No PUC for you: DWD denies a federal $600 payment when there is a “BAR”

CBS 58 has a report about how Wisconsinites with a BAR are not receiving any of the $600 PUC payment despite guidance that they should receive at least $300 PUC payment each week. The key paragraph from the story:

“We have received verification [from the US Dep’t of Labor] that if somebody has a BAR fine, which is a benefit amount reduction, they are not eligible to receive Federal Pandemic Unemployment Compensation, which is the acronym FPUC or the additional $600 a week, and basically it’s because this person was found to have committed fraud against the system and therefore they would not be able to get those additional benefits due to that bar penalty as a result of committing fraud,” said Emily Savard with the Department of Workforce Development.

Here is the May 8th e-mail message in which the Department announced this policy to its staffers:

From _, Melissa – DWD
Sent: Friday, May 08, 2020 10:46 AM
To: _
Subject: FPUC and BAR

If a claimant does NOT receive UI, PEUC or PUA payment for a week because the entire amount is applied to the Benefit Amount Reduction (BAR) the claimant will not receive Federal Pandemic Unemployment Compensation (FPUC) (extra $600).

Melissa _
IQ Supervisor (Integrity and Quality)

The Department’s own original April 20th guidance on PUC benefits did NOT have this exclusion (emphasis supplied).

Eligible to receive a payment under UI, UCFE, UCX, PEUC, PUA, EB, STC, TRA or DUA. FPUC is added after all debts are offset, forfeited, or applied to a benefit amount reduction from the individual’s UI. Individuals whose UI payments are intercepted to pay debts (child support or pverpayments) are eligible for the $600 FPUC payment, even if 100% of their weekly benefit amount is intercepted.

What changed?

According to the CBS 58 report, the Department asked for additional guidance from the US Dep’t of Labor on this issue. But, why would additional guidance be needed?

A BAR used to be called a forfeiture of future unemployment benefits. Here is how an initial determination in 2016 regarding a “BAR” read:

Effect

The claimant shall forfeit $12705.00 of unemployment compensation benefits that become payable during the six year period that ends 02/05/22.

Additionally, the Department may at a later date seek criminal prosecution under Wis. Stats. 108.24.


Forfeiture (the withholding of future payable benefits) is an administrative penalty for intentionally concealing information affecting your unemployment eligibility and is in addition to any overpayment caused by such concealment of information.


And, here is the relevant language for a “BAR” in an initial determination in 2018:

Effect

The claimant’s benefit amount shall have a reduction of $1480.00. This reduction remains in effect for benefits and weeks that become payable during the six-year period that ends 02/15/25.


This benefit reduction of future payable benefits is an administrative penalty for intentionally concealing information affecting your unemployment eligibility and is in addition to any overpayment caused by such concealment of information.


There has been NO change in this law, Wis. Stat § 108.04(11), during this time. The only change has been in how the Department characterizes this forfeiture of future unemployment benefits.

But, this change in terminology by the Department is important. Federal guidance for the payment of the $600 PUC payment has the following information about when there is an over-payment of benefits because of a forfeiture and whether the $600 PUC is still paid:

Question: Must FPUC payments be used to offset intrastate state or federal UC overpayments?

Answer: Yes. FPUC payments must be reduced to recover state and federal UC overpayments if the state has a cross-program offset agreement in place with the Secretary under Section 303(g)(2), SSA (42 U.S.C. § 503(g)(2)). However, a state may not offset more than 50 percent from the FPUC payment to recover overpayments for these unemployment benefit programs.

UIPL 15-20 PUC benefits, Change 1 (9 May 2020) at I-2 (emphasis supplied).

Essentially, the Department is claiming that this change in wording in how it calls this forfeiture of future unemployment benefits — from a forfeiture to a benefit amount reduction or BAR — means that the federal guidance about still paying $300 of the federal PUC payment (and earmarking the other $300 towards the remaining benefit amount reduction) does not apply.

Again, as with eligibility for PUA benefits for the disabled (see the discussion of SSDI in this post), the Department is going out of its way to stymie the whole purpose of the CARES Act: to stimulate the economy by giving folks needed cash to pay for rent and groceries.

As the federal guidance for PUC payments explains:

Question: When is an FPUC payment considered to be overpaid?

Answer: An FPUC payment is an overpayment any time an individual receives an FPUC payment for which the individual was not eligible. For example, if an individual is paid FPUC and the underlying UC benefit payment is subsequently denied and determined to be overpaid, then the FPUC payment is also overpaid. However, if an individual is eligible receive at least one dollar ($1) of underlying benefits for the claimed week, the individual is eligible to receive the FPUC payment for that week.

UIPL 15-20 PUC benefits, Change 1 (9 May 2020) at I-2 (emphasis supplied).

All the claimants currently under the BAR penalty are seeing in their benefit statements that they are being credited/reduced each week for these BAR/forfeiture penalties. Just like any forfeiture, these funds simply are not being paid out to them. So, why is the Department at least not paying out the $300 PUC as per federal guidance on this issue?

from a certain point of view

The targeting of African-Americans for criminal prosecution continues in 2020

A few weeks ago I described how the new administration under Gov. Evers and AG Kaul was continuing in 2019 to target African-Americans for criminal prosecution in unemployment fraud cases.

A new year in 2020 brings . . . five more prosecutions of African-Americans for unemployment fraud. Indeed, all five of these new cases involve African-Americans in Milwaukee county.

Lennington cases 2019 and 2020

As noted here, initial appearances for these new cases are slated on election day, Feb. 18th. And, these numbers raise the percentage of cases being against African-Americans to more than 80%.

