DWD/Advisory Council bill going forward

The official Advisory Council/DWD bill has just been introduced, AB819. So, here is a rundown of what has been happening with unemployment law over the last several months, organized by proposal.

Department Proposals

• A second SSDI prohibition, D15-01, to replace the current prohibition was approved in April 2015 and back-dated in May 2015. But, after the Department started winning the court cases challenging the old SSDI prohibition (see this post for the details), this proposal disappeared from the Department’s legislative draft at the council’s September 2015 meeting. But, after the Labor and Industry Review Commission ruled in November 2015 that departmental error had occurred when appeal tribunals (but not the Commission) had originally ruled in favor of claimants regarding dual receipt of SSDI and UI benefits (and so no repayment of UI benefits previously received was proper), this proposal re-emerged at the November 2015 council meeting in the Department’s legislative drafts and is now part of AB819. Why? This second SSDI prohibition is back-dated to January 2014, the effective date of the original SSDI prohibition.
• D15-02 is a house-keeping change that allows the Department to issue determinations against out-of-state employers in combined wage claims for being at fault for an erroneous benefit payment to a claimant. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86.
• D15-03 applies the Treasury offset program to employers, as described previously in this post. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86. Because of this quick enactment, employers will be subject to treasury offsets for their 2015 tax returns for any unemployment taxes for which they have been found individually liable.
• D15-04 sets up essentially a backup insurance program for reimbursable employers who get their unemployment accounts swindled by identity fraud (and so have little to no hope of ever recovering the stolen benefits). The final recommendation from the council was for reimbursable employers to be taxed initially in order to create a fund of $1 million for covering themselves against identity fraud, essentially the second option of the three presented. This proposal is part of AB819.
• D15-05 corrects a hole in the statutes that accidentally left LLPs out of the definition of employer (see also this DWD memo on this issue). This proposal is part of AB819.
• The Advisory Council approved the Department’s appeals modernization proposal, D15-06, at the 7 January 2016 meeting. LRB draft language was prepped soon thereafter. Perhaps the most significant change in this proposal — notice by Internet in place of postal mail — has NOT received any discussion of comment from council members, however. This proposal is now part of AB819.
• A renewed work-share program, D15-07, is part of AB416 and has been enacted as 2015 Wisconsin Act 86.
• Proposed changes to the definition of claimant concealment in D15-08 (described in this previous post and described in a Department memo (discussed in this post) are part of AB819. Additional criminal penalties for concealment in AB533 continue to advance in the legislature. To see what all the fuss is about, take a look at this January 21st Assembly Committee on Public Benefit Reform hearing regarding AB533 and other UI bills or read this LIRC memo on the proposed concealment changes.
• Technical changes in D15-09 and included in AB819 will allow the Department to distinguish able and available determinations from separation determinations.
• D15-10 eliminates the publication of the claimant benefit tables within the statutes and is included in AB819.
• Major changes to the process for getting unemployment decisions reviewed in circuit court, set forth in D15-11, are part of AB819. These changes were previously described here and here.
• D15-12 allows the same protocols for unemployment taxes in regards to fiscal agents in adult care to apply to fiscal agents in child care situations. This proposal is part of AB819.
• D15-13 ends the sunset date in 2034 for the program integrity fund (i.e., the fund for receiving some of the monies from concealment enforcement) since the Department now expects concealment monies to continue in perpetuity. See the next two proposals for why.
• The Department’s proposals for a program integrity slush fund, D15-14 and D15-15, are part of AB819.

Labor and Management Proposals
At the Advisory Council’s 19 January 2016 meeting, the council took action on various management and labor proposals and the agreed-to changes have been incorporated in AB819.

The management proposals that the council agreed to include significant changes to what will be considered suitable work:

• During the first six weeks of a job search, suitable work that a claimant MUST accept will be those jobs that (1) do not have a lower grade of skill than one or more of his or her most recent jobs and (2) have had an hourly wage that is 75 percent or more of what the claimant previously earned in his or her most recent, highest paying job.
• After the first six weeks, suitable work means any work the claimant is capable of performing regardless of prior experience, skills, or training, as long as the wages for that job are above the lowest quartile wage-level in the claimant’s relevant labor market.

Once a job offer is considered suitable work for a claimant, then the claimant only has good cause for declining the job offer if the claimant’s personal safety is at risk, the claimant’s sincerely held religious beliefs conflict with the work, the work entails an unreasonable commuting distance, or some other compelling reason makes accepting the offer unreasonable. These changes to what will be considered suitable work will also apply to those who tentatively accept a job and then quit within the first thirty days.

