The DWD/unemployment budget, Round 2

Tax breaks for employers

I previously described how the Joint Finance Committee ignored reality and state unemployment law — particularly the state’s partial wage formula that encourages people to work part-time while STILL being eligible for and collecting unemployment benefits — to make false claims about unemployment benefits keeping people from working.

This effort is being done in the name of stigmatizing unemployment benefits. This push to end the pandemic relief programs early is still utter nonsense.

What is lost in this hubbub is the essential nature of unemployment benefits in the first place. Unemployment is an insurance system. Just like car insurance is there when there is an car accident, unemployment is supposed to be there when there is a job loss. Period. Under Wisconsin unemployment law, eligibility is presumed (at least that is what is supposed to happen).

We need to start thinking that unemployment is what it is — insurance — that must be paid out immediately whenever there is a no-fault job loss. As Wisconsin law explains:

Whether or not a given employing unit can provide steadier work and wages for its own employees, it can reasonably be required to build up a limited reserve for unemployment, out of which benefits shall be paid to its eligible unemployed workers, as a matter of right, based on their respective wages and lengths of service.

Wis. Stat. § 108.01(1) (emphasis supplied).

Despite how unemployment is designed to assist claimants and tax employers for those benefits based on each employer’s specific job loss experience, it seems the only action at reform for the moment is to help employers out.

At the June 17th meeting of the Unemployment Insurance Advisory Council, the Department introduced an emergency rule to finally get pandemic-related experience waiver right, at least on a temporary basis. Unlike in other states where any and all 2020 job losses were presumed to be pandemic-related and so not chargeable to employers, Wisconsin at first presumed all job losses were NOT pandemic-related unless an employer provided specific evidence and a form about the pandemic-nature of that job loss. Furthermore, the period for this pandemic-related waiver originally expired on 16 May 2020.

Then, after further orders and passage of 2021 Wis. Act 4, the time period for possible waiver of initial claims on employer experience-rating was extended to those claims filed before 13 March 2021. But, in general forms and reasons still need to be submitted by employers to take advantage of having any unemployment claims against their UI tax account waived because of the pandemic.

With this new rule, the Department is finally waking up to the idea that an automatic, blanket waiver for employer pandemic-related charges is more efficient and easier to administer than a case-by-case, employer-by-employer waiver application (something other states realized back in March and April of 2020). Now, more than a year after the pandemic started and several prior emergency rules:

This rule provides that the Department, in calculating an employer’s net reserve as of the June 30, 2021 computation date, shall disregard all benefit charges and benefit adjustments for the period of March 15, 2020 through March 13, 2021.

New rule at 2 (emphasis supplied). But, the Department is NOT actually forgiving these pandemic job losses on a permanent basis in light of a pandemic for which employers had no control of ability to affect. Unlike other states that sought to make the administrative burden for employers and employees easier in face of the pandemic and the ensuing massive job losses, Wisconsin is still only delaying this experience-rating. Individual and employer-based charging based on job losses in 2020 will be implemented for 2023.

The Department will, in effect, assume that all benefit charges and adjustments were related to the public health emergency declared by Executive Order 72. This assumption applies only for the purposes of setting the contribution rates for 2022. This rule will ensure that employers’ contribution rates for 2022 are calculated based on reserve fund balances as of June 30, 2021 without taking charges related to the public health emergency into account so that the policy goals of 2019 Wisconsin Act 185 and 2021 Wisconsin Act 4 are met. This rule will only affect calculation of contribution rates for 2022. Contribution rates for 2023 will be calculated in 2022 after all recharging is complete.

New rule at 3. In short, this new rule is only a delaying action for a massive administrative headache for everyone.

Note: Reimbursable employers are not being forgotten either. The Department also announced at the June 17th meeting that it was going to ask for an additional extension of the charging waiver for reimbursable employers.

Not to be outdone when thinking of employers, the Joint Finance Committee has also stepped into this game with a $60 million per year transfer from general tax revenue to the unemployment trust fund for the next two years. See item 9 of Motion 2001 that was approved on June 17th and LRB-4069, scheduled for public hearing on June 23rd. The goal here is to keep the tax rate for employers at Schedule D — the lowest unemployment tax rate schedule — for these next two years.

This concern for employer tax rates when an economic recovery is underway is economically idiotic. As of December 2020, Wisconsin had one of the higher trust fund balances in the nation. See also the table in State Unemployment Insurance Trust Fund Solvency Report 2021, US Dep’t of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services (March 2021) at 59. Wisconsin continues to pay out unemployment benefits at much lower than expected levels, yet the concern continues to be on keeping unemployment taxes at their already lowest levels.

Note: this employer tax proposal is occurring because Republicans are proclaiming employers are still hurting and cannot afford any increase in unemployment taxes at the same time these same Republicans are proclaiming an economic recovery is being held back because “jobless workers” are refusing to go back to work and make the recovery even better. In other words, the economic picture radically changes according to the policy goal being pushed.

As I said in January 2021, maintaining a positive balance in the trust fund during times of massive job loss is economic waste. Governments need to spend money during times of recession and then raise taxes during times of economic recovery (which seems to be now and next year).

$1.1 billion is the amount available in the unemployment trust fund at the end of December 2020. $1.1 billion that is not helping anyone but just sitting in a bank account.

Wis. Stat. § 108.01(1) (emphasis supplied) provides:

Unemployment in Wisconsin is recognized as an urgent public problem, gravely affecting the health, morals and welfare of the people of this state. The burdens resulting from irregular employment and reduced annual earnings fall directly on the unemployed worker and his or her family. The decreased and irregular purchasing power of wage earners in turn vitally affects the livelihood of farmers, merchants and manufacturers, results in a decreased demand for their products, and thus tends partially to paralyze the economic life of the entire state. In good times and in bad times unemployment is a heavy social cost, directly affecting many thousands of wage earners. Each employing unit in Wisconsin should pay at least a part of this social cost, connected with its own irregular operations, by financing benefits for its own unemployed workers. Each employer’s contribution rate should vary in accordance with its own unemployment costs, as shown by experience under this chapter.

So, money to pay rent and groceries, to dine out in restaurants, just to spend on consumer goods — WHEN there is a state-wide lack of consumer spending because of a worldwide pandemic — is not going out to the unemployed workers in this state who need it.

That statement is still true today. Sigh.

The summer 2021 unemployment situation

Several folks have forwarded to me different articles that describe the current unemployment situation.

An article in Dissent establishes that the current attack on pandemic unemployment programs is mostly just another kind of attack on working folk.

Across the country, workers have used the health and safety concerns posed by the pandemic and the enhanced unemployment insurance provided by the CARES Act to renegotiate the basic social contract that governs the American workplace. As social-distancing restrictions end and employers look to meet customer demand, pandemic unemployment benefits—which increase the amount in weekly income and the length of time that workers can claim it—have empowered working people across the economy.

Nationally, wages at the bottom of the labor market experienced a huge jump in April 2020 and continued to rise. Average hourly earnings in retail are up a dollar since May 2020, and over $1.50 since before the pandemic. In education, hourly earnings are up ninety cents since May 2020. As one indication of confidence in individual bargaining, workers are quitting at a historically high rate. Four million workers, nearly 3 percent of the labor force, voluntarily left employment in April. Workers who quit are not eligible for unemployment insurance: they are changing jobs to look for better pay and treatment.

The Biden administration has professed a commitment to creating a bargaining environment more favorable to workers. “It is the policy of my Administration to encourage worker organizing and collective bargaining,” the president wrote in his April Executive Order on Worker Organizing and Empowerment, which established a cabinet-level task force to promote those goals. The purpose of the order is to determine how the administration can begin to reverse the decline in union membership, to which the White House attributes “serious societal and economic problems in our country,” including “widespread and deep economic inequality, stagnant real wages, and the shrinking of America’s middle class.”

These goals are running aground in the face of a now ubiquitous talking point: according to the nation’s business press and cable news channels, a “labor shortage” created by workers’ increased bargaining power is holding back growth of the post-pandemic economy.

In Wisconsin, wages have not actually increased all that much during the pandemic, especially in sectors where pandemic job losses were greatest — hospitality and leisure — where a huge jobs hole has been created: “More than half of the private sector jobs lost in Wisconsin in 2020 were in the Leisure and Hospitality Sector, over 60,000 in all, which left us with nearly 22% fewer Leisure and Hospitality jobs than there were in December 2019. “

On the other hand, jake reports, “one sizable industry was nearly back to even in Wisconsin by the end of the year, and both managerial and manufacturing jobs lost a lower rate of jobs than the statewide level of 4.8%.”

Job change, Dec 2019-Dec 2020, Wisconsin
Construction -0.02% (-32 jobs)
Financial Activities -1.0% (-1,539)
Prof./Business Services -2.5% (-8,030)
Manufacturing -4.0% (-19,311)

And, Jake explains, many people are actually not receiving unemployment at all but moving on to “better” jobs on their own.

It’s pretty obvious what is happening here. Many people who lost their jobs as COVID broke out had to settle for other work, and I have to think that they and a lot of others have questioned the point of settling for menial jobs that don’t pay much, and put them in contact with large amounts of people that may not be vaccinated against a virus that has killed nearly 600,000 Americans.