In 2020 (2020!), how and why can this racial targeting still be going on?

Note: the rationale for NOT pursuing these cases for purposes of restitution is put into doubt when the plea deal for one of these cases is being delayed for several months to allow for restitution to be completed. In this light, it is all too apparent that the Department of Workforce Development and the Department of Justice are filing these cases, in part, as a debt collection tool.

African-Americans are again being targeted for criminal prosecution

There is a new governor, a new Attorney General, a new secretary at the Department of Workforce Development, and a new division administrator for unemployment. But, African-Americans in Milwaukee continue to be targeted for criminal prosecutions for alleged unemployment fraud. Indeed, even as the number of cases have declined, the percentage against African-Americans have increased.

I previously posted about these prosecutions in October 2016 and November 2018.

Here are the 2015 and 2016 cases (click on the table to see details):

First cases

And, here are the 2017 and 2018 cases (click on the table to see details):

Westman and Rusch cases by race and gender

As noted in my previous posts, African-Americans made up 70-76% of all criminal cases, even though they made up only 7% of Wisconsin’s state population and only around 27% of the population in Milwaukee County. The percentage of claimants in the state as a whole who are African-American is around 11-12% of all claimants.

Several legislators have asked for information about these cases and an explanation for why African-Americans are being targeted for these prosecutions See, for example, this letter. Numerous groups have also raised concerns. Formal, public responses to these and other queries have been ignored, however.

The new head of criminal cases for the Department of Justice did present to the Unemployment Insurance Advisory Council at the council’s April 18th meeting in 2019. At this meeting, Deputy AG Eric Wilson explained that criminal prosecutions would only be filed where the alleged fraud was sizable, where civil remedies were inadequate, and where there was a history of previous fraud. In addition, cases would no longer only be filed in Dane County (forcing residents from Milwaukee County and other parts of the state to travel to Madison for every event in their case) but would be filed in the county where the defendant resides. See meeting minutes at 3-5.

Starting in the summer of 2019, the Department of Workforce Development under Caleb Frostman and Mark Reihl and the Dep’t of Justice under Josh Kaul started a new round of these prosecutions being handled by Assistant AG Dan Lennington (click on the table to see details):

2019 cases

While the number of prosections is down from previous years (except for 2016, when there were also 11 prosecutions), the percentage of African-Americans being prosecuted is still around 73%. Anglos make up only 18% of these cases, and persons of color combined constitute 82% of all cases (9 out of 11).

Furthermore, the one defendant outside of Milwaukee County (an African-American women in Manitowac) is still being forced to travel to Dane County for her case. So, the declaration in April of 2019 about no longer requiring defendants to travel to Madison for the convenience of prosecutors only applies to the Milwaukee County cases.

And, it gets worse. One 2019 case was almost immediately dismissed by the prosecutor after being filed. In such circumstances, dismissal is usually because the defendant is not competent to stand trial or is deceased (one of the 2018 cases was dismissed soon after filing because the defendant was declared not competent to stand trial). As the Department of Workforce Development charges unemployment concealment/fraud for accidental or unintentional claim-filing mistakes, many, many folks with learning disabilities have been so charged. So, this near immediate dismissal indicates that the Department of Justice is not really applying any new or tougher criteria in deciding which cases to prosecute.

Indeed, the plea deal set for May 29th in one case (delayed by several months to allow for restitution to be complete) indicates that these cases are still largely being pursued as a means of debt collection despite the Deputy AG’s contrary statements back in April 2019 to the Advisory Council.

Finally, there is still no explanation for why African-Americans are being targeted for these cases wholly out of proportion to their presence in the population or even the unemployed. This racial bias has been going on for four+ years now without explanation.

If Lando was in Wisconsin, he would know what is going on here.

Lando and Vader

Beres, absenteeism, and a temporary change of heart

In 2018, unemployment and absenteeism were intertwined with a legal attack on agency deference that were described in a series of five posts about three cases: Tetra Tech, Beres, and Wisconsin Bell.

On 26 June 2018, the Wisconsin Supreme Court delivered its decision in DWD v. LIRC (Beres), 2018 WI 77, 382 Wis.2d 611, 914 N.W.2d 625. In a short and unanimous opinion, the state supreme court overturned the appeals court and accepted the argument of the Department of Workforce Development that this new misconduct provision added over the objection of the Unemployment Insurance Advisory Council allowed employers to set their own disqualification standard in regards to absenteeism for the purposes of misconduct.

an employer can opt out of the statutory definition of “misconduct” by absenteeism and set its own absenteeism policy, the violation of which will constitute statutory “misconduct.”

* * *

We conclude that the word “unless” in the “unless otherwise specified” clause of Wis. Stat. § 108.04(5)(e) means that an employee will be considered to have been terminated for “misconduct,” and thus disqualified from obtaining unemployment compensation benefits, if the employee violates the statutory definition of absenteeism, except if the employee adheres to the employer’s absenteeism policy specified in the employment manual of which the employee acknowledged receipt with his or her signature in accordance with the statute.

Beres, 2018 WI 77 at ¶19 and ¶23.

