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.

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

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.

Documentation for PUA claims

Update (24 May 2021): The May 20th deadline date listed below is a general guess at what the Department is doing. The documentation date for your specific case will vary. For example, those who are just being paid PUA benefits now and whose PUA claims include weeks from the summer of 2020 will probably have until late August 2021 to provide the required documentation. And, those who have new PUA claims that start no earlier than December 2020 will only have 21 days from their initial claim date to provide the requested documentation.

The intent here is to proactive and provide the required documentation ASAP to avoid the administrative sludge being created for you here.

Update (13 May 2021): Here is a PDF document I prepared for folks in a support group that will be contacting others about this PUA documentation requirement.

The Continued Assistance Act included a new documentation requirement for PUA claims. In my original post on the Continued Assistance Act, I explained:

There is now an additional documentation requirement for PUA claims. Claimants will have to provide documentation regarding their employment, self-employment, or the job offer/work they were slated to start for any weeks PUA weeks for the week ending 1/2/2021 or later.

  • New PUA claims filed on Jan. 31st or later will have to provide that documentation within 21 days of the claim.
  • Continued PUA claims or initial PUA claims filed prior to Jan. 31st will have 90 days to provide this documentation.

This documentation requirement only applies when PUA benefits are paid for weeks in 2021. If you only collect PUA benefits for 2020 weeks claimed, then you do NOT need to provide this additional documentation.

But, those PUA claimants who have filed for PUA benefits for weeks in 2021, you NEED to provide this documentation even if you have previously submitted this same documentation to the Department already.

And, this documentation MUST be submitted VERY SOON. The Department sent this notice dated 19 Feb. 2021 to many claimants and indicated that the documentation had to be submitted within 90 days of this letter. That means the documentation MUST BE SUBMITTED to the Department no later than 20 May 2021.

So, 20 May 2021 may be when additional documentation is due in your case.

This additional documentation needs to be mailed to:

PUA
PO Box 7905
Madison WI 53707

Or faxed to 608-327-6193. Include a cover page that states: ATTN: PUA, your full name, your social security number, and the number of pages being faxed.

Make sure to keep a copy of what you send in as well as a record of when you mailed or faxed this documentation in.

For those PUA claimants who are filing certifications for weeks in 2021, below is the kind of documentation you need to provide the Department, organized by the type of reason for your PUA benefits. Note that many of the PUA claim reasons do not require any documentation. Only those reasons connected to a loss of employment because of the pandemic require this additional documentation. Here is what you need to provide (if “no additional documentation needed” is listed below, then you are fine and do not need to support any additional documentation).

PUA claim reasons

I have been diagnosed with COVID-19 or am experiencing symptoms of COVID-19 and am seeking a medical diagnosis.

No additional documentation needed.

A member of my household has been diagnosed with COVID-19.

No additional documentation needed.

I am providing care for a family member or a member of my household who has been diagnosed with COVID-19.

No additional documentation needed.

A child or other person in my household for which I am the primary caregiver is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for me to work.

No additional documentation needed.

I am unable to reach my place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency.

No additional documentation needed.

I am unable to reach my place of employment because I have been advised by a health care provider to self-quarantine due to concerns related to COVID-19.

No additional documentation needed.

I was scheduled to commence employment and do not have a job or am unable to reach the job as a direct result of the COVID-19 public health emergency.

Letters offering employment, statements/affidavits by individuals (with name and contact information) verifying an offer of employment.

If self-employment was slated to start up but was halted because of the pandemic, provide business licenses, state or Federal employer identification numbers, written business plans, a lease agreement, or some other documentation of the planned start of the gig work.

I have become the breadwinner or major support for my household because the head of the household has died as a direct result of COVID-19.

No additional documentation needed.

I quit my job as a direct result of COVID-19.

No additional documentation needed.

My place of employment is closed as a direct result of the COVID-19 public health emergency.

Paycheck stubs, earnings and leave statements showing the employer’s name and address, or W-2 forms.

For employees of such organizations like the Peace Corps, AmeriCorps, and educational or religious organizations where traditional employment relationships may not exist, there are additional options, like documentation of work being done provided by these organizations or signed affidavits from persons verifying the individual’s attachment to such organizations is allowed.

I am self-employed (including an independent contractor and gig worker) and experienced a significant reduction of my customary or usual services because of the COVID-19 public health emergency.

State or Federal employer identification numbers, business licenses, tax returns, business receipts, screen shots of documented earnings and work performed and the dates for such work, or signed affidavits from persons verifying the individual’s self-employment

I was denied continued unemployment benefits because I refused to return to work or accept an offer of work at a worksite that, in either instance, is not in compliance with local, state, or national health and safety standards directly related to COVID-19. This includes but is not limited to, those related to facial mask wearing, physical distancing measures, or the provision of personal protective equipment consistent with public health guidelines.

No additional documentation needed.

I provide services to an educational institution or educational service agency and am unemployed or partially unemployed because of volatility in the work schedule that is directly caused by the COVID-19 public health emergency. This includes, but is not limited to, changes in schedules and partial closures.

Pay stubs or earnings and leave statements showing the employer’s name and address, W-2 forms, some kind of documentation of work being done which is provided by these organizations, or signed affidavits from persons verifying the individual’s attachment to such organizations.

