had prior experience as a camp counselor and summer camp jobs are readily available in her local area? After twenty weeks of unemployment in May, it would be reasonable for that former welder to look at camp jobs. But, how does the Department create a system for mandating that a particular welder with camp experience apply for camp jobs?