So when they get a chance to move on for something that is safer and/or pays better and treats them better, they’re taking it. It just hurts the fee-fees of greedy, mediocre business owners that people are taking what they have (don’t) have to offer.

Jake’s look at the 2020 economic numbers reveals that Wisconsin has actually lagged the rest of the nation:

I also wanted to give you a look at how Wisconsin shaped up compared to the rest of the US in personal income. This number went up across the board in the US despite the COVID recession because of thousands of dollars in stimulus payments, enhanced unemployment benefits, and PPP bailouts. But Wisconsin didn’t have nearly the boost that most places had, with our income growth of 4.4% putting us down at 46th in the country.

We trailed in all three areas, particularly in those transfer receipts, which may reflect that we had fewer people collecting those higher unemployment benefits, stimulus checks and PPP funds. But we also trailed in earnings (Wis down 0.3%, US was up 0.3%), and lagging in wage and earnings growth has continued to be a worrying trend in the last decade in Wisconsin.

So, the problem in Wisconsin is not too much support for unemployment but too little. What worries current legislative leaders, apparently, is that even this minimal support is still too much. In These Times features the situation in Wisconsin.

In Wisconsin, the legislature has voted to reinstate work search requirements for people receiving unemployment insurance, and declined Governor Evers’ proposal to add $15 million to the state’s unemployment system, as well as a proposal to add $28 million to worker training programs. Meanwhile, Republicans in the legislature have made moves to eliminate the $300 supplement from the federal government for UI.

[Gov. Evers says he disagrees with these actions but has not promised to veto the rollback of these pandemic unemployment programs. The evidence of these programs, however, . . . ]

“Unemployment rates in Wisconsin don’t support the overdrawn and quite dramatic, self serving conclusion that there are a bunch of people sitting on the sidelines who are ready to go to go to work in otherwise low wage, no benefit, insecure, crappy jobs if $300 a week, supplemental unemployment benefits were eliminated,” said Peter Rickman, president of MASH. At the same time, Rickman sees the current economic landscape as an opportunity for workers. ​“The way the labor market is constructed right now is such that the balance of power instead of being wholly and entirely in favor of the boss class, has had a slight tipping towards the working class,” he said.

Senator Melissa Agard (D‑16th District) argues that cutting UI won’t put people back to work as much as it would harm struggling families. ​“It’s really unfortunate that my Republican colleagues in Wisconsin are continuing down the same path that they were on pre-pandemic: making it harder for people to be able to get ahead and take care of themselves and their families,” Agard told In These Times. ​“Folks are having a hard time finding people for jobs primarily because they’re not paying people a living wage, or respectable wage to do those jobs.”

One final point to keep in mind is that Wisconsin’s unemployment system has a partial wage formula (not offered in most states) that means unemployment and work are NOT mutually exclusive. Many unemployed folk can and do work part-time while still receiving unemployment benefits.

More Department proposals for 2021

At the 18 March 2021 meeting of the Advisory Council, the Department presented its first eight proposals. These first eight proposals included the proposals that the Advisory Council originally approved of in 2019 (but which were not enacted because of the pandemic).

At the 15 April and the 20 May 2021 meetings of the Advisory Council, the Department presented another 18 proposals — D21-09 thru D21-26. Yikes. Here are those proposals, with links to the actual proposals that appeared at the May 2021 Advisory Council meeting.

D21-09, Employee Status solely determined by unemployment law

The Department seeks to amend the definition of employee and self-employment.

The Department proposes to amend sections 108.09(2)(bm) and 108.09(4s) to provide that all issues of unemployment insurance employee status may only be determined under Wisconsin unemployment statutes and rules. This proposal will provide consistency in determining individuals’ eligibility for unemployment benefits and employers’ unemployment insurance tax liability by limiting the employee status inquiry to the provisions of the unemployment insurance law.

D21-09 at 2. The actual proposed changes seem to do little more than re-arrange statutory wording, however. At present, current unemployment law prohibits consideration of licensing requirements or other state or federal law in determining employee status. So, there is a change in wording being proposed, but I cannot determine what substantively is being changed. The Department’s rationale seems to be that administrative law judges are over-turning initial determinations that held claimants to be employees (and so, concluding that the claimants truly were independent contractors) because those administrative law judges were looking to laws outside of unemployment law.

Yet, Wis. Stat. § 108.09(4s) currently holds that (emphasis supplied):

the appeal tribunal shall not take administrative notice of or admit into evidence documents granting operating authority or licenses, or any state or federal laws or federal regulations granting such authority or licenses.

So, the actual goal of this proposed change is unclear at the moment.

D21-10, SUTA dumping

This proposals adds a provision — required by federal law — to prevent employers from re-organizing themselves and thereby reducing their tax rate significantly and restoring a positive account balance as a “new” employer — a practice called SUTA dumping.

SUTA dumping is a major problem that can easily “cost” thousands of dollars (and maybe even tens of thousands) per employer, especially when extended beyond one year. The proposed penalties are a $5,000 forfeiture, a possible $10,000 civil penalty, and possible criminal charges as a class A misdemeanor (up to 9 months in jail and up to a $10,000 fine).

So, these penalties are chump change and unlikely to discourage any employer but the smallest from SUTA dumping. A large employer who might save $70,000 or more in three years will not bat an eye at these proposed penalties.

Moreover, the penalties for claimant concealment are much more severe. Alongside the financial penalties that claimants incur for the claim-filing mistakes, per 2017 Wis. Act 147 the criminal penalties for claimant concealment are:

  • For benefits up to $2,500: An unclassified misdemeanor with a fine up to $10,000, imprisonment up to nine months, or both.
  • For benefits up to $5,000: A Class I felony, for which the penalty is a fine upto $10,000, imprisonment up to three years and six months, or both.
  • For benefits up to $10,000: A Class H felony, for which the penalty is a fine up to $10,000, imprisonment up to six years, or both.
  • For benefits over $10,000: A Class G felony, for which the penalty is a fine up to $25,000, imprisonment up to 10 years, or both

And, unlike claimant concealment, actual and specific intent to commit SUTA dumping needs to be proven. Proposed Wis. Stat. § 108.16(8)(mm)3 will read:

For the purposes of this paragraph and par. (m), “knowingly” means having actual knowledge of or acting with deliberate ignorance of or reckless disregard for the statute violated.

D21-10 at 3. Claimant “intent” for the purpose of unemployment concealment is shown for any claim-filing mistakes by the following factors:

a. Whether the claimant failed to read or follow instructions or other communications of the department related to a claim for benefits.
b. Whether the claimant relied on the statements or representations of persons other than an employee of the department who is authorized to provide advice regarding the claimant’s claim for benefits.
c. Whether the claimant has a limitation or disability and, if so, whether the claimant provided evidence to the department of that limitation or disability.
d. The claimant’s unemployment insurance claims filing experience.
e. Any instructions or previous determinations of concealment issued or provided to the claimant.
f. Any other factor that may provide evidence of the claimant’s intent.

Wis. Stat. § 108.04(11)(g)2 (setting forth a claimant’s duty of care to provide accurate and complete responses to Department inquires).

These standards are hardly comparable. They should be. They need to be.

D21-11, Work-share modifications

Work-share has been one of the few unemployment success stories in Wisconsin during this pandemic. In light of federal changes to work-share programs during the pandemic, this proposal seeks to expand work-share options and flexibility in light of those federal changes so that more employers and employees can take advantage of these benefits.

This proposal is a no-brainer and should have been adopted months ago.

The Department wants to hear about other changes needed to work-share efforts in Wisconsin. Other than a reduction in the complicated paperwork (a universal complaint for work-share), contact me with your suggestions. I will pass them on to the Advisory Council.

D21-12, Secretary waiver of provisions for the sake of funding flexibility

This proposal expands the general savings clause (the Department’s secretary can waive compliance with any specific state requirement should that state requirement be found to conflict with federal law) to also allow the Department secretary to waive requirements that prevent the state from taking full advantage of federal funding opportunities (like immediately waiving the waiting week when the pandemic struck, as the legislative delay costs Wisconsin employers’ millions of dollars).

Given the current actions of the legislature, this proposal is probably dead on arrival no matter what the Advisory Council recommends.

D21-13, Initial tax rates for construction employers

Unemployment taxes have been declining so rapidly in Wisconsin that the initial tax rates for construction employers — one of the few booming industries from before and during the pandemic — are now lower than the initial rates of non-construction new employers.

2021 tax rates   Non-construction   Construction
Payroll<$500,000   3.05%              2.90%
Payroll>$500,000   3.25%              3.10%

D21-13 at 1. Because construction work is generally seasonal work, initial tax rates in construction should in theory be higher than for general, non-construction employers. The Department’s solution is to amend “the initial tax rate for construction employers to be the greater of the initial rate for non-construction employers or the average rate for construction industry employers as determined by the department on each computation date, rounded up to
the next highest rate.” D21-13 at 2.

Until construction work no longer has seasonal layoffs because of winter, this proposal makes sense.

D21-14, Phone hearings prioritized

Prior to the pandemic, the Department closed hearing offices and forced claimants and employers into phone hearings. An outcry ensued, but the pandemic made phone hearings a necessity.