I am an employee and my hours have been reduced or I was laid off as a direct result of the COVID-19 public health emergency.

Pay stubs or earnings and leave statements showing the employer’s name and address, W-2 forms, some kind of documentation of work being done which is provided by these organizations, or signed affidavits from persons verifying the individual’s attachment to such organizations.

Final thoughts

Keep in mind that the PUA benefits you are claiming in 2021 may be based on multiple reasons. For instance, your PUA claim could be based on your employer closing because of the pandemic, but you also may have been quarantined because of Covid-19 for two weeks in February 2021. So, if your PUA claim for weeks in 2021 is based on any of the reasons identified above for which additional documentation is needed, including a job loss dating back to 2020, then you need to provide the indicated documentation.

The penalty for failing to submit this additional documentation is repayment of all PUA benefits for weeks in 2021:

[For] the individual [who] fails to provide documentation or [who] fails to show good cause to have the deadline extended, an overpayment must be established for all of the weeks paid beginning with the week ending January 2, 2021. This is because the individual cannot be ineligible for a week of unemployment ending before the date of enactment solely for failure to submit documentation.

UIPL No. 16-20 Change 4 (8 Jan. 2021) at I-12.

Department proposals, 2021 edition, and going back to 2019

At the 18 March 2021 meeting of the Advisory Council, the Department began introducing its own proposals for changing unemployment law. More proposals are expected. These first proposals are appearing first because they were originally put forward during the last legislative session. The pandemic, however, meant that these proposals were never acted on.

Some of these proposals are innocuous. Others combine difficult and complex issues with a less than forthright explanation. What follows are these first proposals, their 2019 versions, and an assessment of what is going on.

D21-01, Creating an administrative fund

Here, as in D19-09, the Department seeks to create a permanent administrative fund for its own use.

As explained in the 2021 and 2019 proposals on this issue, there already exists an administrative account under Wis. Stat. § 108.20 that contains the interest and penalties paid by employers who fail to submit timely tax reports and payments.

This account, however, “lapses” at the end of a legislative session, and so any funds in this account gets transferred to general state funds rather than remaining a specific unemployment income/expense item.

The proposal here is to change the administrative account into an administrative fund that cannot “lapse,” so that these funds remain available to the Department. As explained in the fiscal impact:

The most recent lapse expenditures of employer interest and penalties monies occurred in SFY16 and SFY17 of approximately $2.67 million and $2.23 million respectively. This proposal would result in an additional $2 – $3 million in funds remaining within the UI program during years where lapse is in effect.

D21-01 at 3.

In past years, the interest and penalties employers paid were apparently so small that a lapse into the general fund was inconsequential. Now, with these interest and penalties numbers over $2 million, the amount is sizable and worth hanging on to.

Left unexplained by the Department here is why the interest and penalties paid by employers have of late increased so much. The Department’s targeting of small employers for unpaid tax liabilities has noticeably increased the last few years. But, members of the Advisory Council are left to guess why the Department now has $2+ million in this administrative account.

Note: The administrative fund/account here is separate from the Program Integrity Fund under Wis. Stat. § 108.19(1s) and the interest payment fund under Wis. Stat. §§ 108.19(1m) to (1q) when paying interest on federal loans to the unemployment trust fund. As of February 2021, the Department’s program integrity fund was nearly $16 million.

D21-02, Appropriations and technical fixes

This proposal and is predecessor, D19-08, involve hundreds of small changes in wording and statutory references.

In part, these changes are needed in light of the creation of an administrative fund in D21-01. This 2019 memo lists the changes being proposed.

D21-03, REDA for reimbursable employers

Through D15-04, the Department created a reimbursable employer fund to cover benefit charges that arise from identity theft. Because reimbursable employers pay dollar-for-dollar for any benefits paid to a claimant, benefits paid because of identity theft mean that there is no actual claimant from whom the stolen benefits can be recouped. See The first of the DWD-sponsored proposals have appeared in legislation (22 Oct. 2015), DWD/Advisory Council bill going forward (29 Jan. 2016), and 2015 Wis. Act 334 § 73.

From an initial set aside of $2 million for this identity theft fund, there is today around $1.9 million still available.

The Department now proposes here and in D19-01 to use some of these funds to reduce the taxes reimbursable employers pay for covering situations when other reimbursable employers lack the available funds for covering the unemployment benefits owed to claimants.

Note: These shortages from reimbursable employers most often arise when the reimbursable employer closes unexpectedly, leading to its former employees filing claims for unemployment benefits but no employer available for reimbursing the Department for the benefits paid out.

When such shortages arise, the remaining reimbursable employers are charged an additional fee called the reimbursable employer debt assessment or “REDA” to cover this shortage.

The Department proposes that a limited amount of the reimbursable employer identity theft fraud funds set aside in the balancing account be made available to recover uncollectible reimbursements instead of assessing the REDA (or to reduce the amount of the REDA). This would greatly reduce administrative costs to the Department and non-profit reimbursable employers and relieve those employers of having to pay the REDA. The Department proposes that the identity theft fraud funds be used to pay the REDA only if the use of those funds would not reduce the balance of the funds below $1.75 million. This would ensure that the bulk of the identity theft fraud funds are available for restoring identity theft charges.