In Stangel v. Spancrete Inc., UI Hearing No.17402720MW (20 July 2018), the Commission applied the matter-of-fact holding of Beres to find that an employee whose absences led to too many points in violation of the employer’s attendance was disqualified for misconduct. The employee’s absences led to too many points under the employer’s attendance policy (regardless of reason for that absence), the Commission found, and so the employee was disqualified from receiving unemployment benefits. The Commission explained:

it makes no sense to allow the employer to adopt its own attendance policy different from the policy set forth in the statute, as described in Beres, but then limit its ability to define the contours of that policy. As an example, it is common for employers to adopt “no-fault” attendance policies, allocating to employees a large number of occurrences intended to cover both traditionally excused absences (e.g., sick days) and unexcused absences. It would greatly undermine the logic of such policies to hold the employer and employee accountable for the number of absences defined in the policy but to then consider only the “unexcused” absences when analyzing the employee’s termination for absenteeism. Thus, when applying the misconduct standard of Wis. Stat. § 108.04(5)(e), any notice and valid reason limitations will be as defined under the employer’s policy, and so long as the termination comports with the terms of that policy the employee’s violation of the policy will constitute misconduct pursuant to Wis. Stat. § 108.04(5)(e).

Stangel.

As noted by the Commission in its briefing in Beres, this employer-determined misconduct for non-intentional absences (in both Beres and Stangel, the employees were absent because of illnesses over which they had no control) ran the risk of Wisconsin being found by the US Department of Labor to no longer be in compliance with federal requirements for unemployment. That lack of compliance could well lead to Wisconsin employers losing a tax credit and seeing their federal unemployment taxes jumping from a 0.5% to 7.0% tax rate — quite a jump.

And, it seems that this risk finally caught the Department’s attention. In January 2019, the Department petitioned for review in an absenteeism case and filed a brief in March reversing its prior position. In this new case, the employee had acquired too many points under the employer’s no-fault absenteeism policy because of injuries related to a car accident and illnesses. Now, the Department argued that because the employee had provided the employer with notice for his valid (i.e., non-intentional absences), the employer’s absenteeism policy did not completely control in determining whether misconduct had occurred.

In Miller v. FEDEX Ground Package System, Inc., UI Hearing No.18005890MD (29 March 2019), the Commission accepted the Department’s argument (footnote omitted):

The commission has come to the conclusion that its reasoning in Stangel was incorrect, because that reasoning does not comport either with the plain language or with the structure of the statute. The notice and valid reason clause addresses absenteeism without qualification; it does not distinguish between absenteeism pursuant to the statutory standard and absenteeism pursuant to an employer’s policy. As for structure, the general statutory construction rule is that qualifying or limiting clauses in a statute are to be referred to the next preceding antecedent, unless the context or plain meaning dictates otherwise. The alternative of an employer’s policy is a limiting clause immediately following the statutory standard clause, though, and so is not properly read as an independent par.(5)(e) misconduct standard that is not subject to the notice and valid reason clause. The latter clause, by contrast, without question applies to the first clause, the statutory standard, and to the third clause, excessive tardiness. There is no legitimate basis not to apply it to the second clause, employers’ attendance policies, as well.

The commission’s reasoning in Stangel also does not comport with all the other categories of “misconduct,” whether the other specific categories enumerated in Wis. Stat. § 108.04(5)(a)-(g) or the general standard of Wis. Stat. § 108.04(5)(intro.). As the department points out in its brief, all of these standards incorporate intent, recklessness, or some other willful behavior on an employee’s part. To limit the scope of notice and valid reason to how those terms are defined in an employer’s policy would allow, as the instant case shows, the denial of unemployment benefits when the employee has engaged in no culpable behavior.

While this result is laudatory for both employers (no longer facing the risk of losing their federal tax credit) and employees (no longer being disqualified for misconduct when they provide notice of their non-culpable absences), the reasoning seems to contradict the holding in Beres. After all, the Commission made similar if not identical arguments in its briefing in Beres against the Department’s claims in favor of this harsh and unforgiving application of whatever the employer’s own absenteeism and tardiness policy required. See Commission’s brief at 36-43; see also the appeals court decision in Beres, 2017 WI App 29 at ¶¶16-20, 275 Wis.2d 183, 895 N.W.2d 77 (Department’s position would lead to disqualification for innocent absenteeism, and so cannot qualify as misconduct when unemployment presumes eligibility when there is no employee fault regardless of how valid the employer policy is). Yet, the Wisconsin Supreme Court rejected that argument for the holding spelled out above (and what the Department then advocated): the employer’s absenteeism policy governs in toto once the employee acknowledges that policy.

In addition, the scope of Miller in over-turning Beres is limited. Miller only applies to the employees who give notice of their absences. Employees unable to provide notice will still be disqualified even if they are absent through no fault of their own (e.g., a car accident or illness that render them unconscious).

As previously noted, the absenteeism provision at issue here arose under suspicious circumstances. A legislative fix through the Advisory Council needs to be taken up if an actual fix for this problem is to take hold. The Commission’s decision in Miller is at most partial and temporary.

Non-acquiescence: Employer aiding and abetting

Besides the personal liability non-acquiescence tax cases discussed in a previous post, the Department also declared on 21 December 2017 that it was “non-acquiescing” to a Labor and Industry Review Commission decision holding that an employer did not aid and abet claimant concealment: In the Matter of National Security and Investigations LLC, UI Hearing No. S1500384AP (6 Dec. 2017) (non-acquiescence 21 Dec. 2017).

NOTE: During the last few years, the Department has been eager to find an aiding and abetting case against an employer. SeeConcealment problems for employers too” (15 April 2015) (no aiding and abetting found, in part, because employer unaware of unemployment claims at issue) and Gussert v. Springhetti Landscaping and DWD, UI Hearing Nos. 16400598AP-16400609AP (27 January 2017) (no claimant concealment found in case where Department was alleging aiding and abetting by employer). This case represents the third unsuccessful attempt by the Department at such a case.