Current regulations, however, still prioritize in-person hearings over hearings by phone. In this proposal, the Department wants:

to amend chapter DWD 140 to provide that, while parties may continue to request in-person hearings, it is the hearing office’s discretion whether to grant that request. The Department also proposes to clarify language in DWD chapter 140 regarding hearing records, Department assistance for people with disabilities at hearings, and to correct minor and technical language in DWD chapter 140.

D21-14 at 2. As currently worded, the proposal simply justifies what the Department wants to do and provides no actual reasons or justification for these changes. For instance, the Department lacks space for in-person hearings because the Department previously closed three out of four hearing offices.

Even more troubling, the substances of the proposed changes is lacking. Wis. Admin. Code § DWD 140 is THE set of regulations for how hearings are conducted. Any changes to this chapter could have long-term repercussions to claimants and employers about what happens at unemployment hearings and their access to the hearing files connected to these cases.

When presenting this proposal, the Department indicated that the changes to DWD 140 are needed as well as to DWD 149 to reflect the Department’s current practices in responding to open records requests. So, it begs the question of what exactly is in conflict between these regulations and the Department’s current hearing practices. Wis. Admin. Code DWD 149.03 provides:

(1)  Claimants and employing units. Except as otherwise provided under s. DWD 140.09, the department shall make the following records available to the following persons upon request:

(a) An unemployment insurance record concerning an individual is available to that individual.

(b) An unemployment insurance record concerning an individual’s work for an employing unit is available to that employing unit.

(c) An unemployment insurance record concerning a determination to which an employing unit is identified as a party of interest under s. 108.09, Stats., is available to that employing unit.

(d) An unemployment insurance record concerning an employing unit’s status or liability under ch. 108, Stats., is available to that employing unit.

In legal circles it is generally understood that phone hearings favor employers, as employer witnesses can gather in one room and share a set of notes during their testimony without an administrative law judge witnessing those notes being passed.

Finally, for comparison, here is a 1998 Department notice (from a 2000 training about unemployment hearings) about opting for a phone hearing. If the Department is going to go forward with this change, it should address these points it put forward in 1998 for why phone hearings are problematic.

D21-15, Camp counselor employer exclusion

Currently, summer camp counselors are generally ineligible to receive unemployment benefits because they are usually full-time students. But, summer camps must still pay unemployment taxes for the wages paid to summer camp counselor.

This proposal applies the federal definition of excluded employment for camp counselors to state law.

The result of this change is that summer camps will no longer pay unemployment taxes for the wages paid to their summer camp counselors. And, some summer camp counselors who are not students may lose the ability to include their summer camp wages in establishing a benefit year.

D21-16, Repeal of drug testing requirements

This proposal repeals the drug testing provisions the Walker administration kept trying to institute. Recall that the drug testing efforts came in three parts: (1) voluntary employer testing and reporting, (2) mandatory testing of claimants based on to-be-determined federally designated occupations for testing, and (3) mandatory testing of claimants based on a future, state-based list of designated occupations. Only the voluntary employer testing and reporting was ever implemented.

The big news here is that as of 31 March 2021, the Department has received 171 drug test reports (either a failed test or failing to take a test) from potential employers. Previously, the Department had reported none or just a couple of voluntary testing reports from employers. In any case, the impact of these 171 voluntary employer reports remains nil. “No claimants have been determined to be ineligible for UI benefits under the pre-employment drug testing statutes and rules and denied benefits because of the employers’ reports of a failed or refused drug test as a condition of an offer of employment.” D21-16 at 1. So, there has been no opportunity for claimants to maintain their eligibility by enrolling a drug treatment program at the state’s expense.

Because employers have no idea of whether a job applicant is receiving or not receiving unemployment benefits OR because employers are failing to provide the necessary drug-testing paperwork and follow the necessary protocols for reporting a drug test OR a combination of these two factors, the voluntary drug testing has been a complete bust. In more than five years, this effort has not led to a single disqualification or enrollment in a drug treatment program. Ending a program that is doing nothing should make sense.

D21-17, Repeal of the substantial fault disqualification

This proposal seeks to repeal the substantial fault disqualification. There are two issues with this proposal, however.

First, the Advisory Council previously rejected substantial fault when it was originally proposed. It was the Joint Finance Committee that went around the Advisory Council and which included substantial fault in the state budget. So, the Advisory Council does not need to approve of this repeal. It was already rejected, and the rejection should be included as a matter of course.

Second, court decisions in Operton v. LIRC, 2017 WI 46, and Easterling v. LIRC, 2017 WI App 18, have limited the scope of substantial fault in important ways from how the Department applies this disqualification. But, the Department continues to ignore those court precedents. Indeed, as of May 2021, I have come across two cases of employees disqualified for substantial fault because of unintentional mistakes where the mistakes in question are nearly identical to the mistakes in Operton (inadvertent job mistakes) and Easterling (unintentional mistakes while attempting to satisfy employer demands).

D21-18, Expansion of the relocating spouse quit exception

This proposal restores this quit exception to allow any claimant who has to quit a job because his or her spouse has to relocate. Prior to 2013, Wisconsin allowed claimants to receive unemployment benefits when they had to relocate because of a spouse transferring to another job for any reason. In proposal D12-19, the Department limited this quit exception to the spouses of military personnel who had to relocate.

So, this proposal restores the expansive nature of this quit exception.

The problem here, like with substantial fault, is that the Advisory Council previously rejected this Department proposal to limit this quit exception to the spouses of military personnel. Here is what the Advisory Council actually agreed to back in 2013. So, this proposed change should be included as a matter of course in the council’s agreed-upon bill.

D21-19, Repeal of the waiting week

The waiting week was enacted as part of the 2011 budget act, 2011 Wis. Act 32 and without any input from the Advisory Council.

The concept of a waiting week exists because state unemployment agencies originally could not act quickly on a claim for benefits, and so a waiting week was needed to give the state agency time to process the necessary paperwork. With the advent of claim-filing by phone, however, that additional time was no longer needed. The waiting week effectively became a vehicle for reducing the total amount of benefits paid out to a claimant, since claimants did not receive any unemployment benefits for the first week of their claim.

The Department estimates that the waiting week costs claimants $26.1 million each year. D21-19 at 3. Given the purpose of unemployment benefits to provide immediate economic stimulus to workers in time of need after losing their jobs, a waiting week makes no sense.

D21-20, Repeal of the lame duck work search and work registration changes

The lame duck laws, see 2017 Wis. Act 370 for the unemployment changes, that were enacted after Scott Walker lost his re-election bid, moved the Department’s work search and work registration requirements from Department regulations and into statutory law. That is, Republicans were so concerned about making sure these obstacles for unemployment eligibility remained in place that they made them statutory rather just a regulation that the new administration might then revise.

So, this proposal restores what existed before the lame duck changes and gives the Department some additional flexibility in how work search and work registration requirements are administered.

D21-21, Repeal of the wage cap on benefit eligibility

Right now, a hard cap of $500 per week is written into unemployment law. This cap was first proposed by the Department in D12-18, which the Advisory Council adopted at their 21 Feb. 2013 meeting.

In light of Wisconsin’s partial wage formula, a claimant with a weekly benefit rate of $370 could in theory have as much as $574 in wages and still qualify for at least $5 in unemployment benefits. D21-21 at 1. In other words, the partial wage formula indicates that anyone with $575 or more in wages would NOT receive any unemployment benefits.

As a consequence, the $500 cutoff actually discourages some work, as any employee who receives $500 or more in wages loses all unemployment benefits. For instance, a person with a WBR of $370 who earns $550 in wages would receive $22 in unemployment benefits that week, if the $500 wage cap was eliminated.

In other states, the gap between earnings and unemployment eligibility is called an “earnings disregard.” In some of these states, a worker who earns just $200 in a week loses unemployment eligibility dollar for dollar, so the earnings disregard in those states is sizable. See Massachusetts, for example, in this table. Because of Wisconsin’s partial wage formula, the earnings disregard in Wisconsin is limited to this $500 wage cap and only applies for claimants receiving the highest weekly benefit rate.

So, at present this $500 wage cap has a very limited effect. But, should the weekly benefit even be increased, it will become a major problem. And, as indicated in the next proposal, Wisconsin now has the second-lowest weekly benefit rate in the mid-west. So, this artificial cap needs to go if Wisconsin is going to raise its weekly benefit rate.

Finally, as noted by the Department, D21-21 at 3, the eligibility ban when working 32 or more hours in a week remains in place.

D21-22, Raising the weekly benefit rate

Currently, Wisconsin has the second-lowest maximum weekly benefit rate in the mid-west.

State   Max. WBR    Max. w/ dependents
IL        $484           $667
IN        $390           $390
IA        $481           $591
MI        $362           $362
MN        $740           $740
OH        $480           $647
WI        $370           $370

A listing of the weekly benefit for all the states is available here.

Note: this data is different from what the Department reports in its proposal, and these numbers are current as of October 2020. These numbers have changed since then. Ohio, for instance, currently has a maximum WBR of $498 and $672 with dependents.

The highest WBR available is in Massachusetts, at $823 ($1,234 with dependents). The second highest is in Washington state at $790.

This proposal sets forth a series of increases in the weekly benefit rate.

