No administrative concealment penalties for Lost Wages Assistance

There is no doubt any longer that the 40% administrative concealment penalty that the Department charges for unemployment fraud is highly profitable to the Department.

Note: The 40% administrative penalty is actually two separate penalties: a 15% penalty that goes back into the unemployment trust fund and a 25% penalty that goes into a separate program integrity fund.

The program integrity fund has mushroomed in size with the Covid-19 pandemic, as all of those unemployment benefits that were paid out have become an effective mechanism for charging unemployment fraud for unintentional claim-filing mistakes and thereby tacking on additional administrative concealment penalties. From its creation in December 2015, the program integrity fund has risen to over $36 million by March of this year.

The “dedication” of the Department to charging these administrative concealment penalties became obvious from testimony during various hearings in 2022 and early 2023, when Department program integrity staffers revealed that the Department applied the 40% administrative concealment penalties as early as December 2020 to Pandemic Unemployment Assistance (“PUA”) benefits.

At that time, the U.S. Dep’t of Labor had explicitly directed that PUA benefits were NOT subject to administrative concealment penalties, because the U.S. Dep’t of Labor understood at that time that PUA benefits were like Disaster Unemployment Assistance (“DUA”) benefits. See UIPL No. 16-20 Change 2 (21 July 2020) at I-9 (states may not impose a 15% fraud penalty or their own disqualification period because provisions set forth in 20 CFR § 625.14 for DUA benefits govern and did not allow for such additional fraud penalties).

Note: DUA benefits are FEMA-funded and so not an unemployment benefit at all, an important point that will be revisited below.

Another note: In UIPL No. 16-20 Change 4 (8 Jan. 2021) at I-24 to I-25, the U.S. Dep’t of Labor reversed course by concluding that Section 251 of the Trade Adjustment Assistance Extension Act of 2011 (TAAEA), Pub. L. 112-40 (2011) applied to PUA benefits, as PUA benefits qualify as an “unemployment compensation program of the United States” for which a minimum 15% administrative concealment penalty must be charged. In UIPL No. 20-21 (5 May 2021) at 4-5, the U.S. Dep’t of Labor expanded application of administrative concealment penalties to include PUC, MEUC, and PEUC benefits as well as PUA benefits.

So, the Department had decided to charge administrative concealment penalties for PUA benefits WHEN the U.S. Dep’t of Labor had explicitly directed states to NOT charge administrative concealment penalties for PUA benefits and BEFORE the U.S. Dep’t of Labor had reversed course and determined that PUA benefits should be subject to administrative concealment penalties.

In light of the Department’s “dedication” to charging administrative concealment penalties, the Department also began charging its administrative concealment penalties to Lost Wages Assistance that claimants received (according to Department program integrity staffers, the Department made the decision to charge administrative concealment penalties for Lost Wages Assistance in August 2020, more than a month before any Lost Wages Assistance was even paid out to claimants in Wisconsin).

Furthermore, the Department charged these administrative concealment penalties in many cases without any notice, as the first UCB-27 forms in 2021 that set forth over-payments for Lost Wages Assistance failed to disclose the administrative concealment penalties the Department was charging.

Note: Compare later UCB-27 over-payment notices for Lost Wages Assistance that included the administrative concealment penalties.

And, there certainly was no way to appeal these alleged over-payments, as the UCB-27 forms were not themselves appealable, only notices that could be “objected” to.

The problem here is that Lost Wages Assistance, like Disaster Unemployment Assistance, was awarded from Robert T. Stafford Disaster Relief, see generally 42 USC §§ 5121–5207, and Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019 (Aug. 8, 2020). As with DUA benefits, Lost Wages Assistance was funded as emergency disaster relief and was never a federally-funded unemployment benefit. So, there was never any legal basis for charging administrative concealment penalties for Lost Wages Assistance.

As already observed, however, the Department was and is “dedicated” to charging administrative concealment penalties. As a result, only a few people who had representation have managed to challenge these administrative concealment penalties for Lost Wages Assistance.

Those who managed to get this issue to the Labor and Industry Review Commission finally saw a different result, as the Commission concluded that there was no legal basis whatsoever for charging administrative concealment penalties for Lost Wages Assistance.

On September 27, 2022, an appeal tribunal decision was issued finding that the claimant intentionally concealed work and wages from the department while working as a self-employed real estate agent. The decision resulted in a $1,200 overpayment of LWA benefits. [The appeal tribunal had also concluded that 40% administrative concealment penalties applied to Lost Wages Assistance because concealment penalties always apply when there is unemployment fraud.]