In this case, the small employer could not pay the employee anymore because of a shortage of revenue and a lack of timely payment of bills from clients. Given the slow business, the employer told the employee to file a claim for unemployment benefits, and the employee did so.

In those claims, the employee did not report any work for the employer since he was not getting paid for his work. During these weeks, the employer provided alternative compensation to the employee: a canoe, a car for a spouse, cash, use of a debit card, and use of a company vehicle.

The employee eventually quit because of a lack of work. He then filed a wage complaint for unpaid wages against the employer, and a settlement was eventually worked out. After the settlement and resolution of the wage case, the employer informed the Department of unreported wages during the weeks the employee had filed claims for unemployment benefits.

The Department charged the employee with concealment, and no appeal of that charge was filed. The Department also charged the employer with aiding and abetting claimant concealment because the employer told the employee to file a claim for unemployment benefits as work was slow and revenue was behind.

NOTE: That aiding and abetting charge was for $9320 (for what appears to be 25 weeks of benefits at $373 per week) plus another $12500 in additional penalties ($500 for each week of the alleged 25 weeks of concealment) for a total liability to the employer of $21,820.

This accusation was not enough to demonstrate aiding and abetting for the Commission, however. The Commission explained (footnote omitted):

The record shows that the department’s initial finding of aiding and abetting was based on the adjudicator’s impression that the employer instructed [the claimant] not to report hours and wages to the department when filing for unemployment benefits. The employer clearly told [the claimant] to file for benefits while work was slow, but there is no objective evidence in the record that an agreement existed between the employer and [the claimant] to conceal work and wages from the department.

The distinction noted by the Commission here is vitally important. Claimants are entitled to benefits when available work has declined, and so there is nothing wrong with a claimant filing for partial unemployment benefits because of a decline in available work. Indeed, the formula for partial unemployment benefits encourages claims for unemployment benefits by making employees eligible for those benefits even when working numerous hours and receiving substantial pay in a given week.

This basic eligibility criteria certainly casts some shade on what the Department is alleging in this case. Because the Department in this case is essentially claiming that an employer encouraging an employee to file for unemployment benefits because of a lack of available work constitutes aiding and abetting, the Department is turning a basic eligibility issue into a point of liability for both employer and employee whenever there is cooperation between the two.

There is an additional problem with this case for employers: the employer, angry at having to settle a wage case, tried to turn the tables on its former employee by informing the Department about the former employee’s prior unemployment claims. Because the employer and employee were at one time friendly with each other, however, the Department turned their initial lack of hostility into a kind of conspiracy charge about unemployment benefits being paid in lieu of regular wages.

Luckily for the employer, the Commission saw through the dubious nature of this claim (footnote omitted):

Under the facts in this case, the commission finds that the most reasonable inference to draw is that [the claimant] intentionally withheld his time sheets in January, February, March, and April 2014 because it was to his advantage to do so. It was [the claimant’s] understanding, or justification, that he could claim unemployment benefits because he was not getting a paycheck. The unemployment benefits [the claimant] received provided him with money “to live on” and satisfied, at least in part, his child support obligation. Later, after he quit his employment with the employer, [the claimant] attempted to get paid for the hours listed on his time sheets, which had not been previously submitted, by filing a complaint with the state.

The employer unquestionably could have been more diligent in analyzing its unemployment insurance reserve fund balance statements, but the fact that the employer failed to do so does not prove that the employer willingly assisted [the claimant in concealing work and wage information from the department. The employer did not know how partial benefits are calculated and believed that any weekly amount less than $360 was a partial benefit. [The claimant’s] co-worker claimed unemployment benefits during the first four months of 2014, and he reported working for and earning wages from the employer. There is no sound reason why the employer would aid and abet [the claimant] in concealing work and wages from the department while, at the same time, allowing [the claimant’s] co-worker to report work and wage information to the department.

But, any employer should take away from this case the fact that the Department is refusing to accept it as precedent. The Department believes that cooperation between employer and employee about eligibility for unemployment benefits could easily be the basis for an aiding and abetting charge against the employer. As the employer was originally charged with over $21,000 in liability for that alleged aiding and abetting, the danger being created by the Department here is much more than a speculative problem for small employers.

The Department essentially wants to punish employers who think their employees should be eligible for unemployment benefits. Should employers change their mind about that “cooperation,” they face a very real risk of being targeted by the Department.

Low unemployment rates and low unemployment benefits — record lows for a reason

Mark Sommerhauser’s article about possible changes to criminal prosecution of unemployment fraud has a remarkable chart detailing the roller coaster plunge in unemployment benefits in Wisconsin since the end of the great recession.

UI benefits chart

In 2018, only $1.11 million in first-week unemployment benefits were paid out in Wisconsin. Here are some numbers to provide some perspective on this decline in unemployment benefits.

Historical comparisons

At the January 2019 Advisory Council meeting, the financial report included some jaw-dropping numbers regarding the stellar decline in unemployment taxes employers pay and the even steeper drop in unemployment benefits being paid to claimants. Tom McHugh explained during his presentation that benefit payments in 2018 had not been this low prior to 1994.

So, a comparison between the years 2018 and 1994 seems in order. Monthly claims history data reveal:

| Year | Init. claims | Benefits paid |
| 1994 | 430,452      | $405,625,564  |
| 2018 | 283,398      | $397,746,075  |

So, while the amounts of benefits paid are relatively close — a difference of around $8 million — there is a difference of 147,000 initial claims between the two years. These numbers mean that in 2018 the Department paid on average $1403 in unemployment benefits for each initial claim, whereas in 1994 the Department paid on average $942 in unemployment benefits for each initial claim that year.