  1. For benefits paid for weeks of unemployment beginning on or after January 2, 2022, but before January 1, 2023, the maximum weekly benefit is capped at $409.
  2. For benefits paid for weeks of unemployment beginning on or after January 1, 2023, but before December 31, 2023, the maximum weekly benefit is capped at 50% of the state’s annual average weekly wages.
  3. For benefits paid for weeks of unemployment beginning on or after December 31, 2023, the maximum weekly benefit is capped at 75% of the state’s annual average weekly wages, or the maximum weekly benefit amount from the previous year, whichever is greater.

Wisconsin’s weekly benefit rate relative to the wages being paid in this state has never been all that good and has become essentially a token reimbursement in the last few decades.

History of the weekly benefit rate relative to wages paid in Wisconsin

Using the average weekly Wisconsin wage of $951 in 2019, the maximum WBR in 2023 would be $475, and in 2024 the maximum WBR would be $713. So, this proposal would basically make the maximum weekly benefit rate actually useful and relevant again in Wisconsin.

D21-23, Expanded flexibility in searching for suitable work

Here, the Department proposes two changes. First, the Department wants to expand the canvassing period from six weeks to eleven weeks.

The canvassing period is the time when you can reject a job offer which is a lower grade of skill or at a significantly lower rate of pay (less than 75%) than you had on one or more recent jobs without losing your eligibility for benefits. See Tips for filing for unemployment benefits in Wisconsin for more information about your canvassing period.

Second, the Department proposes expanding the trial time period for quitting a job without being disqualified from receiving unemployment benefits from 30 days to ten weeks (the original time period). The Advisory Council originally approved of the change from ten weeks to 30 days.

This trial time period provides various ways for an employee to still qualify for unemployment benefits when quitting a job regardless of the employee’s actual reason. The main reason found in this category usually is that the job fails to meet established labor market standards (e.g., wages are 25% or less than what is normally paid in that specific labor market for that occupation). But, any reason that would have allowed the employees to refuse the job offer in the first place as well as any reason for quitting the job with good cause applies here. Only the last reason — having good cause for quitting the job — is still available to employees after the trial period has expired.

D21-24, changing the SSDI eligibility ban to an offset

This proposal was previously discussed here, along with the entire history of the Department’s SSDI eligibility ban qua offset. Whether as an eligibility ban or an offset, it still makes no sense. There should be no SSDI offset, just like there should be no SSDI eligibility ban.

Here is hoping the Advisory Council can fix this crazy proposal and end this discrimination against the disabled.

D21-25, Mandatory e-filing for employers

At present, large employers (those with annual unemployment taxes of $10,000 or more) must e-file their reports and e-pay their unemployment taxes.

This proposal would mandate e-filing and e-pay for ALL employers.

The problem is that many one or two person LLCs and other self-employed individuals have no conception of unemployment taxes and the reports that need to be filed. Given the lack of broadband access in the state, this mandate for these small employers is likely difficult to impossible to implement.

Without a broad-based, educational media campaign, this mandatory e-filing will accomplish little more than allowing the Department to levy administrative penalties against small employers who have no idea what is going on and fail to provide their forms and payments via e-file and e-pay. The fact that implementation will be delayed until the Department actually has the technology in place to support this proposal offers little assurance. In short, this proposal should be rejected out-of-hand. After all, those who push for ease-of-use indicate that multiple kinds of access need to be maintained and fully supported. So, mandatory e-filing and e-pay actually runs counter to making unemploymeny more modern and easier-to-use.

D21-26, New worker mis-classification penalties

This proposal seeks to replace the token employer penalties for mis-classifying construction workers (1) with penalties that at least some have some dentures to them and (2) to expand this issue to all industries rather than limiting it to just construction.

The Advisory Council at the urging of Mark Reihl, then the head of the carpenters’ union in Wisconsin (and now division director for unemployment) originally approved the original penalties proposed by the labor caucus.

  1. $500 civil penalty for each employee who is misclassified, but not to exceed $7,500 per incident.
  2. $1,000 criminal fine for each employee who is misclassified, subject to a maximum fine of $25,000 for each violation, but only if the employer has previously been assessed a civil penalty for misclassified workers.
  3. $1,000 civil penalty for each individual coerced to adopt independent contractor status, up to $10,000 per calendar year.

D21-36 at 1.

With this proposal, the Department explains:

The proposal removes the $7,500 and $10,000 limitations on these penalties and provides that the penalties double for each act occurring after the date of the first determination of a violation. The proposal also removes the limitations on the types of employers to which the penalties apply, allowing them to be assessed against any type of employer that violates the above prohibitions.

D21-26 at 4.

BUT, the intent that needs to be shown for these mis-classification penalties remains unchanged. Per Wis. Stat. § 108.221(1)(b):

(b) The department shall consider the following nonexclusive factors in determining whether an employer described under par. (a) knowingly and intentionally provided false information to the department for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee:

1. Whether the employer was previously found to have misclassified an employee in the same or a substantially similar position.
2. Whether the employer was the subject of litigation or a governmental investigation relating to worker misclassification and the employer, as a result of that litigation or investigation, received an opinion or decision from a federal or state court or agency that the subject position or a substantially similar position should be classified as an employee.

Under this standard, it is well nigh impossible to charge an employer with mis-classification for a first-time violation. On the other hand, claimants are given no such leeway for their claim-filing mistakes. As noted above with proposal D21-10 (SUTA dumping), claimants who have filed for unemployment insurance previously and been given notice to read the claimants’ handbook are presumed to know everything about how to file an unemployment claim and to not make any claim-filing mistakes. But, here, employers are not liable for mis-classification (a far more serious problem economically) until after their first instance of mis-classification. In other words, these mis-classification penalties can only apply to employers when prosecuted a second time for the same mis-classification. Having two bites of the apple sure is nice.

Either employers should be held to the same claim-filing standards as employees, or the intent requirements used against employees for their claim-filing mistakes needs to be seriously redone.

Ending the supplemental unemployment programs early in service of stigma

Update (14 June 2021): UI Works provides some information about how unemployment is a crucial economic support for families and state economies.

Yesterday, both Wisconsin legislative chambers passed AB336, a bill to stop PUA, PEUC, MEUC, and PUC benefits in Wisconsin. The Republicans in the state legislature are pushing for the end of all of these pandemic-related supplemental unemployment benefits, under the disguise that these additional benefits are keeping people from working.

Utter nonsense. The real reason for what is happening is a push to create a stigma against those receiving unemployment benefits.

First, the news from a few days ago about a massive budget surplus based in large part on these federal supplemental unemployment benefits should be enough to indicate just how foolish this proposed early end to these programs is.

While I have some concerns about how unemployment payments in 2021 are goosing these fiscal numbers (because the 2021 payments largely represent payment of weeks claimed in 2020 since unemployment payments in Wisconsin are delayed by six to twelve months or even longer), the legislative fiscal bureau has assured me that these back-loaded payments have been accounted for in the fiscal projections.

So, Republicans are basically proposing to cut off immediately one of the major engines of economic recovery. Why?

Second, the recovery is still ongoing. While initial claims in 2021 are well below what they were in 2020 when the pandemic first struck, they are still running at over twice the number of initial claims that occurred in 2019. So, despite all the reports about businesses having trouble finding workers, it seems that far too many businesses are also still letting people go.

Third, David Copper writes that cutting unemployment benefits early hurts workers and state economies:

  • Pulling out of federal unemployment insurance (UI) programs is short sighted and not justified by current labor market conditions; the economy is improving but still far from healthy.
  • Suitable jobs are still not available for many jobless workers. Cutting back aid will leave many struggling to make ends meet and damage these states’ long-term economic health.
  • Unemployment benefits help speed recovery by bolstering consumer demand. Governors choosing to pull out of federal programs are taking away dollars that would likely be spent at businesses in their own states.
  • Workers should have time to find work suitable to their skills and circumstances, and not be cornered into taking any job available. An adequate UI system provides workers with the financial cushion and time to find appropriate work.
  • Forcing the unemployed to take jobs that pay less than their previous positions or that are not appropriate for their skills is a waste of workers’ training, a job taken from someone else, and a hit to that worker’s earnings—all of which hurt states’ long-run potential for growth.

Fourth, rumors of labor shortages are NOT backed up by the actual data, writes Heidi Shierholz.

  • The chorus of employers complaining they can’t find the workers they need is not new. As we have seen coming out of previous recessions, as employers raise wages to attract workers, their staffing needs are being met.
  • The main problem in the U.S. labor market remains one of labor demand, not labor supply. The latest jobs report showed no signs of widespread labor shortages.
  • In a large majority of sectors, wages are growing solidly but not fast enough to raise concern about damaging labor shortages, given that job growth in those sectors is also strong.
  • Employers of low-wage workers typically have a great deal of power to suppress wages. This corners workers into taking any job regardless of how bad the wages or working conditions. Unemployment benefits are helping to take this pressure off workers and allowing them to not accept a terrible job — this is what economists would call efficiency enhancing.
  • States cutting pandemic UI programs stand to lose $22 billion in aid, forgoing an enormous amount of economic activity.

Fifth, a report from Jeanne Batalova and Michael Fix at the Migration Policy Institute indicates that:

A tight labor market and decent supports for unemployed workers means people can avoid getting shunted into jobs below their level of potential. That’s good for them – they will earn higher wages, and for government – they will pay more in taxes. It’s also good for overall economic productivity.