The Department also proposes to increase the minimum amount of the REDA from $10 to $20, which would reduce the administrative costs of assessing the REDA.

What is left unsaid in this proposal is whether the Department will stop its collection efforts against reimbursable employers who have defaulted and created the uncollectible debt in the first place.

D21-04, Changing the timing of DWD reports

This proposal and its predecessor, D19-19, are less complicated than they seem.

The Department is responsible for releasing three reports and conducting one event — the public hearing. Here is the current schedule:

  • public hearing every two years (usually in November) of even numbered years
  • fraud report released annually in March of each year
  • financial outlook report released in April on odd years every two years
  • Advisory Council report released in May on even years every two years

Essentially, the Department wants to shift the financial outlook report to being released in May every two years on even numbered years. Because the financial report is shifted to even-numbered years, the Department wants to move up the Advisory Council report to January. The new schedule would be:

  • public hearing every two years (usually in November) of even numbered years
  • Advisory Council report released in January on even years every two years
  • fraud report released annually in March of each year
  • financial outlook report released in May on even years every two years

The impetus for this change is so that most of the reports and information become available when unemployment legislative proposals are brought before the legislature. Right now, an odd-numbered year, is when those proposals first appear and are developed. Next year — an even-numbered year — is when those proposals are likely to be brought before the legislature. Apparently, the Department wants to use the Advisory Council report and the financial outlook report to support whatever proposed legislative changes are being pushed for at the time.

As a consequence, the focus of the Department’s efforts with this change is being pointed to a specific legislative session, rather than any general, long-term view of the unemployment system as a whole.

D21-05, Avoiding DOR debt collection

As many claimants can already attest, the Department is incredibly effective at debt collection.

In this proposal and its 2019 version, D19-22, the Department proposes to exempt itself from Wis. Stat. § 71.93(8)(b), which requires state agencies to enter into an agreement with the Department of Revenue for collecting long-term debts.

Given how effective the Department has been at collecting unemployment debts and the tools available to it — offsets against unemployment benefits, interception of tax refunds, liens against real estate and cars, wage garnishments, levies of bank accounts, and re-payment plans — debt collection by the Department of Revenue adds unnecessary layers and additional fees. So, this proposal makes sense.

D21-06, Excluding appeal tribunals from the definition of departmental error

Revamping departmental error has been a constant item on the Department’s agenda. Over the past decade, the Department has changed unemployment law to excuse its mistakes rather than actually correcting its actions and policies. Here is what the Department has done so far:

This new proposal dates back to when the SSDI eligibility ban was enacted and was originally set forth in D19-07.

Recall that the original SSDI eligibility ban was poorly drafted, see D12-05, and the Commission held in Gary Kluczynski, UI Hearing No. 14400214AP (30 May 2014) that this original ban on receiving unemployment benefits only applied to the week in which SSDI benefits were received. In D15-01, the Department proposed the eligibility ban that we have today.

Between D12-05 and D15-01, the Department challenged the Commission over Kluczynski and other SSDI recipients it and appeal tribunals had originally found eligible for unemployment benefits under D12-05. The Department won many of those cases in circuit court, and the Commission then changed its mind and agreed with the Department that SSDI recipients were not eligible for unemployment benefits.

But, when the Department began seeking to recoup unemployment benefits against SSDI recipients, the Commission held that it and appeal tribunals had gotten the law wrong and so these SSDI claimants did not need to repay the unemployment benefits they had received. The Department then took this repayment issue to the appeals court and lost decisively in DWD v. LIRC (Morse), 2017 WI App 68:

DWD’s argument is that it should be permitted to recover the overpayments if there was a reasonable basis for DWD’s mistake. In essence, DWD contends that a departmental error stemming from a misinterpretation of law should not preclude overpayment recovery if the misinterpretation was reasonable.

As stated, Wis. Stat. § 108.02(10e)(am)1. defines “[d]epartmental error,” in part, as follows: “A mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, whether by commission or omission.” Nowhere in the statute do the words “reasonable” or “unreasonable” appear. We may not add words to the statute’s text. Words excluded from a statutory text must be presumed to have been excluded for a purpose. Heritage Farms, Inc. v. Markel Ins. Co, 2009 WI 27, ¶14 & n.9, 316 Wis.2d 47, 762 N.W.2d 652. “One of the maxims of statutory construction is that courts should not add words to a statute to give it a certain meaning.” Fond Du Lac Cty. v. Town of Rosendale, 149 Wis.2d 326, 334, 440 N.W.2d 818 (Ct. App. 1989). We deduce the legislature’s intent from the words it has chosen. See id. at 332. We reject DWD’s invitation to add additional requirements to these existing statutes. The legislature did not choose to insert adjectives such as “reasonable” or “unreasonable” or “longstanding” to limit the statutory terms “misapplication or misinterpretation of the law.” We have no power to insert what the legislature chose to omit.