In part, the lower number in 1994 exists because the maximum weekly benefit that year was only $243, whereas in 2018 the maximum possible weekly benefit rate was $370.

But, this data also includes information about the weeks being claimed versus the weeks that are actually compensated.

| Year | Weeks claimed | Weeks compens. | Prct. |
| 1994 | 2,589,895     | 2,443,988      | 94.4% |
| 2018 | 1,659,861     | 1,352,076      | 81.5% |

In 2018, just over 81% of the weeks being claimed were leading to actual payment of unemployment benefits, whereas in 1994 fully 94.4% of initial claims led to the payment of unemployment benefits.

The available weekly claims data for these years adds another eye-popping wrinkle to this comparison: the size of the labor force.

| Year | Init. claims | Covered emply. |
| 1994 | 452,526      | 2,301,412      |
| 2018 | 279,912      | 2,817,338      |

Note: changes in the number of initial claims being filed likely exist because of what is being measured: weekly versus monthly claims data.

So, in 2018 there was a drop of nearly 62% in initial claims from 1994 even through the number of covered employees actually increased by more than 500,000. If eligibility for unemployment benefits was the same in 2018 as it was in 1994, there should obviously have been more unemployment claims given the 500,000 employee increase in the eligible labor force. But, rather than an increase in claims in 2018 there has instead been sharp dive in unemployment claims.

Someone might argue that the workforce in Wisconsin has substantially changed from 1994 to 2018. That explanation does not hold much water.

Union sector comparison

This chart shows that there have been slight declines in manufacturing from 1994 to 2017 in Wisconsin as a percentage of the workforce (from 25.44% of the workforce to 21.21% of the workforce) as well as in public sector employment (15.06% to 12.84% of the workforce). But, the real changes have not been so much in the makeup of the workforce so much as in the percentage of who belongs to a union. Only private construction has NOT seen a dramatic drop in both union coverage and union membership from 1994 to 2017. And, those drops are by half or more from what existed in 1994. So, the decline in unionization is at least strongly correlated with the decline in Wisconsin employees receiving unemployment benefits in this state.

Fraud comparisons

The other major factor at play with the decline in unemployment benefits is the increased prosecution by the Department for alleging fraud.

As the Department’s fraud allegations are a relatively new phenomena (while unemployment fraud has always existed as a category, prosecutions did not begin in earnest until this last recession), this data cannot provide a look back all the to 1994. But, this data does reveal what the Department has been doing since 2011.

Initial claims and fraud cases by year

Here, the number of fraud cases as a percentage of total initial claims actually increased in 2013 and 2014, declined in 2015 and 2016, and has held steady at 1.67% of total initial claims in 2017 and 2018.

The over-payments being assessed as percentage of benefits being paid out, however, actually increased slightly in 2018, going from 1.11% of all unemployment benefits paid out in 2017 to 1.18% in 2018.

over-payments assessed by year

The decline in collections in 2018 from 2017 was more sizable, dropping from 3.14% of all benefits paid out to 2.58% of all unemployment benefits paid out in 2018.

over-payments collected by year

Noticeably, the collection of over-payments allegedly connected to fraud were in 2018 still more numerous than collections for non-fraud over-payments. Only in 2011, the first year of the Walker administration, was the ratio of fraud to non-fraud over-payment collections well below 100% (at 55.51% that year).

What’s next?

This month, the Department announced that unemployment rates are at a record low of 2.8%. As Jake has described these numbers, this low unemployment rate masks significant job losses in Wisconsin. Wisconsin is trailing the rest of the mid-west in job growth (and the mid-west itself as a region is trailing the rest of the nation in job growth).

The 1994 numbers described above indicate that while the state’s economy has not actually changed all that much from what existed in 1994, the unemployment system itself has markedly change. Even with a maximum weekly benefit rate in 2018 that is $127 higher than what existed in 1994, total unemployment benefits being paid out are about the same in 2018 in absolute dollars (i.e., NOT adjusted for inflation), 24 years later. This stagnation is shocking.

The big change with unemployment during the last eight years or so is the expansive and aggressive charging of unemployment fraud by the Department for accidental claim-filing mistakes. The case law is now over-flowing with decisions about how the Department has charged claimants with fraud for accidental claim-filing mistakes, defended those charges despite all evidence to the contrary, and even sought retribution against those who dared challenge the Department’s wishes on this front.

And, it is obvious to anyone filing unemployment benefits today about how complicated and difficult the claims-filing process has become. It is now all too easy for someone to make an accidental mistake during their weekly claim certification and then find themselves facing charges for unemployment concealment simply for not understanding what is being asked.

Note: this confusion and resulting mistakes ares even more likely when language and technology barriers are considered. Unemployment claims are on-line only now and STILL only in available English.

Finally, the decline in union representation and coverage from 1994 to 2018 indicates that the institutions that could have raised alarms and fought back against these changes to the unemployment system today lack the strength and support to conduct such a fight. As a result, these fundamental and far-reaching changes to the unemployment system have occurred without significant challenges.

A possible change on the UI fraud vendetta?

Mark Sommerhauser had an article this past Sunday for the Wisconsin State Journal about the push started by the prior administration for charging fraud against claimants for their non-intentional, claim-filing mistakes.

Not surprisingly, the former unemployment administrator, Joe Handrick, talked up how claimant fraud cases were, according to him, always legitimate.