In addition, this accepted management proposal will either eliminate unemployment eligibility entirely for anyone receiving temporary or partial workers’ compensation benefits or mandate offsets against UI benefits for those receiving these kind of workers’ compensation benefits (the specific type of workers’ compensation benefit being received leads to the different kinds of treatment). In other words, the SSDI prohibition is being expanded to workers’ compensation benefits. Also, anyone making a mistake in how they report their specific workers’ compensation benefits will, under the new on-line filing system, likely face a concealment charge for his or her mistake in reporting the kind of workers’ compensation benefits he or she is receiving.

These management-sponsored changes will take effect four weeks after enactment.

The labor proposals that the council agreed to include:

• repealing the mis-classification prohibitions in workers’ compensation and fair employment law,
• creating an administrative penalty for mis-classification for unemployment purposes of $500 per employee (capped at $7,500) when construction employers (and only construction employers) knowingly and intentionally provide false information to the Department (NOTE: compare this definition with the proposed changes to claimant concealment) for the purpose of misclassifying or attempting to mis-classify an employee,
• fining employers in painting and sheetrock work $1,000 per incident (capped at $10,000 per calendar year) when coercing employees into accepting non-employee status for unemployment purposes, and
• fining construction employers $1,000 per employee (with a maximum of $25,000) for subsequent violations as well as possible referral for criminal prosecution.

These mis-classification changes will take effect six months after passage.

Budget Bill Fixes
The LIRC funding fix bill, discussed here, is also right now being considered by the legislature.

The call in the budget bill for the Department to create suitable work rules for claimants has been eliminated by the management-sponsored changes to suitable work described above.

Update (12 June 2021): Fixed broken DWD links to labor proposals and management proposals that the Advisory Council agreed to.

DWD explains its concealment changes

At the request of an Advisory Council member, the Department released a memorandum explaining the third sub-section of its proposed new concealment law. This concealment proposal was previously described in this post, and a general review of concealment can be found in these posts. Here is the Department’s latest memo with commentary.

To: Unemployment Insurance Advisory Council
From: Andy Rubsam
CC: Janell Knutson
Date: January 14, 2016
Re: D15-08 Definition of Concealment — effect of proposed section 108.04(11)(g)3

The Department proposed, and the Council agreed, to amend the statutory definition of “conceal” in the unemployment insurance law. The revised definition of “conceal” contains the following provision: “Nothing in this subsection requires the department, when making a finding of concealment, to determine or prove that a claimant had an intent or design to receive benefits to which the claimant knows he or she was not entitled.” The Council requested that the Department provide analysis of this provision, including examples of how the law will be applied.

NOTE: This language is the third sub-section of the new concealment definition. The first sub-section defines concealment as “intentionally misleading the department by withholding or hiding information or making a false statement or misrepresentation.” The second sub-section states that a “claimant has a duty of care to provide an accurate and complete response to each inquiry made by the department in connection with his or her receipt of benefits” and then goes on to list the factors to be considered by the Department in determining whether the claimant has fulfilled this duty of care. Accordingly, the statute places the burden of proof on claimants to demonstrate how their actions are innocent of any alleged concealment. The memo does not address this shift in the burden of the proof in concealment cases. Cf. Leonard A. Miszewski, UI Hearing No. 12401605AP (30 November 2012) (“A concealment finding, however, must be supported by clear and convincing evidence,” not just by a preponderance of the evidence [footnote omitted]).

The Department interprets the proposed section 108.04(11)(g)3 in concealment cases to mean that the Department must find that the claimant intended to deceive the Department but the Department need not determine whether the claimant knew that the claimant would in fact receive a greater amount of unemployment benefits as a result of the deception. The proposed statutory change requires the Department to determine whether the claimant intended to mislead the Department on the benefit claim “by withholding or hiding information or making a false statement or misrepresentation,” but does not require the Department to determine that the claimant knew the effect of that intentionally incorrect answer.

NOTE: So, the Department is explaining here that concealment is an intentional act but establishing that intent exists when there is “withholding or hiding of information or making a false statement or misrepresentation” (aka a mistake of some kind) and does NOT require the Department to show that the claimant knew he or she was intending to conceal. In other words, concealment will be an intentional act when there is a mistake and does not require the claimant to have any knowledge about the intended consequences of that mistake. Huh? How is concealment still an intentional act then?