In fact, rather than saying a tight labor market/decent support policy is good or bad for employers, maybe we could differentiate and say it’s good for employers who hire higher-skilled workers and bad for those employers who offer jobs that do not require much education or training.

Sixth, because of Wisconsin’s partial wage formula, workers receiving unemployment benefits do better when working part-time, receiving both wages and unemployment benefits. In other words, unemployment and work are NOT mutually exclusive in Wisconsin and often happen together, especially in retail and restaurant work, where the supposed workers shortages are allegedly highest.

As Ruth Conniff writes, a politics of austerity and resentment is behind these changes.

trying to pit one group of voters against another doesn’t work as well when the Republicans are turning down billions that would make a big difference in people’s lives in every area of the state.

As I have written, the Republicans are simply returning to the old playbook of making unemployment worse in order to drive workers into low wages jobs as a substitute for the unemployment benefits they should be receiving. Feudal economics, indeed.

What is lost in this hubbub is the essential nature of unemployment benefits in the first place. Unemployment is an insurance system. Just like car insurance is there when there is an car accident, unemployment is supposed to be there when there is a job loss. Period. Under Wisconsin unemployment law, eligibility is presumed (at least that is what is supposed to happen).

We need to start thinking that unemployment is what it is — insurance — that must be paid out immediately whenever there is a no-fault job loss. As Wisconsin law explains:

Whether or not a given employing unit can provide steadier work and wages for its own employees, it can reasonably be required to build up a limited reserve for unemployment, out of which benefits shall be paid to its eligible unemployed workers, as a matter of right, based on their respective wages and lengths of service.

Wis. Stat. § 108.01(1) (emphasis supplied).

For those that want to see the impact this reduction of unemployment is having on states that are going forward with it, NELP has the details:

In 21 States Ending All Pandemic Unemployment Programs Early, 3 in 4 Will Lose All Jobless Aid

Nearly 4 Million Workers to Lose Lifeline Unemployment Payments Starting June 12

NATIONWIDE — In the 21 states ending early their participation in all federal pandemic unemployment programs, three quarters of the workers now receiving jobless aid—nearly 2.3 million people—will be left with no state or federal jobless aid at all, according to a new analysis released today by the National Employment Law Project (NELP).

The greatest numbers of workers affected by the pandemic unemployment cutoffs will be in Texas, Ohio, Maryland, Georgia, Indiana, Arizona, Tennessee, Missouri, South Carolina, and Florida. In Texas, a staggering four in five workers (81.9%) currently receiving unemployment payments—totaling 1.2 million workers, 59.3% of whom are workers of color—will lose all unemployment income support.

“The post-pandemic recovery has barely started. Employment remains far below pre-pandemic levels. Millions of people are still out of work and need the income support from unemployment insurance to get by,” said Rebecca Dixon, executive director of the National Employment Law Project. “So it’s unconscionable that these 21 Republican governors have unilaterally decided that no one in their state needs any pandemic jobless aid anymore and that it’s OK to pull the plug on these programs early.”

“This severe, abrupt, and ill-advised cutoff of pandemic jobless aid hurts the workers and families who need that income support, harms the small businesses that depend on those workers to spend money as customers, and will set back the economic recovery in those states,” added Dixon.

The first wave of premature cutoffs begins on Saturday, June 12, in four states: Alaska, Iowa, Mississippi, and Missouri. Alaska will be ending only the $300 Federal Pandemic Unemployment Compensation (FPUC) weekly supplemental payments, while the other three states will be terminating all pandemic unemployment programs. Twenty-one more states will follow suit through June and early July, although NELP has argued that the U.S. Department of Labor has legal authority to ensure that all eligible workers continue to receive Pandemic Unemployment Assistance (PUA) benefits through September 6.

More than 3.9 million workers in 25 states will lose the weekly $300 FPUC payments. Workers of color will bear the brunt, as nearly half (over 46%) of unemployment insurance (UI) recipients in those states are Black, Latinx, Indigenous, and other people of color.

Workers losing out on lifeline payments will face an economy that is far from fully recovered. The May jobs report showed 9.3 million people unemployed, with another 5.3 million only working part-time but still seeking full-time work. The economy is down 7.6 million jobs (5%) from pre-pandemic Feb. 2020 levels. With families still reeling from loss, lack of childcare, and ever-present concerns about getting sick on the job, FPUC and all UI funds remain a crucial lifeline.

“The past year has demanded bold solutions to unprecedented levels of unemployment, with the additional federal unemployment funds serving as a necessary stopgap in lieu of structural reform. At this pivotal moment, elected officials need to get behind critical reforms to prevent future failures of our unemployment system, so we can avoid the type of harmful actions we’re now seeing at the state level,” said Dixon.

Federal pandemic programs are still helping millions of people and their families get through the worst economic crisis in over a century. For jobless workers and their families in states where Republican governors have opted out, the ramifications will be far-reaching:

- Over 3.9 million workers will lose the weekly $300 FPUC supplement in the 25 states. 3,951,578 people receiving unemployment payments as of May 15 will be affected — all of them losing the $300 weekly FPUC benefit supplement and more than half (57.5%) abruptly losing all unemployment benefits.

- In the 21 states ending participation in all of the pandemic programs, nearly 2.3 million people, who represent 74.5% of those receiving unemployment benefits in those states, will be left with no state or federal unemployment aid at all.

- Black, Latinx, Indigenous, and other people of color are nearly half (over 46%) of UI recipients in the states ending pandemic unemployment programs early.

- Of the 25 states cutting pandemic unemployment payments, 11 of them have 40% or higher people-of-color UI recipients, and eight have 50% or higher.

With unemployed people spending money at higher rates, federal assistance helps stimulate the economy just as businesses and industries begin to reopen, in addition to keeping families afloat. States that are prematurely ending federal pandemic unemployment programs threaten to stymie a fuller recovery.

READ THE DATA BRIEF: 3.9 Million Workers Face Premature Cutoff of Pandemic Unemployment Programs

Being able and available when disabled: getting worse in the weekly certifications

In September 2020, I described how the able and available questions on the weekly certification ignored actual Department regulations. In short, the questions about being able or available for full-time work ignored key regulations that allow claimants to answer “yes” if they could work to the best of their ability the number of hours they were capable of working. So, a claimant who can only work 20 hours in a week because of a physical or psychological disability should answer yes to these questions as long as they are capable of working 20 hours in a week and do not restrict their ability or availability even further.

Rather than incorporating these regulatory requirements into these questions, the Department has doubled down on ignoring its own regulations.

Here is how the ability to work question read in July 2020.

Ability to work question in July 2020

And, here is how the question read in October 2020, a few weeks after my original post on this issue.

Ability to work question as of October 2020

A fourth bullet point concerning childcare issues has been added, but the question itself is otherwise unchanged. As indicated previously, restrictions on an ability to work do NOT make someone unable to work full-time, especially when those restrictions arise from physical or psychological conditions.

Here is how the Department further revised these questions in April 2021. First the ability to work question.

Ability to work question in April 2021

The explanatory bullet points concerning the pandemic have been reduced to just two and the question itself has been changed to turn entirely on whether a person can work 32 hours in a week or not.

Nearly identical changes have been made to the available work question:

Work availability question in April 2021

So, now the Department is requiring people to answer “no” if they cannot work 32 or more hours in a week, including when a person has medical restrictions that limit an ability to work. This question is legally wrong.

The relevant unemployment regulations do NOT reference medical restrictions. There is no reference at all in Wis. Admin. Code § DWD 128 to a claimant’s medical restrictions. Section DWD 128.01(3)(a) explicit states that the factors to be considered by the Department may include:

2. The nature of the restrictions caused by the claimant’s physical or psychological condition.

Per this regulation, an ability to work and a disabled claimant’s availability for work are based on whether a claimant has physical or psychological restrictions that mean he or she cannot work 32 or more hours in a week. And, according to these regulations, as long as that claimant is able and available to work that number of hours, he or she is able and available for full-time work. Again, from these same regulations:

Example 1: A claimant has a number of physical restrictions due to recent surgery, including a restriction to work no more than 20 hours per week for 2 months. With the restrictions, the claimant cannot perform the duties of his or her usual occupation but is able to perform a number of jobs for which he or she has prior training and experience. The claimant is willing to do these jobs and is willing to work 20 hours per week. The claimant has no other restrictions to availability. Benefits will not be denied solely because of the inability to work full−time [32 or more hours in a week].

So, these new questions are in direct violation of the Department’s own unemployment regulations.

Even worse, administrative law judges at unemployment hearings are asking disabled claimants for “evidence” regarding their “medical restrictions,” as if these weekly certification questions stated actual unemployment law and over-ruled the actual regulations that directly relate to this issue.

Understand as well that answering “no” to these questions based on what is being asked means that all benefit payments are on hold until the Department “investigates” this issue, which now takes around three to five months.