Handrick said he fears those efforts could lose momentum under a provision of Evers’ plan for the next state budget, which calls for eliminating the one-week waiting period. Handrick said the waiting period was crucial in enabling state officials to catch fraudulent applications.

Handrick also rejects claims that some people prosecuted for fraud only made mistakes, saying the department long has distinguished between intentional and inadvertent omissions by claimants that lead to benefit over-payments.

“The things that get assigned as fraud are where the person clearly and intentionally attempts to defraud the people of the state of Wisconsin,” Handrick said. “Only the worst of the worst get referred to district attorneys for prosecution.”

There are two major problems with this statement.

First, the waiting week has absolutely nothing to do with alleged fraud investigations. The waiting week originally existed as a mechanism for delaying payment of unemployment benefits because of administrative difficulties in processing unemployment claims. Since the 1980s, however, that delay has no longer been needed, and now a waiting week’s only purpose is to reduce the unemployment benefits that are paid out. See Avoiding Waiting Weeks, “Unemployment Insurance Policy Advocate’s Toolkit” at 56-7.

This claim about waiting weeks is even more surprising in light of the Department’s obvious delays in investigating claim-filing mistakes. Indeed, the Department has gone out of its way to delay investigations and efforts into claim-filing mistakes so as to make the amounts at issue larger when the Department finally gets around to examining alleged mistakes. Furthermore, while other states have instituted practices that actually match claim-filing information with employer’s withholding tax reporting, Wisconsin has refused to implement such an obvious mechanism for catching claim-filing mistakes quickly. See my discussion of Massachusetts and New Mexico in Findings of the unemployment audit (17 Dec. 2014). The Commission as well has observed that the Department’s concealment efforts do NOT prevent improper payments from occurring in the first place and has noted that the Department’s concealment investigations often lead to exceptionally long and unwarranted delays in benefit payments.

Second, Mr. Handrick is ignoring the hundreds of cases in which the Department has alleged fraud for UNintentional claim-filing mistakes. There is a reason, after all, for why the Department wanted the Commission eliminated in the last budget cycle. See LIRC’s elimination (1 March 2017). In 2014, only 20% of the Department’s concealment charges that were appealed ended up being affirmed. This evidence indicates that only one out of every five of the Department’s concealment charges are actually based on intentional acts of claimants.

Note: recent cases that have come to my attention indicate that the Department’s appetite for alleging concealment has only increased over the years. See Thoreson v. Thor’s Wolverine Den LLC, UI Hearing Nos. 18401886MD and 18401885MD (22 Mar. 2019) (claimant who helped brother tend bar for no pay does not have to repay any unemployment benefits and certainly not the $25,000 in alleged concealment charged by the Department because claimant did no work for brother).

In other words, there is a gigantic gap between Handrick’s statements about rampant unemployment fraud and the reality of folks being confused and making accidental mistakes when attempting to navigate a hostile and opaque claim-filing system. No one should be taking Handrick’s statement’s at face value. Luckily, the new Department secretary, Caleb Frostman, indicates in the State Journal article that he wants to make the unemployment claim-filing process friendlier to claimants. Here’s hoping he and the Department get to work on this goal. And soon.

Unemployment benefits for federal workers during the shutdown

The Department of Workforce Development released the following notice yesterday:

Wisconsin ready to assist furloughed federal employees
Workers can access unemployment funds during partial shutdown

MADISON — Federal employees in Wisconsin can apply for unemployment benefits to help meet their financial needs while they wait for work to resume.

“We are ready to assist any federal employee that is facing a lack of work and income due to the partial shutdown,” said Department of Workforce Development Secretary Caleb Frostman. “Furloughed federal workers are dislocated workers, unemployed through no fault of their own and can apply for unemployment.”

Federal employees can apply for unemployment through DWD’s online UI benefit system at my.unemployment.wisconsin.gov.

Because many federal offices are currently closed, furloughed workers should be prepared to provide wage verification in the form of pay stubs or a W-2 form as DWD may be unable to verify wages through the employer.

Federal workers that are working full time but are not being paid during the partial shutdown are not eligible for unemployment benefits.

There are more than 29,000 federal employees in Wisconsin. Per preliminary counts, DWD’s unemployment division fielded roughly 426 total initial and continued unemployment compensation claims between Jan. 7 and Jan. 11, 2019.

As required by law, workers who receive back pay should plan to repay any unemployment benefits received.

Several issues need pointing out, however.

First, federal workers are finding it difficult to impossible to actually file unemployment claims. On-line claims (the only method allowed for filing an unemployment claim) are being rejected without an explanation that the worker understands. And, phone calls to get an explanation are limited to certain days of the week, and those days are connected to a worker’s social security number. Miss that day, and you have to wait several other days or maybe even a week to try again with a phone call.

Note: For example, after two minutes of voice menu choices and prompts, I learn that I need to call back on Monday, Wednesday, or Friday, as Tuesday is not my designated day according to my social security number if I want to ask someone a question about the claims-filing process.

Second, the on-line claims process (the last time I had access) does not contain a category for govt shutdown. These workers are not laid off. They have not been discharged either or let go for performance-related reasons. They could indicate that they are locked out, but I do not think that reporting category exists. And, the kind of questions being asked can lead to claims being summarily rejected. For instance, a federal worker could easily report he or she is still eligible for work with his or her federal agency. Answering yes to such a question would automatically mean no eligibility for unemployment benefits because the separation seems to be a voluntary quit by the employee.