The issue presented in this case is whether the department may assess a 40% penalty on the LWA overpayment because of the concealment of the hours worked and income received by the claimant from his self-employment.

The commission finds that the Department does not have the legal authority to charge a penalty on fraudulently obtained LWA benefits. The LWA program is not an unemployment benefit program, and the associated benefits are not unemployment benefits.

Note: Ex. 7 at U78; Hearing Tr. at 39 (Department witness testified that “LWA is not an unemployment benefit.”)[.] The LWA program was created by a Presidential Memorandum on August 8, 2020, under the Robert T. Stafford Disaster Relief and Emergency Assistance Act[,] 42 U.S.C. § 5174 (the “Stafford Act”).

As such, the legal authority that requires a penalty to be charged on fraudulently obtained regular unemployment benefits and the federally provided pandemic unemployment benefits does not extend to the LWA program and benefits.

Note: The Department of Labor (“DOL”) initially advised states that a fraud penalty could not be charged on Pandemic Unemployment Assistance (“PUA”) benefits that were obtained fraudulently. UIPL 16-20, Change 2, Attachment I, I-9, issued July 21, 2020. However, the DOL subsequently changed its stance on whether a penalty could be charged on PUA benefits that were obtained fraudulently. UIPL 16-20, Change 4, issued January 8, 2021. The DOL provided further guidance that informed states that the fraud penalty must be charged to all CARES Act unemployment benefits obtained fraudulently. This included PUA, Federal Pandemic Unemployment Compensation (“FPUC”), Mixed Earners Unemployment Compensation (“MEUC”), and Pandemic Emergency Unemployment Compensation (“PEUC”) benefits. UIPL 20-21, p 4-5[,] issued May 5, 2021. As justification for this change, the DOL cited Section 251(a) of the Trade Adjustment Assistance Extension Act of 2011 (“TAAEA”) (Pub. L. 112-40), which created section 303(a)(11) of the Social Security Act (“SSA”) (42 U.S.C. § 503(a)(11)). Section 251(a) of the TAAEA applies to unemployment benefit programs. 42 U.S.C. § 503(a)(11) states, “At the time the State agency determines an erroneous payment from its unemployment fund was made to an individual due to fraud committed by such individual, the assessment of a penalty on the individual in an amount of not less than 15 percent of the amount of the erroneous payment.”

The claimant was paid LWA for weeks 31, 33, 34, and 36 of 2020 in the amount of $1,200.00 [$300 each week], for which the claimant was not eligible and to which the claimant was not entitled, and that the payment of such benefits was due to. Fault on the part of the claimant and/or repayment would not be contrary to equity and good conscience, and that recovery of the benefits paid shall not be waived, within the meaning of Section 262 of the Continued Assistance for Unemployed Workers Act of 2020.

The department may not assess an administrative penalty equal to 40% of the LWA overpayment.

The Department’s “dedication” to administrative concealment penalties would not be denied, however. And so, the Department appealed the Commission decision to circuit court. But, it turned out that the circuit court was not as dedicated to administrative concealment penalties as the Department. The court initially observed:

This case involves the legality of a $480 penalty the Department of Workforce Development (“Department”) assessed against [the claimant] for his inappropriate receipt of $1200 in disaster relief funds stemming from his concealment of real estate commissions earned during four weeks in 2020. It is a fair assumption that, even with rigid adherence to electronic document protocols to prevent waste, the litigants have incurred more than $480 in paper costs addressing this penalty.

The amount of the penalty, however, is not the issue. The issue is the Department’s authority to assess it, and in order to resolve that issue, the Court must harken back to the strange and surreal period known as the COVID-19 pandemic.

* * *

The Department essentially makes two arguments supporting its authority to assess a penalty on overpaid LWA payments. First, it contends that the provisions of the CARES Act specifically authorize the Department to assess a penalty, and those provisions can and should apply to the LWA, as well. Second, the Department argues that, because [the claimant’s] LWA benefits were paid from the Wisconsin Unemployment Trust Fund, the Department is authorized to charge a 40% penalty—and in fact the Department is statutorily required to impose that penalty—under Wis. Stat. § 108.04(11)(bh).

The court rejects both claims. First:

Unlike the CARES Act programs, however, LWA is not an unemployment program. The source of the program, the guidance associated with it, and the testimony of the Department’s own witness before the appeal tribunal, establish this. None of the authorities cited by the Department specifically authorizes the Department to charge a penalty on LWA overpayments, nor does the State Plan agreement with FEMA authorize imposition of a penalty.