So, not only does this question not follow the Department’s own regulations, but it also now runs afoul of federal requirements for unemployment benefits to be paid “when due.” A recent federal court decision explains the nature and importance of this requirement:

It has long been recognized that protracted denial of subsistence benefits constitutes irreparable harm. See Morel v. Giuliani, 927 F.Supp. 622, 635 (S.D.N.Y. 1995) (finding irreparable harm where New York City regularly failed to provide “aid continuing” benefits, in violation of federal and state law), amended, 94-CV-4415, 1996 WL 627730 (S.D.N.Y. Mar. 15, 1996). To indigent persons, the loss of even a portion of subsistence benefits results in injury that cannot be rectified through the payment of benefits at a later date. See id. (collecting cases). The reason for this should be obvious. Subsistence benefits by definition are those that provide for the most basic needs. As such, when the outright denial or undue delay in the provision of subsistence benefits is at issue, courts have not hesitated to utilize the extraordinary remedy of preliminary injunctive relief. See, e.g., Willis v. Lascaris, 499 F.Supp. 749, 759–60 (N.D.N.Y. 1980) (enjoining reduction in food stamp allowances); Hurley v. Toia, 432 F.Supp. 1170, 1176–78 (S.D.N.Y. 1977) (granting preliminary injunction and staying enforcement regulation authorizing termination or reduction of public assistance benefits prior to affording hearing), aff’d, 573 F.2d 1291 (2d Cir. 1977); Boddie v. Wyman, 323 F.Supp. 1189, 1193 (N.D.N.Y. 1970) (“There is no doubt . . . that the differences sought in payments by the plaintiff are extremely important in respect to these things daily and in that sense when the day passes the injury or harm that may occur is irreparable.”), aff’d, 434 F.2d 1207 (2d Cir. 1970), aff’d, 402 U.S. 991, 91 S.Ct. 2168, 29 L. Ed. 2d 157 (1971).

That unemployment insurance benefits fall into the category of subsistence benefits cannot be credibly disputed. Indeed, the vitalness of unemployment insurance benefits is codified in New York Labor Law, which recognizes that “[e]conomic insecurity due to unemployment is a serious menace to the health, welfare, and morale of the people of this state.” N.Y. Labor Law § 501. This is all the more true against the backdrop of the current health crisis ravaging this nation—a crisis which has led to almost unprecedented unemployment across various sectors, including the app-based FHV industry.

Islam v. Cuomo, 475 F.Supp.3d 144, 153 (E.D. N.Y. 2020). Note: Wisconsin has similar statutory language concerning the economic insecurity created by unemployment in Wis. Stat. § 108.01(1).

Unemployment in Wisconsin is recognized as an urgent public problem, gravely affecting the health, morals and welfare of the people of this state. The burdens resulting from irregular employment and reduced annual earnings fall directly on the unemployed worker and his or her family.

Making the claim-filing questions worse — further ignoring unemployment law and adding additional delays to benefit payments — is ignoring how vital unemployment benefits are to those who have lost jobs through no fault of their own.

Note: my thanks to various workers for bringing these changes to my attention. Keep the tips coming.

The DWD budget

The Joint Finance Committee met yesterday for the 2022-2023 fiscal budget. At this meeting, there were many complaints about job shortages and how “unemployment” was keeping the people collecting benefits from working. Rep. Zimmerman even described how he had to close his winery early on one Saturday because of a lack of workers. How terrible.

Apparently, no one on this committee understands that Wisconsin’s partial eligibility formula for unemployment benefits encourages people who are collecting benefits to accept part-time work and to work part-time.

Sigh. Under the partial wage formula, part-time weekend work is a financial boon for those collecting unemployment benefits. So, the real problem Rep. Zimmerman is having for finding weekend workers for his winery is that he is not offering a high enough wage to attract applicants. In other words, being unemployed does not mean that a person is not working. Indeed, in Wisconsin prior to the pandemic and outside of the winter months when many jobs shut down, most unemployed workers are actually still working.

As usual, Jake has the details on what the Joint Finance Committee did and did not do.

The LFB also mentions that the Evers Administration could use some of the $2.5 billion in discretionary money that the state will receive over the next 2 years, but much of those funds have already been planned on to be spent for other needs, such as $420 million in grants to small businesses.

So Evers was planning to use $15 million in state money in 2022 and 2023 to make up the deficit that exists in unemployment administration. And now the GOPs say “no,” which means that we will have to find somewhere else to make up the money, or eventually lay off a sizable amount of the staff that was added to take care of the delays in getting people their benefits, and in clearing up questions about their applications.

And did the WisGOPs remove any of the barriers and added paperwork that made getting benefits such a pain in the backside for so many state residents? OF COURSE NOT, and in fact, they’re bringing back more of this idiocy.

“Also Wednesday, the Republicans voted to reinstate a drug testing policy for some recipients of unemployment benefits.”

“In addition, they approved commissioning a study that would link how long Wisconsinites can receive benefits to the state’s unemployment rate. Under that system, the unemployed would qualify for benefits for a longer period when jobs are harder to find.”

Of course, the flip side is that they also can cut off people faster if the unemployment rate goes down. Even if the number of jobs remains significantly below where they were at the peak (which is the situation we are in today).

This connecting of unemployment benefits to the unemployment rate is a favorite mechanism for making unemployment that much more worse in times of an economic downturn. Legislators have been pushing this idea since 1 April 2013 (see #30). In Florida when the pandemic struck, Floridians were only eligible for 12 weeks of regular unemployment benefits (special legislation was passed to increase the number of weeks to 19). So, while the unemployment system in Wisconsin has been bad, the system in Florida has been even worse. This Florida “solution” — Wisconsin ended work search waivers during the winter off-season because of another Florida innovation — should be rejected out-of-hand.

As the Political Environment sums up the whole process:

[The Joint Finance Committee] just blocked funding for a UC system upgrade.

As I recently wrote, Wisconsin’s GOP leaders are running a pain and suffering operation out of the State Capitol that deliberately keeps low-income and disadvantaged citizens trapped in poverty, bad health and powerlessness.

Pro bono of the year award for unemployment

The Wisconsin state bar has announced its winners for pro bono attorney of the year award, and I am a co-winner with Rebecca Salawdeh in light of our separate work responding to the unemployment crisis in this state.

This entire website describes my efforts on behalf of the unemployed. So, I do not need to say much more about what I have been doing.

But, we all should hear about what Rebecca has been doing. She has been volunteering every Wednesday at Legal Action’s Milwaukee clinic to answer questions claimants are having about their unemployment claims. She has also taken on numerous cases herself and has appealed a few to the Labor and Industry Review Commission.

The need for just explaining the claim-filing process is overwhelming, Rebecca has found. Claimants cannot figure out what is going on with their claims — why a claim is being investigated or on hold or being denied. They cannot get answers from the portal or from staff answering claimants’ phone calls, Rebecca has observed. And so, just providing some perspective and explanation to claimants has been a godsend to many, Rebecca has witnessed, even for those who do not have a viable claim for unemployment benefits. For too many, finally getting an explanation about what has been going on is all that they wanted or needed.

Rebecca has also taken on several cases herself. Most of those hearings have gone well. The few that have not are being appealed to get the law applied correctly.

What Rebecca has seen in these cases is the toll that all of the delays and complications in the claim-filing process have created for claimants. One woman, on finally receiving the appeal tribunal decision finding her eligible and about to receive more than $10,000 in unemployment benefits, broke down and wept uncontrollably. Only at that point could all of the waiting and tension finally be released, and it was too much for her to contain.

I wholeheartedly agree with everything Rebecca has seen. A video of my acceptance speech has yet to be made available. But, here is the text of that speech.

I want to thank the state bar, all of the people who nominated me for this award, and my family for tolerating my crazy work hours this past year.

This award is because of the many unemployed folks I have been helping, including many, many disabled workers who are denied regular unemployment benefits.

When the pandemic hit, a host of new unemployment programs were started up, including a new program called Pandemic Unemployment Assistance or PUA, intended for workers for whom regular unemployment benefits were not available.

Perversely, Wisconsin initially held that these PUA benefits were NOT available to disabled workers because of the eligibility ban for regular benefits – the very reason PUA benefits were created in the first place.

Luckily, leadership at the Department of Workforce Development listened to reason and reversed course from what staffers were saying. By late July 2020, PUA benefits were finally available to disabled workers.

But, the struggles for disabled workers to receive their PUA benefits did not end. New obstacles have appeared through new tests and changes in how the Department administers the claim-filing process. For instance, despite state unemployment law holding that disabled workers are able and available for work that is less than 32 hours a week, as long as they work to what their disabilities allow, the Department and administrative law judges are holding that disabled workers are automatically disqualified if they ever work less than 32 hours in a week.

So, disabled workers continue to struggle. They have lost jobs and have waited and waited and waited for unemployment benefits. Far too many are still waiting on benefits now in May 2021 after having lost work in March or April of 2020.

Even for those that have received their PUA benefits, far too many have had to avoid eligibility traps during the claim-filing process or at their hearings or just to find ways to cope with the waiting. Numerous cases concerned simple questions about these disabled workers losing their jobs when their employers closed because of the pandemic. Their claims were denied despite their obvious eligibility for PUA benefits. And so, they waited months for hearings to state the obvious: they lost work when their employers closed because of the pandemic.

That waiting was torture for more than a few. Some have sold their furniture. Food banks and rental assistance are life-saving. Some having fallen into the trap offered by payday lenders. Wisconsin invented unemployment benefits so as to provide immediate and needed financial assistance at times of massive job loss. It has failed.