Keep in mind how concealment is currently defined for unemployment purposes. After reviewing decades of case law and statutory developments in unemployment law, the Commission explained in Holloway v. Mahler Enterprises, Inc., UI Hearing No. 11606291MW (4 November 2011) that:

From this background, what it means to intentionally mislead or defraud may be stated simply: it means the claimant is trying to get away with something the claimant knows he or she should not be getting away with. In most unemployment insurance cases where the issue is concealment, what the claimant will be alleged to have tried to get away with, is gaining unemployment benefits to which the claimant knows he or she is not entitled. By contrast, where a claimant’s incorrect answer to a material question is due to ignorance or mistake, it will not be the case that the claimant is trying to get away with something, and that claimant will not be guilty of concealment.

What the Department is doing with this new definition of concealment, it seems, is removing the need to show in a concealment case that a claimant is trying to get away with something he or she knows she should not. But, how will concealment be shown then if knowledge about the concealment no longer has to demonstrated in some way? Will any mistake now be concealment? Does the Department provide examples that could clarify these changes?

For example, if a claimant intentionally fails to report quitting a job, the claimant has concealed. This is true even if the quit would not have disqualified the claimant for benefits because the quit fell within one of the exceptions such as quit with good cause. Proposed section 108.04(11)(g)3 provides that the Department does not need to establish that the claimant knew that the failure to report the quit would result in payment of benefits to which the claimant was not entitled. Rather, the claimant intentionally misled the department by not providing the information.

NOTE: This example does not really explain anything, since the intent of the concealment is presumed. What are the circumstances for finding that a claimant’s failure to report a quit is intentional? Furthermore, this example of quitting for good cause as concealment regardless of the consequences is unnecessary. Right now, a claimant can still commit concealment for actions that would not effect their eligibility for unemployment benefits. See Kincaid v. Madison Taxi, Inc., UI Hearing No. 15001437MD (20 August 2015) (claimant who failed to report job offer for which he had good cause for declining still committed concealment because all bona fide job offers have to be reported on weekly claim certifications).

So, the Department is showcasing an alleged change in unemployment concealment that does not actually exist. Per Kincaid, concealment right now can be found regardless of whether the claimant is entitled to the unemployment benefits or not. The issue in current law is what the claimant intended to accomplish via the filing mistake. Accordingly, this example provides no clarity about what this new concealment definition is doing.

This “example,” however, does provide some “clarity” in light of the Department’s new on-line claims filing system. When the Department implements its new on-line claim-filing system, claimants will be asked literally about dozens of kinds of information they must correctly provide. Besides hours and wages, this new system will require them to classify accurately their weekly income from holiday pay, sick pay, baby-sitting pay, performance bonuses, and other kinds of sources and report those weekly totals without any mistake.

Traditionally, claimants have not been liable for concealment when the total income reported in a week is correct even though the categories of where that income originates might be incomplete or mistaken. The Department’s example, however, indicates that any mistake regardless of the consequences on the benefits due a claimant will now count as concealment. In other words, if I report $150 in wages on a weekly claim but do not indicate that this amount is actually $100 in earned wages and $50 in holiday pay, under this new definition I am guilty of concealment simply because I was inaccurate in how I classified the wages I received. As the Department explains in its memo, the new concealment definition” does not require the Department to determine that the claimant knew the effect of [an] intentionally incorrect answer.” Accordingly, the “materiality” of the mistake is apparently no longer needed for an allegation of concealment. The mistake IS itself concealment.

Another example could involve a claimant intentionally failing to report part-time work on their benefit claim. Because the claimant intentionally failed to report work, the claimant concealed. Proposed section 108.04(11)(g)3 provides that the Department is not required to determine the claimant’s knowledge about the effect of the false answer on the claimant’s benefit amount. Had they not concealed the information, the claimant may have been entitled to partial benefits.

NOTE: This example again presumes intentional concealment has taken place without any explanation of how concealment or the intent for that concealment is actually found. And, the direct statement that “the Department is not required to determine the claimant’s knowledge about the effect of the false answer” indicates that the intent needed for establishing concealment will be some sort of knowledge-free intent. In other words, concealment can be charged without any evidence regarding the claimant’s knowledge of what his or her concealing act means. Accordingly, it seems that good faith mistakes can know be charged as concealment since a claimant’s knowledge of his or her actions no longer matter. In this light, this new concealment law overturns prior Commission decisions like Peters v. United Rentals, UI Hearing No. 12400788AP (31 May 2013) (employee made a good faith mistake in reporting her quit as a discharge in light of mediation agreement regarding her separation from employment). As stated before, unemployment claims are now a trap and should be avoided.

White House announces new UI reforms

The President has announced several initiatives and proposed changes to unemployment law, including federally-funded wage insurance (up to $5,000 a year for two years available to workers who accept jobs that pay less than $50,000 and which is less than their previous position), expanding eligibility for unemployment benefits to part-time workers (many states, including Wisconsin, limit unemployment benefits only to those seeking full-time work), mandating 26 weeks of state UI benefits (several states have reduced the maximum weeks of available benefits), creating a trigger for federally-funded Extended Unemployment Compensation (EUC) benefits, and mandating employer’s UI taxes are sufficient to a certain extent. Initial details about these proposals are available here.

These proposals are for the most part limited tweaks to the unemployment system. The biggest changes are making wage insurance broadly available and making UI benefits available to those seeking part-time work.

The wage insurance proposal provides an economic stimulus at a time when consumer spending and wage gains remain flat. But, this insurance also provides structural support for pushing wages down by creating a cushion for workers’ loss of income in subsequent jobs.

Expanding unemployment benefits to those limited to part-time work is a boon for those in part-time jobs, including many women who can only work part-time because of family and child-care responsibilities.

Such a change, however, presumes that unemployment benefits are generally a benefit to folks making unemployment claims. As evident in Wisconsin (and other states such as Michigan), receipt of unemployment is too often leading to concealment charges and penalties that turn unemployment benefits into a millstone of debt. As the numbers in Wisconsin reveal, benefit payments are declining and now are at record lows. Because claimants in Wisconsin can no longer collect unemployment benefits because of easy disqualifications like substantial fault or end up repaying benefits they do receive because of concealment charges arising from simple filing mistakes, unemployment taxes are collecting into a fund and will never be paid out. Until the feds address these kinds of changes in state unemployment systems, any expansion of UI eligibility will likely only make things worse for most claimants.

Substantial fault and misconduct principles from unemployment law to come to workers’ compensation

A Department-sponsored bill from the Workers’ Compensation Advisory Council, SB536, will make the following changes to workers’ compensation law:

Employees suspended or terminated for misconduct or substantial fault This bill provides that an employer is not liable for temporary disability benefits during an employee’s healing period if the employee is suspended or terminated from employment due to misconduct, as defined in the unemployment insurance law, or substantial fault, as defined in the unemployment insurance law, by the employee connected with the employee’s work.

The unemployment insurance law defines “misconduct” as action or conduct evincing such willful or wanton disregard of an employer’s interests as is found in 1) deliberate violation or disregard of standards of behavior that an employer has a right to expect of his or her employees; or 2) carelessness or negligence of such degree or recurrence as to manifest culpability, wrongful intent, or evil design in disregard of the employer’s interests or to show an intentional and substantial disregard of an employer’s interests or of an employee’s duties and obligations to his or her employer.

The unemployment insurance law defines “substantial fault” as acts or omissions of an employee over which the employee exercised reasonable control that violate reasonable requirements of the employee’s employer, but not including minor infractions, inadvertent errors, or failure to perform work due to insufficient skill, ability, or equipment.

In other words, temporarily disabled employees lose their workers’ compensation benefits when they lose jobs because of misconduct or substantial fault (which by the way also cancels out their unemployment benefits). Given this two-fer, employers will have an extra incentive for discharging employees who suffer a temporary workplace injury. Not only are the employees disqualified from receiving unemployment benefits, but they also lose their workers’ compensation benefits. Given how easy it is to find substantial fault (the Commission has found mere negligence to qualify as substantial fault), workers’ compensation benefits for temporary injuries are likely to become exceptionally rare under this new provision. YIKES!

NOTE: As seen in the 21 October 2015 minutes of the advisory council meeting in which this change — Management Proposal 11 — was discussed, these concerns about the impact of this disqualification were not new. In these minutes, however, these concerns were made in regards to misconduct only. Substantial fault was not discussed.

LIRC funding fix

Recall that in the latest Wisconsin budget, not only was LIRC’s budget cut and its general counsel made a political appointee of the Governor, but the Labor and Industry Review Commission was also transferred from DWD to the Department of Administration for budgetary purposes.

