NELP commentary on Obama Administration UI proposals

Rick McHugh of the National Employment Law Project has two posts describing the Obama Administration’s unemployment proposals.

In the first post, he notes that the Administration wants to mandate a norm of 26 weeks of state UI benefits, which currently exists in Wisconsin after the waiting week, use of an alternative base period for determining eligibility for UI benefits (also currently available in Wisconsin), opening up UI eligibility to those looking for part-time work (currently NOT available in Wisconsin), and requiring states to allow workers to quit jobs for compelling family circumstances without losing unemployment benefits (currently available in Wisconsin but not well-enforced).

The Administration is also offering $5 billion in funds to states for modernization efforts and an option to create a volunteer work option — aka Georgia Works — for claimants.

In the second post, McHugh describes how the administration wants to: (a) institutionalize a four-tiered extended benefits program and the triggers for such benefits; (b) mandate minimum UI taxes, index the taxable wage base for unemployment taxes to inflation, impose a minimum state UI tax rate, and create new triggers for an increase in federal UI taxes when a state’s UI reserves fall below certain thresholds; and (c) make work-share options a permanent feature of the unemployment system.

Work search waivers: current limits to remain in place

Back in December 2015, legislators voiced concerns about the limitations to an 8 or 12 week maximum on work search waivers that went into effect this winter and wanted a return to the old waivers that lasted the winter season.

A senate bill to return work search waivers to the old, season long length has been proposed. Unfortunately, this senate bill was introduced just as the assembly was wrapping up its business for the year. So, even if the senate passes this bill, the only way for the assembly to pass it as well is if a special session is called to return assembly members to Madison to pass this bill. Such action is unlikely.

So, expect the 8 and 12 week maximums on work search waivers to continue into next winter as well.

Criminalization and strict liability for concealment: moving forward

The official Advisory Council/DWD bill, AB819, passed the Assembly yesterday and is now ready for the Senate to take up (as reported previously, both the Assembly and the Senate had committee hearings on their respective versions of the DWD-UI bill; so far, only one elected official — Sen. Chris Larson — has voted against these changes to unemployment law).

Meanwhile, the criminalization of unemployment mistakes — aka concealment which will soon be redefined as strict liability — via AB533 was also passed by the Assembly this week. This bill even gained a sponsor — Rep. Rohrkaste. It was also significantly amended to criminalize individuals acting on behalf of employers who:

knowingly makes a false statement or representation in connection with any report or as to any information duly required by the department under this chapter, or who knowingly refuses or fails to keep any records or to furnish any reports or information duly required by the department under this chapter and who, as a result of that false statement or representation or knowing refusal or failure, avoids liability to the department for contributions, reimbursements, assessments, or other amounts under this chapter . . .

In other words, employers and their agents who make “knowing” mistakes on their unemployment reports may face the same criminal penalties that claimants do for their mistakes on their weekly claims. Watch out employers.

NOTE (19 February 2016): Mike Ducheck from LRB points out a major mistake of mine: the substitute amendment was NOT passed but tabled. Instead, the Assembly passed an amendment that deleted several lines from the bill, including the requirement that a “person knowingly made false statements or representations” for these new criminal penalties to apply. In other words, there is no criminalization for employers’ mistaken unemployment reporting, only claimants’ mistaken unemployment reporting once the recommended changes to concealment in AB819 pass.

Note as well that these new criminal penalties will only apply for the “mistakes” that occur after this bill becomes law.

The Wisconsin jobs picture in 2016

Back in January 2016, CogDis presented Rep. Gordon Hintz’s (D-Oshkosh) run down of Wisconsin’s job numbers. While the post takes on its typical anti-Walker bent, it does present the numbers as they are, which are not all that great.

The declining market for unemployment benefits

Claire McKenna and Rick McHugh of NELP describe how unemployment benefits continue to be artificially low across the nation in 2015. Their key finding:

Using the latest data, we find that the recipiency rate in 2015 remained at a record low, with just over one in four jobless workers (27 percent) receiving UI benefits in 2015.

Their measure for a recipiency rate actually shows Wisconsin as above-average in the nation at 36%. As noted in their discussion of their methodology, there are several ways to measure recipiency rates. Their measure, for instance, does not account for penalty weeks (such as those where over-payments are being recovered because of concealment). Given the push for alleging concealment in Wisconsin, this 36% recipiency rate in Wisconsin is probably too generous.