Representation at these unemployment hearings has been crucial to turning the situation of these disabled workers around. Cases are being won and payments have gone out. The secretary’s office at the Department has been especially helpful in speeding up the scheduling of emergency matters so as to prevent evictions, or worse. Mothers and their children have celebrated the December holidays in their own home. Family pets have not been abandoned. Cars have finally been fixed.

Still, the problems with the unemployment system continue and, in some ways, are getting worse. If these trends are not turned around, I may well be up for this award next year. So, I urge all of you to get involved in this unemployment crisis and give me some competition. There is plenty of work to do.

Thank you.

Unemployment taxes and personal tax liability for employers

Claimants are not the only folks having trouble with unemployment.

Many employers think that incorporation protects them from individual liability. Not so. In particular, for unpaid unemployment taxes there are specific provisions for holding an individual owner of a company (and others, see below) responsible and liable for unpaid unemployment taxes. Besides interest and penalties, the Department will work out payment plans, intercept tax refunds, place liens on property, revoke professional licenses, levy bank accounts, and even garnish wages from later employment to recoup unpaid unemployment taxes.

In 2013, the Department proposed several changes to make it easier for employers to get the administrative penalties and interest connected with unpaid unemployment taxes waived. See Memorandum RE: 27 November 2012 DWD legislative proposals to Advisory Council (13 Jan. 2013) at 46-50. And, prior to the Great Recession, the Department had created a special work group to assist new employers with understanding unemployment issues and taxes.

Somewhere along the line, the Department changed course, particularly with small employers. The work group to assist employers disappeared, and the Department started pursuing anyone connected with small employers for unpaid tax liabilities despite those collections efforts being legally deficient.

The Department also began changing the law of personally liability in ways that were not acknowledged at the time.

Wis. Stat. § 108.22(9) sets forth the personal liability provision in unemployment law. Under this provision, a person is personally liable for unpaid unemployment taxes when the following four criteria are met:

  1. That person is an officer, employee, member, manager, partner, or other responsible person of an employer,
  2. That person has control or responsibility for paying unemployment taxes,
  3. That person willfully fails to pay those unemployment taxes, and
  4. That person was subject to proper collection efforts by the Department.

Prior to 2015, Wis. Stat. § 108.22(9) (the 2013 version) varied significantly from its current form. The requirement for being a “responsible person” was first put forward statutorily by the Department itself in proposal D15-05 (19 Feb. 2015) to the Unemployment Insurance Advisory Council and was enacted in § 91 of 2015 Wis. Act 334. While the proposed change was described as a way of making sure members of a partnership could be found liable for unpaid unemployment taxes, the proposal also indicated that the scope of personal liability was limited to “responsible persons.” As explained in the Department’s proposal:

This proposal will create a more level playing field because it will ensure that responsible persons are not able to avoid personal liability for unpaid UI contributions simply because they chose a particular form of business entity. It also provides flexibility for the department to impose personal liability if the Legislature creates other business forms (such as a Low-Profit Limited Liability Company or “L3C”).

Proposal D15-05 at 2. In a memorandum dated 19 March 2015 that was provided to the Advisory Council, the Department offered an explanation of what it considered to be a responsible person based on both state income tax rulings as well as Commission precedent.

The proposed amendment to section 108.22(9) is designed to permit an assessment of personal liability for unpaid unemployment insurance contributions against individuals who, by nature of their “status, duty and authority,” are responsible for filing the contribution reports and paying the taxes. This is similar to the way that LIRC currently interprets section 108.22(9) and is consistent with the federal IRC and the Wisconsin Revenue Statute.

Memorandum to the Unemployment Insurance Advisory Council (19 March 2015) at 2. As explained in this memorandum:

the Tax Appeals Commission, which reviews assessments of the Wisconsin Department of Revenue, has interpreted the term “responsible person” broadly and it “gauges responsibility by examining whether the person had the actual or de facto authority to withhold, account for, or pay the taxes, the duty to pay the taxes, and whether the person intentionally breached that duty.” Sandberg v. Wisconsin Department of Revenue, Wisconsin Tax Appeals Commission, ¶401-491, (Nov. 18, 2011).

And the Tax Appeals Commission held that “the responsible person determination is pragmatic and based on considerations of substance, rather than form. It boils down to the fact that the crucial inquiry is whether the person had the effective power to pay the taxes — that is, whether he had the actual authority or ability, in view of his status within the corporation, to pay the taxes owed.” Id (internal citations omitted). The Tax Appeals Commission in Sandberg found that the son of the business owner was not a “responsible person” for the purposes of the Wisconsin Revenue Statute because “evidence showed that the business, in fact, was a ‘one-man show’ where his father, Kenneth Sandberg, was ‘that man.'” Id.

Id. (footnote omitted).

So, it would seem that individual liability should be limited to those owners and individuals who have designated or actual authority for unemployment tax matters, regardless of the title or status of that person. After all, the persons actually responsible for paying unemployment taxes should be the person liable for those taxes when they go unpaid, not any possible director or even employee of the company.

And, that perspective made sense until Proposal D17-07, in which the Department proposed eliminating the 20% ownership threshold. The change was explained this way:

removing the ownership interest requirement from Wis. Stat. § 108.22(9)

And, the fiscal impact, according to the Department, was minimal:

Trust Fund Impact: This proposal would have a negligible but positive impact on the Trust Fund. Without the 20% threshold, this change would streamline investigations into assigning the debt. Some nonprofits do not have a clear owner, so this may make assigning personal liability in cases involving nonprofits easier. However, in general, individuals the department is trying to assign personal liability to already meets the 20% threshold and thus would not result in a significant impact to collections.

Proposal D17-07 (23 May 2017) at 19. The Advisory Council approved of this change, and it was enacted as part of 2017 Wis. Act 157.

So, because the Department re-wrote this individual liability law broadly, it is now free to ignore its own arguments about how the targets of the Department’s collection efforts would be limited. So, the Department for the past several years has expanded who it targets for debt collection to include ANY employee or individual in its discretion it thinks it can collect from.

A December 2020 decision by the Labor and Industry Review Commission concerning a sprawling, for-profit enterprise illustrates just how expansive these debt collections efforts have become: Rice Mgmt., Inc. et al., UI Hearing Nos. S1900089MW-117MW (Kevin Breslin), UI Hearing Nos. SI900262MW-290MW (Robert Parkins), UI Hearing Nos. S1900291MW-319MW (Mary Jo Parkins), UI Hearing Nos. S1900320MW-348MW (Gina Mignano), and UI Hearing Nos. S1900349MW-77MW (Anthony Carriero) (30 Dec. 2020)

Note: In the briefing before the Commission, I represented one of the individuals pursued for debt collection, the assistant controller, Anthony Carriero.

The Department only pursued two out of five partners, all of whom raked in millions (the two were Kevin Breslin and Williams Burris, Jr.,, and Burris settled his case with the Department prior to hearing and withdrew his appeal) for collection efforts. But, several lower level employees and former employees were targeted (including an assistant controller, who reported to a controller, who reported to a CFO, who in turn reported to a managing partner), apparently for no other reason than that the Department had their names and contact information.

Of the four requirements for personal liability, both the administrative law judge and the Commission found that the second and third factors were obviously not met for the defendants other than Breslin. But, in examining the first requirement, the Commission provided the first extended analysis of all the changes the Department has wrought, and the result shows just how broad debt collection in unemployment law now reaches.

This part of the statute has undergone some changes in recent years. Prior to 2015, the statute provided that before a person could be found personally liable, the individual had to be “an officer, employee, member or manager holding at least 20% of the ownership interest of a corporation or of a limited liability company” subject to Chapter 108. In 2015, the legislature changed this so that the individual could be “an officer, employee, member, manager, partner, or other responsible person holding at least 20 percent of the ownership interest of a corporation, limited liability company, or other business association” subject to Chapter 108. It appears that the impetus to broaden the statute in 2015 was to include managing partners of limited liability partnerships as persons who could be found personally liable for the contributions owed by an LLP, and to ensure that those people could be found responsible even if they chose another business entity. However, if the person did not own 20% of the business, the condition still was not met. In 2018; the statute was changed again, and it now provides that before a person can be found personally liable for an organization’s unpaid unemployment insurance taxes, the first condition that must be met is that the person must be or must have been “an officer, employee, member, manager, partner, or other responsible person of an employer…”

As the appeal tribunal noted, there is little case law on the first condition with the new statutory language. Previously, the analysis for this condition was focused on whether the individual owned 20% of the business and the nature of the business. With the recent law changes, the legislature has expanded who can be found personally liable to persons beyond the listed titles and without regard to ownership, and it has expanded the application of the law to any employer rather than just to corporations, limited liability companies, or other business associations.

The appeal tribunal paraphrased this condition as requiring that the individual “has a special relationship with the company.” Under this interpretation, in addition to determining whether the individual was an officer or employee, etc., the appeal tribunal questioned whether the individual was also a “responsible person” of the employer and analyzed whether the individual’s particular duties made that owner, officer, or employee a “responsible person” of the employer. In this reading of the statute, the word “other” in the statute was read to imply that any officer or employee, etc., must also be a “responsible person” as well, and, therefore, the decision maker must decide whether the person is a “responsible person” under this first condition in addition to determining whether the person was an officer or employee, etc. In the Carriero decision, for instance, the appeal tribunal found that the words “or other responsible person of the employer” now acted to modify the word “employee” to differentiate employees who have greater responsibilities from those who do not.