Even if we did have such power, we would not exercise it here. First, we see no benefit to the claimants, DWD, LIRC, or the courts, in imposing DWD’s proposed “reasonable misinterpretation” exception to the waiver statute. Such an addition would result in additional litigation about whether an interpretation, though pronounced an error of law by a court, was still “reasonable.” Such a debate would inevitably cause unnecessary and unproductive expenditure of agency and judicial resources. It is a court’s job to interpret statutes. See Ott v. Peppertree Resort Villas, Inc., 2006 WI App 77, ¶11, 292 Wis.2d 173, 716 N.W.2d 127 (describing what a court must do when interpreting statutes). Courts should not be drawn into collateral litigation about whether a wrong interpretation was nonetheless “reasonable.” One person’s “reasonable” (e.g., an agency that wants its money back to pay other benefits) can be another person’s “absurd” (e.g., an unemployed claimant who really needed the money, did not misrepresent anything, was entitled to the benefits under the prevailing statute interpretation, and spent it before the court decision). DWD’s approach, if adopted, would produce the opposite of the certainty and predictability that the administrative system of unemployment benefits was designed to produce. We cannot conclude that DWD offers a more reasonable interpretation of Wis. Stat. § 108.02(10e)(am)1. than LIRC. See DWD, 375 Wis.2d 183, ¶11.

Morse at ¶¶22-4.

So, in D19-07 and now D21-06, the Department wants to overturn Morse without mentioning this court decision at all (and instead indicating that this issue is only a minor and technical dispute between it and the Commission) in order to make sure that any unemployment benefits that ever go to SSDI recipients in the future will always have to paid back. The Department’s explanation for the fiscal effect of this change reveals that this change in the law is very much about SSDI benefits:

To determine the impact of the proposed change, 2015-2017 data was reviewed for LIRC determinations that found departmental error based on appeal tribunal determinations. There were no LIRC decisions that found departmental error in 2016 or 2017 and in 2015, there were approximately 10 determinations. The total overpayment for all affected determinations was approximately $6,560, which claimants would now be required to pay back if departmental error could not be found on appeal tribunal determinations. At an 80% collection rate, this results in an average savings to the Trust Fund of $5,200 annually. Since there were no LIRC decisions that found departmental error [by an administrative law judge] in 2016 or 2017, the Trust Fund savings may be less going forward.

As this explanation indicates, the only cases at issue here are the 2015 and earlier SSDI cases for which the Department wanted to recoup unemployment benefits.

The other problem with this proposed legal change that is not mentioned at all is that the current understanding of departmental error has been in existence for decades and serves as an important check against appeal tribunals for getting basic unemployment law wrong. See, e.g., Parker v. Cady Cheese Factor Inc., UI Hearing No. 05200982EC (12 Aug. 2005) (an interpretation of a statutory provision which disregards a contrary long-standing interpretation by the commission constitutes departmental error).

Essentially, the Department’s proposed change to departmental error would mean that administrative law judges could ignore longstanding Commission precedent, and the consequences of that ignorance would fall exclusively on claimants. Under the Department’s proposed change in the definition of departmental error, waiver of any over-payments for the actions of administrative law judge’s would no longer be available to claimants who rely on administrative law judge’s getting unemployment law right in the first place.

I cannot think of anything more detrimental to the cause of justice and the purpose of unemployment benefits as vital economic assistance than this proposed change.

D21-07, Clarifying the effect of criminal convictions when charging concealment

In this proposal, the Department seeks to address the situation of a claimant who is charged criminally for unemployment fraud before the Department has alleged unemployment concealment.

In some circumstances, however, criminal prosecution may result in a court-ordered restitution order or judgment when the Department has not issued an administrative determination that a debt is owed. Examples could include submitting forged documents to the Department with the expectation that the forger would receive a benefit; submitting false unemployment benefit claims by using a fictitious employer scheme; or filing benefit claims using stolen identities.

D21-07 at 1. This concern is at present completely hypothetical, but the Department’s ever zealous push for pursuing unemployment concealment against claimants means that it is always thinking through the angles and procedures for these kinds of cases.

So, the Department wants to make sure that its concealment cases are NOT affected by any criminal cases and that claimants criminally guilty of concealment can not later contest that guilt to the Department. To accomplish this goal, the Department wants a change in law so that any criminal proceeding will serve as issue preclusion for the Department’s own concealment case against the claimant.

Section 108.101(5) of the statutes is created to read:

Notwithstanding sub. (4) [no other legal matter is binding for purposes of unemployment law], a final order or judgment of conviction for a crime entered by a court is binding on the convicted person in an action or proceeding under this chapter that relates to the criminal conviction. A person convicted of a crime is precluded from denying the essential allegations of the criminal offense that is the basis for the conviction in an action or proceeding under this chapter.

D21-07 at 1. In making this proposal, the Department does not intend “this proposal to change the Department’s practice with respect to nearly all cases referred for criminal prosecution. The Department intends to continue to refer most cases for prosecution after its administrative determination is final.” D19-20 at 2 (emphasis supplied).

Given that a person found guilty of criminal unemployment fraud will likely face prison as well as steep financial penalties, the goal here of later going after the claimant administratively for unemployment concealment seems to either be overkill or an admission that the Department cannot coordinate a criminal prosecution with prosecuting attorneys to make sure that the criminal case includes all relevant administrative issues from the Department’s perspective.

D21-08, Fiscal agents and family care employment

Like the departmental error proposal, this proposal hides a great deal of complexity and numerous other issues.

The aging of boomers and the push in Wisconsin for family members to provide care for their aging parents through numerous state support programs has led many, many folks to obtain “work” as family caregivers or to hire in-home caregivers to supplement what the children are doing.

A quirk in state law, however, allows the companies that facilitate this family care to avoid being identified as employers. Instead, the parents who are receiving this care are identified as the employers of their children and other caregivers for the purpose of unemployment law.

Note: This quirk in state law also applies to parents providing care of their adult children, though the specific statutes at issue are different.

Most parents and their children never know about the parent being the employer of record because the “notice” of this issue is provided in small print on one of many forms they complete when starting out with this family care. Because the parents are the employer of record, however, they are supposed to pay unemployment taxes for the wages paid their caregivers. Needless to say, most of these “employers” never pay the unemployment taxes that are owed.

For the most part, no one discovers this problem until after the parent has passed away. Then the children and hired caregivers file unemployment claims because they are now out of a job and looking for new work.

The family members who provide care to their parents are excluded from receiving any unemployment benefits pursuant to Wis. Stat. § 108.02(15)(km), which defines excluded employment as a family member providing personal care or companionship to another family member.

Many, many family members are only finding out about this exclusion when they file for unemployment benefits. And, given the arcane nature of this exclusion, many are paid unemployment benefits by mistake, only to have the Department recoup those unemployment benefits at a later date.

Understandably, non-family members are still eligible for unemployment benefits. But, the parent-as-employer has passed away without paying the unemployment taxes that were due, and any claim against the “estate” for unpaid unemployment taxes is unlikely to get anywhere given that these estates are usually meager to begin with and already claimed by other debts.

In D17-02, the Department addressed this lack of liability for the unpaid unemployment taxes by making the fiscal agents joint and severally liable for the unemployment taxes that are still owed. See also the discussion of D17-02 in Department unemployment proposals in 2017 (24 May 2017). As the Department explained for why joint and several liability for fiscal agents was needed:

Individuals who receive long-term support services in their home through government-funded care programs are domestic employers under Wisconsin’s unemployment insurance law. [Wis. Stat. § 108.02(15)(km)] These employers receive financial services from fiscal agents, who directly receive and disperse government program funds. The fiscal agent is responsible for reporting employees who provide services for the domestic employers to the Department, and for paying unemployment tax liability on behalf of the employer. [Wis. Stat. § 46.27(5)(i)] Currently, approximately 16,000 of the 19,000 domestic employers in Wisconsin receive government-funded care and use a fiscal agent. These employers incur tax liability when fiscal agents fail to file quarterly reports or fail to make tax liability payments. [As of July 2016, the receivables for domestic employers is $44,709.02] It is difficult to collect delinquent tax from domestic employers who use fiscal agents because these employers are typically collection-proof.

D17-02 at 1 (footnotes inserted into text). These numbers — 16,000 out of 19,000 domestic employers — indicate just how significant this issue is.

In D19-03 and now D21-08, the Department is proposing to change the law so that fiscal agents could optionally elect to be the employer-of-record for family members caring for others in their family. That is, family members would no longer be prevented from receiving unemployment pursuant to Wis. Stat. § 108.02(15)(km).

The fiscal impact of this proposed change based on the claim-filing problems that occurred when claims were at a near-record low is sizable.

In 2018, there were approximately 93 determinations excluding wages from benefit claims under 108.02(15)(km). Assuming the individual had no other base period wages this would result in approximately $354,330 in additional benefits paid annually (assuming an average weekly benefit amount of $300 and average weeks paid of 12.7). Adjusting for taxes, this would result in an approximately $233,857 cost to the Trust Fund. However, this does not take into account the additional tax revenue on employee whose wages would no longer be excluded from UI coverage.

In summary, this proposal could result in:

• More tax revenue received and more benefits paid based on previously excluded wages under 108.02(15)(km); however, this amount cannot be established.

• Fewer benefit overpayments based on the 108.02(15)(km) exclusion estimated at $100,000 annually. This is because under this proposal these benefits would now be payable. However, most overpayments are collected (at least 80%) thus this would not have a significant impact on the Trust Fund.

D21-08 at 5-6.

The problem with this proposal is that the change in who is the employer in these cases is an optional change done at the discretion of the fiscal agent. Given how confusing, unknown, and ambiguous this issue is already for parents and their family care-givers as well as what the Department is encouraging here (that fiscal agents voluntarily take on an additional expense at their discretion), this proposed change seems highly unlikely to lead to any practical change at all in regards to family members currently being placed in excluded employment.

Right now, almost all family members think that these fiscal agents are their employers. Family members as caregivers report their hours of work to these fiscal agents, and these fiscal agents are the entities that pay family members for their hours of care for their elderly parents and relatives. Almost none of them understand at all that the parents receiving care are legally an employer responsible for paying unemployment taxes.

So, if this proposal is going to have any actual impact on a very confusing and difficult situation, the switch from parent-as-employer to fiscal agent-as-employer needs to be a mandatory change, not optional.

Unemployment delays, part 6

Previous posts detailed the length of time and number of cases in the unemployment backlog in part 1, some of the mistakes by the Department that allow cases to be re-opened in part 2, a place for stories and advice about how to find assistance in part 3, how most claims in Wisconsin — and unlike in other states — are being denied and thereby creating a ginormous backlog in hearings in part 4, and in part 5 how the Department’s big push to fix the backlog in December 2020 was creating a hearings backlog and not addressing the root causes of all the delays.

Hard data regarding the Department’s handling of initial claims is now available about that big push for clearing the backlog.

Date        First   15 days 21 days 35 days
           payments
01/31/2021  18,094  64.70%  70.10%  77.00%
12/31/2020  35,548  49.50%  54.50%  61.70%
11/30/2020  13,676  65.00%  67.80%  71.70%
10/31/2020  10,249  56.10%  58.70%  62.20%
09/30/2020  8,709   50.40%  53.00%  57.10%
08/31/2020  11,144  53.10%  55.10%  57.50%
07/31/2020  15,410  39.20%  41.20%  43.90%
06/30/2020  18,862  39.30%  40.40%  42.60%
05/31/2020  36,273  33.00%  35.90%  47.50%
04/30/2020  183,447 81.90%  88.60%  98.80%
03/31/2020  26,472  95.50%  97.60%  99.00%
pandemic    377,884 57.06%  60.26%  65.36%

prepandemic 239,601 86.80%  92.86%  96.85%
(Jan. 2018 thru Feb. 2020)

As evident here, December 2020 saw a marked increase in first payments of initial claims, around 2.5x the number of payments in November 2020. Unfortunately, the number of first payments declined by half in January 2021.

This increase in first payments for December, however, is good news because the hearings backlog did not skyrocket. Previously, I had feared that the hearings backlog would be at 25,000. At the end of January 2021, the hearings backlog had only climbed to 15,915, up from 15,744 in December 2020.

So, kudos to the Department for clearing some cases by getting those cases approved.

Still, systemic problems with the processing of unemployment claims remain. This first payment data indicates that the effort to clear the backlog was a one-time event. TMJ4 reports that the processing delays have arisen in part because the Department added a bunch of new staffers with minimal training who then focus on specific issues rather than looking at the big picture.

Second, way too many initial claims are still NOT being paid. Through January 2021, Wisconsin has only made first payments of 27.98% of 147,260 PUA initial claims. For comparison, North Carolina has made first payments in 60% of 415,747 PUA initial claims, and New Jersey has made first payment of 76% out of 707,167 PUA initial claims.

For initial claims of regular unemployment benefits, Wisconsin has only made first payments of 30.85% out of 1,248,186 initial claims through the end of January 2021. Prior to the pandemic, the percentage of initial claims that ended up with a first payment in Wisconsin was 38.81%. So, Wisconsin is actually paying out fewer initial claims during the pandemic than from before the pandemic.

In comparison, Colorado’s first payments during the pandemic are at 64.20% out of 775,053 initial claims. Prior to the pandemic, the percentage of initial claims with first payments in Colorado was at 65.40%. In North Carolina, 44.82% of 1,642,172 initial claims for regular unemployment benefits during the pandemic led to first payments (prior to the pandemic, North Carolina was paying 45.25% of initial claims for regular unemployment benefits). Only New Jersey has seen a sharp decline in first payments for regular unemployment claims, paying 38.29% of 2,025,278 initial claims, down from 51.72% prior to the pandemic.

So, the claim-filing problems in Wisconsin are more severe than in any other state, including states like New Jersey and Colorado that still have COBOL-based mainframes on the back end of their claim-filing systems. The majority of initial claims in Wisconsin simply are NOT being paid at all.

Third and more troubling, there is now a major backlog with unemployment hearings that shows no signs of being cleared anytime soon. During the pandemic, the number of appeals filed per month have averaged 4,138 per month, while the number of appeal tribunal decisions has averaged 2,958 per month, more than a thousand less than the number of appeals. In January 2021, that gap declined to around 500 more appeals than decisions.

So, the size of this hearing backlog of around 16,000 cases now means that claimants will likely have to wait eight or more months for their cases to be heard.

And, the number of initial claims is still running more than 2x higher than normal. As a result, there are plenty of cases still in the pipeline.

w/e 2021    Week    Ratio   2021    2020    Difference
12/26/20    52      1.36    14,235  10,483  3,752
01/02/21    1       1.49    19,161  12,854  6,307 (new data source)
01/09/21    2       2.73    22,539  8,255   14,284
01/16/21    3       2.66    16,977  6,388   10,589
01/23/21    4       2.52    15,439  6,134   9,305
01/30/21    5       2.48    15,584  6,280   9,304
02/06/21    6       2.28    14,970  6,579   8,391
02/13/21    7       2.79    16,205  5,808   10,397
02/20/21    8       2.66    16,207  6,098   10,109
02/27/21    9       2.35    13,272  5,658   7,614
03/06/21    10      2.41    12,173  5,052   7,121
03/13/21    11              
Totals              2.22    176,762 79,589  97,173
Source: https://dwd.wisconsin.gov/uistats/

Out of 63 SSDI-PUA claimants I am currently working with, 21 are still waiting for their benefits, now a year into the pandemic. Only 26 (less than half) have been paid their PUA benefits without additional hiccups (and most of them were not paid until August and September of 2020). Most of the 21 claimants still waiting for any payment have yet to even have a hearing.

26 — Yes — PUA paid
13 –No — PUA claim denied
5 — ? — payment status unknown
8 — Yes & No — paid some, and then denied
6 — Not covid19 — denied because of no pandemic-related job loss
2 — Not A&A — denied because not able and available
3 — Yes, some — paid some PUA, waiting on rest
63 — Total claimants

As usual, John Oliver explains how truly broken unemployment is throughout the nation:

The failures in the unemployment system is a national problem. What has happened in Wisconsin is simply a “leading” indicator of how just how broken the system is. This propublica description of the claim-filing problems in North Carolina, for instance, also describes many of the same issues in Wisconsin about changes on making claim-filing more difficult, reducing already low employer taxes even further, and cutting off eligibility through additional claim-filing requirements.

Reporters have informed me that claimants are only winning around 30% of their appeal tribunal decisions after an appeal of an initial determining denying their claim (roughly the same percentage prior to the pandemic). That percentage is terrible. Almost all of the denials I am seeing are without any factual or legal merit but occur because the investigator has found a piece of information on the initial claim or a weekly certification to be less than perfect for establishing eligibility. This low win rate for unemployment hearings indicates that the biases against allowing benefits to claimants remain solidly in place: administrative law judges are looking for reasons and evidence for getting claims denied rather than explaining and helping claimants to get those denials over-turned.

So, having representation for these hearings is even more vital now, given the complexity of Wisconsin unemployment to begin with when coupled to the all of the new federal benefit programs that have been added.

I have done a video interview with the Wisconsin state bar where I plead for more lawyers to get involved with these unemployment cases.

Lawyers who want to help should read the unemployment primer, the Workers’ Guide to Unemployment Law, and look at the training done in May 2020 by Legal Action and Judicare. Marquette law school is providing the videos and materials for that training as well as other training sessions at this link.

Finally, law students at UW-Madison Law School have stepped up during this crisis and helped out with hundreds of claimants. They have done a remarkable job. Anyone interested in supporting the clinic’s efforts should visit the clinic’s gofundme page.

Unemployment primer now available

A lengthy primer on the unemployment claim-filing process is now available. Anyone filing an unemployment claim in Wisconsin MUST read this primer. It covers:

  • initial claims
  • weekly claims or weekly certifications
  • monetary eligibility — aka, your benefit year calculation
  • non-monetary eligibility — initial determinations relating to a job separation, not being able and available, failing to satisfy a Department job search requirement, or failing to satisfy some other Department claim-filing requirement
  • Partial eligibility — reporting on your weekly certifications your part-time work while collecting unemployment benefits
  • unemployment fraud/concealment
  • benefit over-payments, offsets, and collections: how to object or appeal
  • unemployment hearings — the appeal, appeal confirmation, hearing packet (for telephone hearings), hearing notice, and hearing/appeal tribunal decision
  • petitions for Commission review

Upcoming testimony before a Senate Committee

Update (28 Jan. 2021): TMJ4 is perhaps the only media outlet in the state that actually describes what happened at the hearing over current problems with unemployment claims and how any computer updates are not a viable solution for those currently dealing with this mess.

I am scheduled to testify before the Senate Committee on Economic and Workforce Development this Wednesday, January 27th, at a public hearing starting at 10am, concerning Wisconsin unemployment.

Given the general lack of information about what is actually happening with the unemployment crisis, I have provided the committee a 199pp. PDF of the materials and a 3pp. letter describing those materials.

WisEye will be carrying the testimony live.

Some of the charts and tables in the informational packet include:

WI claimants paid, initial claims, continued claims, and covered employment, 2007-2020

The year of 2007 should be considered a base year for how a healthy unemployment system in this state should function.

WI first time payment timeliness, 2005-Nov. 2020

Notice that during the Great Recession first payments of benefits for the most part continued to be timely.

Comparison of PUA claims-handling for WI and select other states

Except for Minnesota, Wisconsin has had fewer PUA claims that many other states and has paid far fewer PUA claims as a percentage than other states. New Jersey, like Wisconsin, has a COBOL mainframe for their unemployment claims. Yet, New Jersey’s handling of PUA claims shows incredible success compared to Wisconsin.

Update (27 Jan. 2021): My testimony and the testimony of others, including the Department, is available here. My testimony starts around 11am (an hour into the hearing), and runs 30-40 minutes. Here is a recap of my remarks about how disabled workers are being treated:

$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.

One group in particular has been hit hardest — the disabled.

Wisconsin is one of only two states that denies unemployment benefits to those who receive SSDI benefits. This eligibility ban was premised on the belief that only 50 workers would be affected by it.

That belief was not true. In any given year, there are 150,000+ SSDI working in Wisconsin (for 2019, see Table 27 at this link). To put that number in perspective, in the December 2020 jobs report for Wisconsin, there were 128,100 construction workers in this state, a ~22,000 short of the workers who receive SSDI benefits.

Wisconsin is allowing its employers to lay off these 150,000+ disabled workers and face no consequences for such layoffs. If unemployment was automobile insurance, then Wisconsin would exactly be saying that drivers could run over disabled people without any consequences to their auto insurance premiums. This is obscene.

So, a $1.1 billion unemployment trust fund has been built up on the backs of 150,000+ disabled workers in this state who by law cannot receive those unemployment benefits, against this explicit provision in Wis. Stat. § 108.01(1) (emphasis supplied):

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.

New mainframes do not mean the end of old problems

The unemployment special session has come and gone with nothing to show. For some reason, however, folks seem to think a new mainframe is somehow vital to fixing the unemployment case-handling problems at the Department.

I have to ask: what are they smoking?

A new mainframe is a four to eight year project, and there is no guarantee of success. Massachusetts, for example, did not actually get a new unemployment system until its third attempt at replacing its old mainframe.

And, in every state that has moved to a new claim-filing system, the effort has taken numerous years of extensive planning, testing, more testing, and then fixes for implementation mistakes just to make the system operational, if not still worker-friendly.

Do not take my word. Here is what a recent report indicates:

For many years, modernization projects trended in the red—encountering significant cost overruns and schedule delays, with several states actually pulling their projects. As noted in the introduction to this report, as of 2016, 26 percent of projects had failed and been discarded; 38 percent were past due, over budget, or lacking critical features and requirements; and 13 percent were still in progress. However, the past few years have shown great improvement, with more states implementing final systems while controlling costs.

* * *

The completed modernization projects have encountered significant problems, including numerous delays, issues with testing, data conversion errors between legacy and new systems, data loss and security issues, and poor training of staff who interact with claimants. For example, Massachusetts’ modernized system, built by Deloitte, was $6 million over budget and, after rolling out two years late, was riddled by implementation problems. Call center wait times doubled, and there were 100–300 claimant complaints per week, owing in large part to a major increase in system-generated questionnaires to claimants, which delayed claims processing.

While Tennessee’s system was developed by a different vendor, Geographic Solutions Incorporated, they experienced some of the same problems as Massachusetts: the system auto-generated numerous non-critical questions about applications that had to be cleared by staff, and the backlog for responding to user questions about claims stretched to eighty-two days after the system was rolled out in May 2016. Data conversion problems between the legacy and new system caused delays in payments, all during an implementation that a legislative audit later concluded was rushed.

In several other states, implementation has been rushed to meet external deadlines, leading to situations like that in Maine and Washington (described in depth in the case studies) where the state’s system was not ready for a surge of claimant questions, glitches caused the system to go down after launch, and repeat problems with core elements like passwords could not be solved.

Florida’s CONNECT system was riddled with timeliness and accuracy problems when it launched, including more than 400,000 claims documents that were stuck in an “unidentified” queue and unable to be processed. The implementation of the new system coincided with a new requirement that claimants report per week, which could only be reported online through the new system. As described in a previous NELP report, “the number of workers disqualified because DEO [the Florida Department of Economic Opportunity] found they were not ‘able and available for work’ or not ‘actively seeking work’ more than doubled in the year following the launch of CONNECT, even though weekly claims declined by 20 percent in that same year.” The U.S. Department of Labor Civil Rights Division found that this aspect of the system had a discriminatory effect on Limited English Proficient claimants who struggled the most. New Mexico’s modernization implementation also faced a civil rights complaint from a legal service organization based on multiple language access problems, including an elderly Spanish-speaking farm worker who was told he could file online in a site that was only in English.

Centering Workers — How to Modernize Unemployment Insurance Technology (17 Sept. 2020) at 11-12 (footnotes omitted).

Furthermore, as previously pointed out, this report demonstrates that these modernization efforts have gone hand-in-hand with making the claim-filing process more difficult, not less.

Even Jake, normally an astute observer of labor economics, seems to have fallen under the mainframe spell, when he makes the claim that program integrity funds can be used but are insufficient for such a project. Jake mistakenly uses Department budget numbers for real dollars being expended. In reality, program integrity expenses have been limited to the salaries of a few LTE investigators who predominately investigate claimants for alleged fraud when they make UN-intentional claim-filing mistakes.

Note: A Fox6 report ably shows how the Department presumes UN-intentional claim-filing mistakes are fraudulent, as a fraud charge leads to gargantuan penalties for which the Department pockets a sizable amount for its own program integrity fund — a fact Jake fails to mention.

As of November 2020, program integrity (line 228) remains a cash cow for the Department. In that month alone0, this fund raked in $387,871.95 while only expending $22,906.33, raising the amount tucked away to $15,507,000.

The claim-filing problems right now are not going away (see, e.g., how current questions about able and available status violate state unemployment law), and they are getting worse. Pinning hopes to a new mainframe that is years away is ridiculous. Yes, the Department needs a new mainframe, but the problems with unemployment are more basic and have little to do with technology. If anything, the Department has used technology to make the claim-filing process more obtuse and less transparent.

As I previously noted: “New Jersey, a state saddled with an older mainframe system based on COBOL like Wisconsin, has paid nearly 75% of the 657,000 PUA claims filed in that state.” For the same time frame, Wisconsin only paid 32.01% of 112,114 PUA initial applications. So, if a COBOL mainframe is NOT preventing New Jersey from handling SIX times more PUA claims and paying 13.5 more PUA initial claims than Wisconsin (490,282 first payments in NJ versus 35,889 in WI), then just maybe a COBOL mainframe is not the source of the problems here in Wisconsin.