Third, given the Department’s eagerness to charge concealment for non-intentional claim-filing mistakes (including in 2018 alleged mistakes in reporting the reasons for the employee’s separation from employment). So, an employee might indicate he or she is laid off and start collecting benefits because of the shutdown. The Department may later conclude, however, that this layoff “reason” is incorrect and then charge the claimant with unemployment fraud for intentionally providing misleading information on his or her unemployment claim (and even when the mistake was actually unintentional).

Note: for a full description of the unemployment concealment issue, see this expert report I prepared for a case of a claimant charged criminally for the kind of unemployment concealment allegations that the Labor and Industry Review Commission routinely dismisses.

Fourth, any federal workers with second jobs, while still eligible for unemployment benefits, MUST make sure to report wages and hours from those second jobs. Under-reporting those numbers will automatically be considered by the Department to be fraudulent. So, any wages or hours from a second job should be OVER-reported to avoid a fraud charge down the road.

Fifth, you will need to do four job searches a week and many other tasks to remain eligible for unemployment benefits. For how to handle those job searches and other unemployment filing matters, make sure to review these tips for filing unemployment claims in Wisconsin.

Finally, when/if the shutdown ends and if/when missing wages are repaid, you will need to immediately contact the Department about re-paying unemployment benefits. If you wait for the Department to contact you, expect to be charged for unemployment concealment.

So, as repeatedly said here, unemployment is purposefully difficult to impossible to receive and everyone should avoid unemployment benefits unless you have no other options. The on-line system is designed for the benefit of the Department — not you — as a way to catch a mistake on your part. As obvious, these hoops and obstacles for filing unemployment claims are part of a larger economic change underway in this state the past several years. Until there are significant changes in the unemployment system in Wisconsin, you need to be as careful as possible and understand that the Department is always looking for a reason to disqualify you or charge you with concealment if you do end up receiving unemployment benefits.

UPDATE (17 Jan. 2019): Another problem appears for federal employees — having the wages to qualify for unemployment benefits in the first place. Because of the shutdown, federal agencies are not responding to inquiries from state unemployment agencies about verifying employees’ wages. As a result, employees need to produce pay stubs going back a year or more to establish the wages paid out for various quarters. The catch: access to the pay stubs is usually only available to employees when at work using their computers.

A January 15th press release from the House Committee on Ways and Means has the details:

Neal Calls on Secretary Acosta to Help Furloughed Workers Access Unemployment Insurance
 WASHINGTON, DC – Today, Ways & Means Committee Chairman Richard Neal (D-MA) sent a letter to Department of Labor (DOL) Secretary Alexander Acosta calling for guidance to be issued that would ensure that states can provide federal workers not being paid during the government shutdown with Unemployment Insurance (UI) benefits. Roughly 800,000 federal workers are furloughed without pay due to the shutdown, and President Trump has stated that this impasse could persist for many more months. Unemployment Insurance would  help furloughed workers make ends meet and pay for necessities as the shutdown continues.

“During the shutdown in 2013, the Department of Labor moved quickly to make sure this lifeline was available to workers, issuing guidance to state workforce agencies about helping workers access UI benefits, 10 days after the shutdown cut off their pay,” wrote Chairman Neal. “Twenty-four days after the shutdown began, your department has not issued similar guidance to help federal workers navigate this crisis. Indeed, many states are working hard to help these workers, but the lack of guidance and leadership from DOL has impeded their progress.”

Certain UI eligibility requirements – for example, that recipients be actively searching for new jobs, and that they obtain proof of eligibility directly from agencies – can be waived when workers are furloughed or are expected to return to their jobs without pay. However, Chairman Neal pointed out that without guidance on this matter from DOL, “we are hearing reports that some workers have been unable to access benefits, and without guidance, states may not be able to use the flexibility in federal law.” Mr. Neal also raised his concern that as the shutdown drags on, DOL does not act, and more furloughed workers are called back to the office, “this Administration is simply forcing more and more federal workers to return to their work stations without pay or UI benefits.”

Lastly, Chairman Neal pointed out that “the need for unemployment benefits caused by the shutdown will, in the short run, have a negative impact on unemployment trust fund balances, which are already dangerously low in a number of states.” He asked that Secretary Acosta respond and explain “what harm the shutdown is doing to state unemployment insurance trust funds in the short run, whether that impact is triggering tax increases for employers to fund the shortfall, and how you plan to work with states to remedy that harm in the longer term.”

Full text of the letter is available HERE.

As obvious from this press release, the Dep’t of Labor is simply dropping the ball on a host of issues and so adding additional hurdles for federal employees trying to claim unemployment benefits when out of work through no fault of their own.

UPDATE (23 Jan. 2019): For more information about the problems federal workers are having in filing their unemployment claims and actions states can do to ease that claim-filing, see this posting by Andrew Steiner of The Century Foundation.

Note: There is typo in the article. The governors who want the federal govt to pass legislation to allow unemployed federal workers to receive unemployment benefits even when called back to work for no pay are from Michigan, New York and Washington, not Wisconsin.

 

Criminalizing unemployment benefits

The Department of Workforce Development has not only been extremely aggressive on charging claimants with concealment (aka fraud) for unintentional claim-filing mistakes, but it has also pushed criminal penalties for that concealment. I noted previously that the state’s Department of Justice has been only too eager to follow up with that criminal prosecution for those mistakes.

Since then, the state Justice Department hired Jake Westman specifically to prosecute these cases, and he has been busy. Here are his 2016 cases (11 filed that year), his 2017 cases (45 filed that year), and his 2018 cases (37 filed so far). Since he switched in October 2018 to a job at the Division of Hearings & Appeals, Shelly Rusch has taken over his case load. Here are her 2017 (1 case from Westman) and 2018 cases (11 switched from Westman so far).