UI bill public hearings and UI concealment

The official Advisory Council/DWD bill, AB819, had its first public hearing on Thursday, February 4th, before the Assembly Committee on Jobs and the Economy.

The Department of Workforce Development and the Advisory Council presented testimony in support of this bill. The Labor and Industry Review Commission testified against sections 54 and 55 of the bill — Department proposal D15-11, previously described here and here. I cannot think of any instance in which one state agency testified against a bill supported by another state agency. To understand the nature of this dispute, see the Commission’s memorandum and the Department’s responses to that memorandum.

I also testified about the proposed concealment changes in the bill.

On February 10th, the Senate Committee on Labor and Government Reform held its hearing on the Senate version of the Department’s UI bill, SB684. WisEye was there.

The Department and the Advisory Council again pushed for adoption of these proposed changes, and the Commission again disputed the changes to circuit court review. Both Kevin Magee from Legal Action of Wisconsin and myself testified against the proposed concealment and “program integrity” changes.

My testimony focused on the Department’s marked increase in concealment cases starting in 2014 and even more concealment cases in 2015 against Wisconsinites. To demonstrate this concealment expansion, I used two charts. The first chart looked at how concealment assessments have varied from 2011 through 2014.

In this chart, the percentage of concealment assessments relative to the unemployment benefits being paid out was pretty much constant from 2011 through 2013. In 2014, however, concealment over-payments as a percentage of total unemployment benefits paid out jumped to 2.79%, approximately a 0.80% increase from the previous year. A 0.8% in gross domestic product or the unemployment rate would make headlines across the state. So, this 2014 increase in concealment over-payments being charged against claimants is remarkable.

These numbers from the fraud report also show how concealment over-payments suddenly increased in 2014 relative to non-fraud over-payments. In 2011, 2012, and 2013, non-fraud over-payments constituted more than 50% of total over-payments. In 2014, however, non-fraud over-payments dropped over five percentage points to just over 45%. Naturally, the percentage of fraud over-payments to total over-payments jumped in 2014 to nearly 55%. So, in 2014 concealment shot up in scope relative to unemployment in general just as non-fraud over-payments markedly declined.

Over-payment assessment data for 2015 is not yet available. But, the financial reports prepared for the Advisory Council indicate how much concealment monies have been collected by the Department as of 31 October 2015. As of that date, the Department had collected nearly $31 million in fraud and non-fraud over-payments. Of this amount, just over $1.753 million had been collected pursuant to the 15% concealment penalty that applies in concealment cases.

This 15% number provides a mechanism for estimating how much of the $31 million in over-payments relate to concealment allegations in general. Dividing $1.753 million by 15% equals approximately $11.69 million and represents the over-payments so far arising from concealment. Subtracting $11.69 million leaves around $19 million as the non-fraud portion of the over-payments paid in 2015. Accordingly, by 31 October 2015 the percentage of concealment to non-concealment over-payments collected at nearly 61%.

These numbers show a sudden increase in 2014 in concealment cases and this increase accelerated in 2015. In this light, the Department’s push to change the definition of concealment is part of an agenda to expand the scope and reach of concealment. The Department countered in its testimony before the committee that an intent to conceal is still required under its proposed changes to the definition of concealment. The proposed language, numerous posts on this blog, a Commission memorandum, and Kevin Magee’s testimony at the public hearing belie the Department’s assertions. Mistakes are increasingly being charged as concealment by the Department, and Commission review applying the actual concealment standard is the only way to fight these kind of charges.

Essentially, concealment is becoming the modus operandi of the Department’s efforts in administering the state’s unemployment law. Anyone who makes a mistake is at risk of a concealment charge from the Department, and the Department wants to change unemployment law to reflect this practice.

The new (actually old) restriction on travel abroad: concealment and departmental error

Insiders in the Department of Workforce Development tell me that in December 2015 the Department began tracking people who file on-line by their IP address. Because IP addresses identity the country from where a person connects to the Internet, the Department can now tell if a claimant is filing from outside the United States.

This new ability certainly helps in preventing identity theft against claimants or fake claim filing through fictitious companies and claimants — think Nigerian prince scandals with an entourage of suddenly laid-off staffers. But, this new ability also helps the Department enforce a 2012 law. Section 1 of 2011 Wis. Act 236 created a new Wis. Stat. § 108.04(2)(ae) that reads:

A claimant is not available for work under par. (a) 1. in any week in which he or she is located in a country other than the United States, as defined in s. 108.02 (15) (do) 2., or Canada for more than 48 hours unless the claimant has authorization to work in that other country and there is a reciprocal agreement concerning the payment of unemployment insurance benefits between that other country and the United States.