While it is true that an individual may not be found personally liable unless the individual was responsible to pay the unemployment insurance taxes, the commission concludes that this analysis is generally more appropriately addressed under, the second condition, where the commission has historically examined whether an individual is a “responsible person” for purposes of personal liability. This is consistent with the federal case law, which looks at who has a duty to collect and pay over the tax as a “responsible person.” It is thus not necessary to duplicate the analysis for both the first and second conditions, as the appeal tribunal did here. With this reading of the statute, the first condition is fairly simple. If the individual is an officer, employee, member, manager, or partner of the employer, the condition is met with no ownership requirement. The appeal tribunal essentially acknowledged this in one set of decisions by noting, e.g., “Mr. Parkins had no stake in the LLC, but he was indeed an officer, so he therefore satisfies this element.” It is also possible that someone who does not have the status of an officer, employee, member, manager, or partner of the employer could be found personally liable if that person had other authority or was otherwise responsible for the business of the employer, such as a financial agent or a family member. Only if a person is not an officer, employee, member, manager, or partner of the employer, is it necessary, for purposes of this condition, to determine whether the person is an otherwise responsible person of the employer. This clarifies the first condition and also avoids unnecessary duplication of the analysis of whether a person is also a “responsible person” for the payment of unemployment insurance contributions under the second condition.

* * *

Accordingly, each of the putative debtors was at least an officer, employee, member, manager, or partner of the employer.

Rice Mgmt., Inc. et al. at 21-2 (footnotes omitted, emphasis in original). In other words, this first requirement will only really matter when the Department is pursing an individual who has no direct, formal role with the debtor employer (such as the employer’s legal counsel or accounting form). In all other cases, it is met if the person has any connection at all with the debtor employer.

Note: This reference to legal counsel should indicate to the lawyers out there just how far reaching this individual liability could extend. I could see the Department now easily extending personally liability to the attorneys who could have prevented the unemployment taxes from going unpaid, since such a claim is similar if not identical to what the Department argued in this case for the non-partners.

As demonstrated in Rice Mgmt, the second and third requirements still follow traditional analysis and requirements. So, individuals who are not actually responsible or in control of tax liabilities may still avoid personal liability.

But, the fourth requirement — service of proper collection efforts — has, like the first requirement, in practical terms become a non-issue. Previous to all of these changes, notices of unpaid taxes to the corporate entity would be served on the corporate premises, and so those who controlled the company would also have notice. Now, with the number of possible debtors expanded to employees and even persons who have no formal connection at all to the company, they will have no idea about these unemployment debts and the associated collection efforts until charged with personal liability. In this Rice Mgmt case, for instance, Robert Parkins had left the company in early 2017, around six months before any collection efforts were undertaken. Yet, this fourth requirement was satisfied by the Department against him.

The Commission decision is lengthy (40 pages) but deserves a close and extended reading. As numerous employers may not have survived the pandemic, many may find the Department knocking on their doors — and the doors of others — about unpaid unemployment taxes. This decision is the current legal framework for these cases.

Job searches are back

Update (21 May 2021): The Department has announced on its job search FAQ that the four job search actions per week will NOT apply to claimants receiving PUA benefits.

No job searches for claimants receiving PUA benefits

Note: If your PUA eligibility changes or the circumstances connected to your work search waiver change, then you WILL be required to do job searches, including for weeks that have already passed. So, having the job search requirement waived for now does NOT mean it might apply to you later for weeks that have already happened.

The Joint Committee for Review of Administrative Rules met today and voted to immediately suspend the waiver of job search requirements and pandemic-related able and available provisions contained in EmR2106.

Here is what claimants need to know.

Four job search actions are required starting Sunday, May 23rd

Starting Sunday, May 23rd, all claimants will need to do four job search actions every week. What are those actions?

possible job search actions and the proof required for that action

Notice that the Department now expects claimants to retain (for 52 weeks!) their job search records and provide proof for each job search action (for those 52 weeks!).

Even if you cannot do a weekly claim certification at the moment (for instance, because your PUA benefits are on hold), you should still do four job searches and keep records of those searches for any week starting on May 23rd or later.

The work search log files are available here in DOC and PDF formats. More directions for how to complete these forms are available here.

When filing your weekly claim certification, you will be prompted with the following screen:

Weekly work search entry form

After “agreeing” to these requirements, you are then prompted to begin entering each work search action:

Work seach action reporting form

As already noted, keep your job search records for one year, as the Department audits all job searches at some point and has up to a year to do an audit of any claimant after that claimant starts filing his or her weekly certifications. In other words, the Department is sure to audit your work searches at some point. Indeed, at the public hearing today, Department representatives stated that more than 75% of work search reviews lead to weekly certifications being denied.

Loss of pandemic-related able and available provisions

Besides waiving the four job search actions in a week requirement, EmR2106 also provided some important waivers of able and available requirements related to the pandemic. Those provisions are also gone as of May 23rd, and so workers will need to be able and available for work regardless of any pandemic-related concerns.

Workers receiving regular unemployment benefits or PEUC benefits who have Covid-19 symptoms or who are quarantined by a medical provider will now need to report to work regardless of the impact on their health or public health in general.

Update (20 May 2021): Broke out the above paragraph into two, fixed some typos, and added emphasis in places.

Other ‘job search’ requirements

Job center of Wisconsin registration

This registration requirement has remained unchanged and unaffected by the pandemic. Once done, your job center of Wisconsin registration should look like:

Successful job center registration

After a certain number of months, you will need to renew this registration.

Job search training seminar (RESEA)

This attendance requirement has remained in place throughout the pandemic. As noted previously, the Department switched from attending an in-person seminar to a seminar done through e-mail, on-line communications, and phone calls.

Sen. Nass wants job searches back

On May 7th, Sen. Nass announced in a press release:

The Department of Workforce Development has the power to end the emergency rule early on its own authority. Unfortunately, Governor Evers and his administration is ignoring the critical shortage of workers impacting almost every sector of the state’s economy. The legislature will act quickly to restore the work search requirement.

* * *

We need every able-bodied person to re-enter Wisconsin’s workforce to rebuild our economy. In the current situation, nearly every person on UI should be able to find employment in a short time if required to seek work.

A man of action, Sen. Nass has scheduled a public hearing and then a vote to repeal the current work search waiver and pandemic-related able and available provisions for May 19th, starting at 1:30pm, in Room 411 South of the Capitol.

There are some obvious problems with what Sen. Nass is proposing here:

  • “Impact” is not a verb (despite the folks at American Heritage Dictionary relenting on this issue).
  • Wisconsin’s workforce is not 100% able-bodied. As pointed out in the history of the SSDI eligibility ban, more than 5% of the state’s workforce receives SSDI benefits. Is Sen. Nass accepting that the job search waivers continued to exist for SSDI recipients receiving PUA benefits? What about the very few disabled workers who do not receive SSDI benefits?
  • Sen. Nass is presuming facts not in evidence.

    First, Wisconsin over the last decade has experienced exceptionally slow economic growth, slow to declining job growth, and a stagnant or declining population relative to its neighbors. See this post or this post for examinations of recent economic and jobs statistics.

    Second, Wisconsin’s unemployment benefits are not an issue with part-time work. As explained here, Wisconsin’s partial wage formula for unemployment benefits actually encourages unemployed workers to work because those workers can continue to collect their unemployment benefits as well as wages from their jobs. So, restaurant and retail workers where part-time jobs dominate, can usually receive both wages from their jobs and partial unemployment benefits as well as the $300 PUC payments. In other words, these workers would be working if they could, and they probably are working.

    Jake had additional information about how unemployment eligibility has nothing to do with the national jobs data at this post, this post, and this post.
  • This return to job search requirements is actually intended as a way to slow down the growth in wages paid to workers.

    The playbook in Wisconsin over the past decade has been to increase the supply of potential workers, especially at the low end of the wage scale, in order to keep those wages from rising.

Note: Classic supply and demand curves indicate that the more supply of something means a lower price for that something. Likewise, when demand for something is up, the price for that item will increase. In labor economics, then, wages go down when the supply of labor goes up.

That was why legal and administrative changes in unemployment were undertaken in 2013 thru 2017. By making unemployment harder to receive, workers had to turn to low wage jobs immediately to make ends meet. And so, with the supply of workers seeking low wage jobs inflated, wages in Wisconsin were kept low.

Sen. Nass knows that demand for workers is up. So, all he can think about right now is to increase the supply of workers by making unemployment harder to get — right out of the playbook from the past decade.

The problems with this thinking, as noted above, is that unemployment benefits right now really have nothing to do with the labor supply problems at the moment. All that will really be achieved is some additional financial pain and heartache for folks who get caught up in the job search requirement.

At present, the emergency rule with pandemic-related provisions and waiver of the job search requirement, EmR2106, is slated to expire on 10 July 2021.

Maybe in July 2021, the economic impact of the pandemic may finally be waning. But, right now in the middle of May 2021, no one can say that the pandemic is over. Indeed, there are thousands of people still waiting on their unemployment benefits from losing jobs in March and April 2020. Forcing job search requirements again when vaccinations in the state are just over 45% as of May 16th is ridiculous.

The members of the this committee who should hear from you are: