Letter to Governor Walker

In light of the Senate passage of AB819 on Tuesday of this week, I am sending a letter to Governor Walker urging him to line-item veto four provisions in the bill.

Dear Governor Walker:

I represent in my legal practice numerous employees and employers in unemployment law matters, and I urge you to line-item veto various provisions in AB819.

The provisions at issue consist of proposals by the Department of Workforce Development (“DWD” or “Department”) that create marked, unpredictable, and undesirable changes in unemployment law for the employees and employers of Wisconsin.

Changes to the definition of unemployment concealment

Sections 18 and 19 of the bill essentially make claimants strictly liable for their claim-filing mistakes. The proposed changes state that concealment is intentional but then disclaim that the Department does not have to prove that a claimant has such an intent. Furthermore, the proposed changes specify ways for a claimant to show no concealment that are so limited or specific that they essentially mean that concealment will be presumed.

This strict liability standard creates due process issues in unemployment law as well as significant problems for any criminal sanctions against claimants for actual concealment. The implications in criminal cases are especially problematic. While the intent requirement for concealment is being removed, criminal prosecutions for unemployment concealment still need mens rea to be shown. Because the mens rea is being administratively presumed rather then proven, claimants who commit actual concealment could likely avoid criminal prosecution for their fraudulent acts in light of this missing mens rea.

Creating a slush fund for Department expenditures

Sections 83-87 of the bill creates a fund for perpetually funding the Department’s program integrity efforts. This funding mechanism, however, lacks any criteria regarding this spending or legislative oversight and so allows for Department hiring and expenditures that are arbitrary. Accordingly, this program is the antithesis of small government .

Re-doing the prohibition on receiving unemployment benefits when receiving Social Security Disability Income (“SSDI”) benefits

Sections 20-25 of the bill re-write the prohibition on receiving unemployment benefits when already receiving SSDI benefits. An earlier and similar prohibition was enacted as part of 2013 Wis. Act 36. The Labor and Industry Review Commission (“LIRC” or “Commission”) initially held that the original prohibition only applied for the week when the claimant received his or her SSDI benefit check. Four circuit courts, however, reversed the Commission’s reasoning. As a result, there is now no legal need for re-writing this prohibition.

Furthermore, this new prohibition will, pursuant to section 103 of the bill, be retroactive to January 2014, the same time when the original prohibition became effective. Because of this retroactive application, this new prohibition creates a constitutional problem that will lead to a new round of litigation for the three to five claimants who received a few hundred dollars of unemployment benefits before the Commission decisions regarding the first prohibition were over-turned. The Department will end up spending thousands of dollars in litigation expenses and staff hours over a few hundred dollars in unemployment benefits. Since the first prohibition is now being enforced, there is simply no legal or economic need for this second retroactive prohibition.

Changing the procedures for obtaining review of a LIRC decision in circuit court

Sections 54 and 55 of the bill substantially alter the process, venue, and parties involved in appeals of Commission decisions. Among these proposed changes, the Department will have the right to file unemployment appeals in any county it chooses regardless of where employees or employers reside. Furthermore, because these changes presume that any party in an unemployment case risks default judgment when not answering a complaint, employers will need to file answers in claimant appeals of Commission decisions. Since Wisconsin requires any company to have an attorney representing it in court, employers will have to spend several hundred dollars for an attorney to file an answer on their behalf. Right now, employers can rely on the Commission to defend these cases and have no need for separate representation and the filing of answers.

The Commission tried to discuss these changes with the Department and the Advisory Council but was ignored. Without a voice in the process, the Commission formally opposed these changes at public hearings for this bill.

There are notable improvements in unemployment law in this bill. For instance, the provisions for protecting reimbursable employers from identity theft in section 73 of the bill are useful and well-done.

But, the four provisions mentioned here create confusion and legal complications about what unemployment law means and how to apply it. Please line-item veto these provisions.

Update on UI legislation

Advisory Council Bill AB819
Yesterday, the state senate passed the bill and messaged it to Governor Walker for his signature. This law consists of the following 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. Why? This second SSDI prohibition is back-dated to January 2014, the effective date of the original SSDI prohibition.
• 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.
• 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).
• 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.
• Proposed changes to the definition of claimant concealment in D15-08 are described in this previous post and described in a Department memo (discussed in this post), Additional criminal penalties for concealment in AB533 passed the Assembly but has yet to be passed by the Senate. 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. You can see and hear testimony against these concealment changes via this previous post.
• Technical changes in D15-09 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.
• Major changes to the process for getting unemployment decisions reviewed in circuit court are set forth in D15-11. These changes were previously described here and here. The Labor and Industry Review Commission opposed these changes, which essentially reverses the 2016 Appeals Court decision in DWD v. LIRC.
• 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.
• 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.

Labor and Management Proposals
The Advisory Council bill also includes management and labor proposals.

On the management side, there will be 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 employees in painting and sheetrock work $1,000 per incident (capped at $10,000 per calendar year) when coerced 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, was enacted as 2015 Wisconsin Act 194.

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.

Other unemployment-related legislation
A bill to address an NLRB decision about frachisors and franchisees was signed into law as 2015 Wisconsin Act 203. I previously noted that:

unemployment is not mentioned once in the [Browning-Ferris Industries decision this law is intended to undo], 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.

A re-writing of real estate agent law in Wisconsin has been enacted via 2015 Wisconsin Act 258. The original bill, AB456, was intended, in part, to remove real estate agents completely from unemployment coverage. Even though real estate services are not considered covered employment for unemployment purposes, agents who qualify for unemployment benefits through other work they do outside of real estate sales found themselves and their brokerages being brought into unemployment hearings whenever there was a change in their relationship. In short, even though there is no covered employment or even an employer, the real estate agent is still treated as an employee who must either quit with good cause or be discharged without misconduct or substantial fault from a brokerage firm in order to keep receiving unemployment benefits connected to non-real estate work. The legislation as-passed leaves this process in place. Real estate agents, however, will be excluded as employees from workers compensation coverage, workplace discrimination law, and other workplace laws. See Section 174 of the new Act.

Previously enacted legislation
2015 Wisconsin Act 86 contained the following three Department proposals:

• 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.
• D15-03 applies the Treasury offset program to employers, as described previously in this post.
• A renewed work-share program, D15-07.