NOTE: Prior to this legal change, a claimant could still be eligible for benefits if his or her job market moved with her to the other country. See Honea v. Bou-Matic LLC, UI Hearing No. 11005590MW (13 June 2012).

Unfortunately, the Department has done nothing to tell claimants about this restriction. Indeed, the only information available about this categorical restriction on unemployment benefits is from p.27 of the Department of Workforce Development’s January 2013 Financial Outlook report to the legislature:

Act 236
Tighten Benefit Eligibility Requirements for Work Availability

Act 236 also changed various portions of UI law and operations. One change in the law brought about by Act 236 is to clarify the able and available provision of UI law. If a person is outside of the United States or Canada and is not there for a reason related to current employment they are not considered able and available for work and hence not eligible for UI benefits. This codifies what was existing UI procedure. As such this is not expected to have any effect on benefits paid or the UI Trust Fund. This went into effect on April 22, 2012.

Because the Department is now tracking IP addresses, it has begun enforcing this living abroad restriction against claimants. Not surprisingly, besides being declared ineligible for any unemployment benefits for the weeks living outside the US, claimants are also being charged with concealment for intentionally hiding their living aboard status (even though there is nothing from the Department indicating that this issue exists unless you happen to read unemployment statutes).

One of those recently charged with concealment was a claimant who traveled to Germany during the winter months of early 2015 to be with his girlfriend. He was there for love, not for a vacation. Furthermore, his job search was waived for these months, but he kept in contact with his employer on a weekly basis for when he should return to work. Regardless, the Department charged him with concealment for 22 weeks, demanding him to repay $8,140 in unemployment benefits, pay a 40% concealment penalty of $3,256, and forfeit $17,020 in future unemployment benefits because of that alleged concealment. In a lengthy and generally well-reasoned decision, the appeal tribunal tossed the concealment allegations. After observing that there “is no evidence that he was aware that there were geographic restrictions with respect to the availability question for unemployment purposes,” she found:

the mere fact that as a matter of law the claimant in this case is necessarily treated as having been “unavailable” for work while staying outside the United States does not obviate the literal truth that he was at all times ready, willing and able to accept fulltime suitable work during weeks 1 through 22 of 2015.

Because the Department has done nothing to notify claimants of this restriction, the issue of departmental error was also raised. The administrative law judge declined to find departmental error, explaining:

The claimant argues that the overpayment should be waived pursuant to federal law that requires state law to include provisions that reasonably affords those entitled to unemployment compensation benefits an opportunity to know, establish, and protect their rights under its unemployment compensation law. As such the department’s failure to include the geographical restriction in the Claimant Handbook or any other notice delivered to the claimant supports a waiver of the overpayment. However, the state law is in compliance with federal law because the unemployment insurance law is accessible publicly. The entirety of the unemployment insurance law simply cannot be reduced to the Claimant Handbook. Moreover, the department has provided its contact information in the Claimant Handbook with instructions to contact the department if there is a question concerning one’s eligibility for benefits. Accordingly, it was the claimant’s responsibility to report to the department that he would be traveling abroad and to ask whether his travel had any impact on his eligibility.

In other words, the appeal tribunal held that the Department satisfied its burden to explain unemployment law to claimants because the unemployment statutes can be read by the public and the claimant still had a duty to contact the Department about an issue he did not know was actually an issue and ask whether the problem he knew nothing about was actually a problem. To me, this conclusion means that claimants need to be both attorneys and fortune tellers.

The story with wage insurance

As noted previously, in January 2016 the White House proposed various unemployment reforms, including wage insurance for folks who take lower paying jobs.

NELP recently posted some commentary about the wage insurance proposal, describing both the details and limitations of this effort.

Large state UI programs unprepared for next recession

Rick McHugh of NELP offers the following observations about unemployment legislation in other states:

Ben Casselman of the 538 blog has a new posting on the current state of UI programs. . The main focus of the blog is on the fact that several large states’ trust funds have not recovered from the Great Recession and they are unprepared for the next recession.