All of these 93 cases charge claimants criminally with unemployment fraud. None so far have gone to trial, and almost all have ended with plea bargains. One case, 2018-CF-129, was dismissed on Ms. Rusch’s motion after a competency hearing.

Here is a breakdown of the claimants charged in these criminal cases based on race, gender, and initial address information available in these court records.

Westman and Rusch cases by race and gender

Here, we see that all 11 of the 2016 cases were against African-Americans living in Milwaukee. In 2017, African-Americans were defendants in 32 of 45 cases, or 71%. All of those cases were against Milwaukee residents. Of the remaining 13 cases in 2017, seven were against Caucasians, three against Latinos/as, and two against Native Americans. In 2018, the cases against African-Americans finally expanded beyond Milwaukee with 24 based there and four based in other cities. For 2018, African-Americans constitute 75.7% of the defendants (28 out of 37). The remaining nine cases consist of Caucasian defendants.

More Caucasian men are being criminally charged than Caucasian women (nine to seven). Among African-Americans, however, more women are being charged: 38 women to 34 men.

As noted here, the Department of Workforce Development considers concealment to be an unintentional claim-filing mistake. The Department claims otherwise, but the cases brought by the Department and appealed to the Labor and Industry Review Commission show that the Department presumes claimant’s mistakes are intentional and then places the burden of proof on claimants to demonstrate that their mistakes were accidental for some reason. Without knowledgeable help from someone who knows how complicated the unemployment claim-filing process has become or how aggressive the Department is on this issue and a Commission that insists on following unemployment law as written, it can be difficult for someone to explain his or her confusion and get a concealment charge overturned.

What makes this criminal prosecution of claimants for their mistakes even worse is that the Commission has NOT applied the strict liability for mistakes standard that the Department wanted with the 2016 changes in the definition of unemployment concealment. Section 18 of 2015 Wis. Act 334 left intact the requirement that unemployment concealment means “to intentionally mislead.” And so, the Commission has affirmed that unemployment concealment still requires a finding of intent. See Domingo Ramos, UI Hearings Nos. 16606402MW and 16606403MW (23 Feb. 2017) (applying new concealment definition, Commission finds that claimant’s job search mistakes were not intentional and so not concealment).

The Department of Workforce Development, however, has consistently ignored this requirement for unemployment concealment to be intentional and continues to charge concealment against claimants for their unintentional claim-filing mistakes.

And, now the Department of Workforce Development has been combining with the state Department of Justice to bring criminal charges against claimants for those same accidental mistakes. The plea bargains in many of these cases involve little more than paying back the alleged concealment penalties DWD first charged against these claimants in unemployment proceedings. In several, those monies have already been paid back, and so claimants are simply stuck with an additional $500 to $1000 in court costs as part of their plea bargain. In some other cases, it appears that the criminal case was nothing more than an additional mechanism with which to pursue collection against claimants for whom prior collection efforts had been unsuccessful.

That DWD and the state DOJ is targeting folks by race is obvious from this data. Here are the number of “fraud” cases by year:

2013 -- 14,682
2014 -- 13,034
2015 -- 9,793
2016 -- 8,438
2017 -- 5,132

From Addendum A of the 2017 Fraud Report at 11. So, of the thousands of fraud cases per year that DWD is pursuing, it is only bringing 30-50 criminal cases a year, and 70-80% of those criminal cases are against African-Americans. This result simply stinks to high heaven.

But for a new governor who may or may not think of unemployment in the same way as his predecessor, things would be getting even more dire. Rep. Kerkman managed to get criminal penalties for unemployment substantially increased via 2017 Wis. Act 147. As detailed in the Legislative Council memo, fines are substantially increased (usually now up to $10,000 or more) and prison time is increased substantially as well (now from nine months to ten years) depending on the amount of “concealment” at issue.

The current practices of DWD are making unemployment not only impossible to receive but damn near dangerous. Something needs to change in 2019.

Still more money for program integrity

Program integrity at the Department of Workforce Development is about to get a big infusion of cash.

NOTE: While program integrity is intended to examine employers who mis-classify their employees as independent contractors, the main focus has apparently always been on charging employees with unemployment fraud. I make this claim because: (1) my numerous dealings with program integrity investigators has always been on behalf of employees charged with unemployment concealment, never on behalf of employers charged with mis-classified employees, (2) for unknown reasons, reports to the Advisory Council about the Department’s worker mis-classification efforts have always been done orally, (3) those oral reports have never indicated that the entire scope of this program is being described, (4) Department publications in 2017 about its program integrity efforts only have information about claimant concealment and not actual mis-classification efforts, and (5) reports from Department insiders indicate that “program integrity” is a widespread effort toward identifying alleged claimant concealment that includes both specific employees solely focused on program integrity and an additional job duty for all of the Department’s claimant investigators and adjudicators.

Recall that the 2015 unemployment changes in 2015 Wis. Act 334 included two provisions that essentially created a slush fund available to the Department for its “program integrity” efforts.

At the 21 September 2017 meeting of the Advisory Council, Secretary Allen requested and the council approved enactment of this assessment. As the financial report at that meeting indicated unemployment tax receipts amounted to $581.7 million, this tax diversion to program integrity will bring in around an additional $58,170. These funds are on top of the $1.63 million transferred to program integrity in proposal D17-08 that is now part of SB399. SB399 is awaiting the governor’s signature.

NOTE: The Department’s 2017 proposed changes to unemployment law which are now part of SB399 are discussed here.

The Department is running the table.

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