The problem with this change is that administration of unemployment law is funded through a federal tax that employers pay. The funds are then channeled from the feds to the state agency responsible for unemployment law in the state, namely DWD in the case of Wisconsin. Since LIRC is now no longer part of DWD for budgetary purposes, LIRC faces the prospect of losing all of its federal unemployment funding (as well as some equal rights funding that also comes from the feds).

So, AB685 and SB560 create a mechanism for transferring federal funds from DWD to LIRC for its federally funded work.

As the LRB explains:

Under prior law, the Labor and Industry Review Commission (LIRC) was attached to the Department of Workforce Development (DWD) and moneys were appropriated to DWD for the activities of LIRC. 2015 Wisconsin Act 55 (the 2015-17 biennial budget act) attached LIRC to the Department of Administration and appropriated moneys directly to LIRC.

This bill provides for the transfer of federal moneys received by DWD to LIRC for unemployment administration and equal rights functions performed by LIRC and of other moneys transferred to LIRC for other purposes.

The mechanism for accomplishing this transfer of unemployment funds?

to transfer to the appropriation account under s. 20.427 (1) (k) an amount determined by the treasurer of the unemployment reserve fund. [emphasis supplied]

In other words, the treasurer of the unemployment reserve will now have the statutory authority to determine independently what LIRC’s funding from federal monies will be.

UI FAQ by DWD

The Department of Workforce Development has produced a FAQ on unemployment eligibility issues. This information is somewhat more user-friendly than the claimants’ handbook.

There is also a limited FAQ about how the new work search waivers are being applied.

Finally, there is a FAQ on UI concealment. The concealment examples are not really examples but very basic descriptions dating from 2011. Strangely, there are two questions in this FAQ on employers “aiding and abetting” claimant fraud. There is only one Wisconsin case on employer aiding and abetting that I am aware of, however. That case was easily dismissed. But, employers should note that as claimant concealment expands, employers will be dragged into these concealment cases via this “aiding and abetting” provision.

UI Legislative proposals active in 2016

At the 17 December 2015, several legislative proposals affecting unemployment benefits were described to the Advisory Council. This legislation includes:

• Returning work search waivers to what previously existed — Employees and employers have begun to voice concerns about how the limitations on work search waivers previously approved by the Advisory Council do not make sense for Wisconsin. No immediate change to the current work search waivers will happen, however. And, whether Wisconsin ever returns to the original rules is uncertain. For instance, there was extended discussion by council members of perhaps allowing employers to designate certain employees for longer waivers because of their skills or high value to the employer but leaving other employees to the now 8/12 week waiver maximum. See my own comments on the proposed regulations.
• Expanded criminal penalties for unemployment concealment — Previously discussed here.
• UI law changes in order to counter recent NLRB decisions — Legislators want to pass legislation that will supposedly undo a recent NLRB decision called Browning-Ferris Industries that re-defined the test for determining when the employees of one company will be treated as the employees of another company (e.g., when the employees of a franchisee or temp agency are really the employees of the franchisor or client company because the franchisor or client company sets the terms and conditions of employment for the employees). NOTE: unemployment is not mentioned once in the decision, so the applicability and purpose — let alone its effectiveness — of the state law changes in this proposed legislation are muddled at best. And, as DWD notes in its memo, the changes could be extremely problematic for some Wisconsin employers.
• Exempting real estate agents from unemployment law — The proposed legislation is intended to remove real estate agents from coverage of any and all employment law and unemployment law issues.
• Whether UI claimants will have their benefits publicly revealed — As DWD notes, this proposed legislation conflicts directly with federal law.

Also, the Department has begun publishing on its website some of the proposals being discussed by council members, including management proposals to add additional claimant disqualifications and labor proposals regarding new penalties for employers who mis-classify their employees as independent contractors and increasing the wage base and tax schedule for employers’ unemployment taxes in order to make the UI fund solvent. NOTE: This 2013 PowerPoint presentation describes what makes or does not make a UI fund solvent. The Department has yet to publish any of its proposals, so this blog remains the sole source for Department-initiated changes to unemployment law. For instance, the Department is still waiting for the Council’s decision on its UI modernization proposal, D15-06.

NOTE (8 January 2016): At the January 7th council meeting, the Advisory Council approved of D15-06 with minor changes that were not detailed.