Rather than raising taxable wage bases and taking other responsible financing steps, the result of trust fund insolvency has been restrictive state legislation in some states mainly during the 2010-2013 time period. Eight states (AR,FL,GA,KS,MI,MO,NC,SC) have cut the maximum number of available weeks of UI to less than the traditional 26 weeks—and Ohio is considering joining this club. An Ohio bill cutting maximum durations to a sliding scale ranging from 12 to 20 weeks, depending upon the state’s unemployment rate, is advancing in the Ohio House of Representatives. The bill contains many other restrictive eligibility measures, and is modeled upon 2013 North Carolina legislation. It is estimated by the Ohio Legislative Service Commission to reduce benefits by $475 million a year.

One change from the North Carolina pattern is that Ohio employers would see UI payroll taxes fall under the Ohio bill, something that places the entire burden for improving Ohio’s trust fund on its jobless workers. Even North Carolina was not this one-sided in its approach to UI retrenchment. Policy Matters Ohio’s concerns about HB 394 are expressed in testimony by Zach Schiller and Hannah Halbert here and here. Many newspapers in Ohio have expressed concerns about the Ohio bill’s approach, and while momentum has slowed since the bill’s introduction in November 2015, the outcome remains uncertain.

States cutting the available weeks of benefits attempt to justify these changes by claiming that paying fewer weeks of benefit will induce a more rapid return to work by jobseekers. According to a recent Economic Policy Institute Snapshot by Will Kimball, three states cutting UI benefits the most (FL,GA,NC) by adopting a sliding scale approach similar to the Ohio proposal, have not seen their prime age (25 to 54 years of age) employment to population ratios increase. If the rationale for cutting weeks was true, jobless workers would return in greater numbers to employment. What appears to be happening to a more significant extent is that, without support from UI benefits, more jobless workers are dropping out of the labor force in those states.

These initial findings by EPI are consistent with many studies reviewed in NELP’s latest edition of our UI Toolkit. Specifically, one section of the toolkit presents recent studies that show that some economists’ preoccupation with disincentive effects of UI benefits has not been reflected in the behavior of jobless workers during the recession. In addition, the toolkit discusses other reports that show that UI claimants in fact do, in fact, look for work while on UI and that UI benefits keep individuals in the labor market and support better job matching. While sometimes facts don’t matter in contemporary policy debates, the tide of recent perspectives is now running against traditional economists’ strong moral hazard concerns about UI claimants.

Note that Wisconsin has through substantial fault and concealment, already seen a remarkable decline in its benefit levels.

Appeals Court affirms that concealment must be intentional . . . for now

The District One Appeals Court issued a decision today in DWD v. LIRC (called Wallemkamp, after the claimant at issue in the case, Appeal No. 2015-AP-716, affirming the Labor and Industry Review Commission’s requirement that unemployment concealment be an intentional act.

In this case, the claimant was confused for thirteen weeks by questions about how to report her wages from two different employers and about her unemployment reporting requirements in general. Rather than counseling her about her mistakes and having her payback the difference in unemployment benefits from what she received with what she should have received, the Department charged her with concealment and wanted her to repay all unemployment benefits received plus a concealment penalty and to forfeit a sizable amount of future unemployment benefits as additional punishment for her confusion and lack of understanding.

An administrative law judge affirmed the concealment charges. The Commission, however, noted that the claimant in her testimony truly was confused because the questions she was asked were confusing and that she actually lacked a basic understanding of how unemployment law works. Accordingly, the Commission found no concealment because her mistakes were NOT intentional.

The Department appealed that decision to circuit court and then to the appeals court, making a host of arguments about how concealment in general really was not an intentional act, that the Commission was misapplying and did not actually understand unemployment law in matters of unemployment concealment, and that the evidence did not show confusion and misunderstanding but actual intent to defraud the Department.

Two courts have now rejected these arguments. But, the Department is slated to get its way with how it thinks concealment should be applied with a change to the statutory definition of concealment that will make claimants strictly liable for their mistakes. While the statutory definition of concealment will still have the word “intent” in it, there will no longer be any requirement for the Department to show that the claimant has an intent to conceal. The intent in the new definition of concealment will be presumed, and claimants will in the future have to demonstrate that their mistakes were either not their responsibility or beyond their control. Being confused or not understanding unemployment law will no longer suffice. So, the Department may have lost Wallenkamp for now, but the Department is rewriting the statute to get its desired result: strict liability for any claimant mistakes deemed serious enough by the Department to constitute concealment.