Second, as to payment of Lost Wages Assistance coming from the unemployment trust fund through a decision by the Department to pay Lost Wages Assistance from the trust fund rather than following federal guidance:

LWA, however, is not an unemployment insurance program, but a major disaster assistance program, and thus [California Dep’t of Human Resources Development v. Java, 402 U.S. 121 (1991)] provides no support for the Department’s actions. Moreover, the USDOL was clear in its guidance that states could not use funds in their unemployment account in the Unemployment Trust Fund to process funding for LWA payments. (Doc. 38 at 96 of 134 (UIPL 27-20, Change 1)). Simply because the Department ignored that guidance and inappropriately paid [the claimant’s] LWA benefits from the Unemployment Trust Fund does not then bootstrap the Department’s authority to treat the payment like an unemployment payment and assess the penalty otherwise required by § 108.04(11)(bh). Organizations, particularly publicly traded corporations, can get into big trouble for pulling a stunt like the Department pulled in funding the LWA payments from an unauthorized account. In this Court’s view, state agencies should be held to a higher standard, not a more lenient one, when accounting for and disbursing public funds.

The tragedy here is that the Department’s illegal “dedication” to administrative concealment penalties has already won out. As the above-chart demonstrates, the Department has likely collected hundreds of thousands of dollars in administrative concealment penalties tied to Lost Wages Assistance that it will NOT be refunding to anyone, despite this court decision. Indeed, many do not even know about these illegal collections by the Department because they never received notice in the first place.

Lab test subjects as employees

(Update: 2 April 2024): Gov. Evers vetoed AB398.

I am vetoing Assembly Bill 398 in its entirety.

This bill specifies that compensated participants in clinical research trials shall not be treated as employees for purposes of minimum wage, worker’s compensation, and unemployment insurance laws.

I am vetoing this bill in its entirety because I object to potentially depriving clinical research trial participants from receiving the protections and benefits to which employees are generally entitled, as well as related legal remedies. Additionally, the changes in this bill create a specific carveout from provisions that could otherwise classify an independent contractor as an employee for purposes of worker’s compensation protections. There continues to be a well-established process that the Department of Workforce Development uses to navigate employee and contractor determinations on a case-by-case basis. The department uses a six-part test for minimum wage, and a nine-part test for unemployment insurance and worker’s compensation benefits. These tests provide a guideline and consistency for classification between the relationships of individuals and employers.

I object to providing a specific carveout for clinical research trials, which may signal to other employers that they may seek similar special treatment for other work or services that would otherwise qualify for worker’s compensation benefits under the law, which may further limit employee protections.

Moreover, I am concerned this bill may cause Wisconsin to fail to conform with federal requirements. Specifically, it could put Wisconsin in nonconformity with the Federal Unemployment Tax Act which may put employer tax credits and Unemployment Insurance administrative grant dollars at risk of terminating.

Finally, neither the Worker’s Compensation Advisory Council nor the Unemployment Insurance Advisory Council has taken a position on the changes in the bill, and these councils should be key stakeholders for recommending such policy changes for enactment.

As evident here, Gov. Evers largely accepts what the Department is proclaiming about this bill. The problem here is that no one but the Department thinks that people involved in lab testing are employees. Does Gov. Evers really think that my daughters, when they participated in UW-Madison College of Education experiments about teaching math, were employees of UW-Madison because of their participation in those experiments? That is the position Gov. Evers has adopted here.

This bill is needed to correct what the Department is doing. The bill, however, needs to be amended, as indicated below, so that it actually accomplishes what it sets out to do.

---

Update (21 March 2024): I have asked Gov. Evers to veto AB398, which the legislature has sent to the Governor.

Update (23 Feb. 2024): There has been legislative action on the assembly companion bill, AB398, as the Assembly has passed this bill and sent it to the Senate for action.

I would encourage passage IF the bill was amended to actually exclude lab tests subjects as employees in unemployment law. For example: an amendment to the definition of employees in Wis. Stat. § 108.02(12) to exclude from the definition of employee an “individual who receives remuneration, a stipend, or 6compensation for being a participant in a clinical research trial as described in s.108.02 (15) (ko).” This exact provision is included in the proposed change to workers compensation law, and so there is no reason why it should not be applied in unemployment law.

---

In late 2022 and early 2023, a few folks started contacting me about being disqualified or having to repay unemployment benefits they received during the Covid-19 pandemic because of their participation in lab testing studies.

Then at the July 2023 Unemployment Insurance Advisory Council meeting, a coalition of lab testing companies and Rep. Gundrum asked the council to support a change in the law to exempt lab testing as covered employment. According to the minutes of that meeting:

State Representative Rick Gundrum addressed the Council regarding a proposed bill to clarify the employment status of participants in clinical research trials. Rep. Gundrum stated that participants in clinical research trials are volunteers and are not employees of the research organization. Participants receive a stipend for their participation. Rep. Gundrum stated that a clinical trial lasts between three and six months, with the typical participant’s length of stay at the research facility being three to four days. Rep. Gundrum stated that he has heard that DWD considers research trial participants to be employees. Rep. Gundrum stated that the research companies cannot enroll their own employees as participants.

Rep. Gundrum stated that that the draft of LRB 1462 seeks to clarify the relationship between participants and research companies. Under the proposed bill, participants would not be considered employees for purposes of Unemployment Insurance, Workers Compensation, and minimum wage. Rep. Gundrum stated that research organizations in Wisconsin are at a competitive disadvantage with similar firms in other states. The new bill addresses federal conformity issues raised by the Department in last session’s version of the bill.

Ms. Knutson stated that a copy of the LRB Draft is included in members’ packets.

Mr. Manley asked if a participant who is laid off and collecting UI benefits would lose their benefits.

Representative Gundrum stated that he does not think that participants would lose their benefits but will check further and get back to the Council.

Ms. Knutson stated she would check with staff to determine if the stipends would be considered reportable wages.

At the September 2023 Advisory Council meeting, SB387 was introduced to council members along with the Department’s fiscal estimate.

This bill proposes that a participant in a clinical trial is not an employee for purposes of state wage law and workers’ compensation law and is not in covered employment for purposes of state unemployment law. The Department’s fiscal estimate mostly indicates that the financial effects of the bill are indeterminate (other than an annual loss of $2.8 million in unemployment tax revenue to the unemployment trust fund).

This fiscal estimate also indicates that clinical lab companies would lose their FUTA tax credits because those companies would no longer be in compliance with federal unemployment law, unless those companies voluntarily agreed to have their clinical subjects listed as their employees for purposes of unemployment eligibility (and so, undoing the purpose of this proposed law).

As for unemployment purposes, this bill only addresses half of the problem — covered employment — and ignores the issue of employee status. As I wrote in an e-mail message to Rep. Gundrum in Sept. 2023:

I don’t think think SB387 will work as currently drafted. While it excludes employment for UI purposes, it does not address employee or wage coverage. Per the definitions of wages and employee in 108.02, a person qualifies for UI coverage if he/she performs services for pay for an employer/employing unit.

So, even if there is no employment, these lab volunteers will still have to report their wages and any separations to DWD-UI for these lab experiments. So, while the employer may no longer be paying UI taxes for their lab volunteers, the employers will still have to answer questions about all of their lab volunteers and still report all of these employee issues and wages for anyone who is claiming UI at the time of these experiments.

That is, for this proposal to exclude lab participants in all unemployment matters, the exclusion needs to be in both covered employment and in whether laboratory participants still qualify as employees for purposes of unemployment law.

Note: the definition of employee in Wis. Stat. § 108.02(12)(a) is expansive and applies to any person who performs services for pay for another. So, a lack of covered employment does not mean that unemployment is not involved. See Piontek v. Cooper Spransy Realty Inc, UI Hearing No. 09003831MD (17 March 2010), aff’d Piontek v. LIRC, 340 Wis.2d 742, 813 N.W.2d 248 (app. Ct. 2012) (a realty agent’s decision to transfer brokerages — i.e., quit one brokerage — disqualified him from receiving unemployment benefits because of his prior layoff from a factory as he was also an employee of the brokerage despite his realty services to that brokerage being in excluded employment).

I also had questions about the $2.8 million in unemployment tax revenues and the FUTA tax coverage problem mentioned in this fiscal estimate. Federal unemployment law does not really address this issue/problem of FUTA tax coverage, and I suggested that specific directive/advice from Region 5 of US Dep’t of Labor on this loss of FUTA tax credits question be sought out.

And, the $2.8 million figure in annual unemployment tax revenue seems much too large and is somewhat unbelievable. Understand that unemployment taxes only apply to the first $14,000 paid to an “employee.” So, a tax payment of $1000 per “employee” would be an extremely high 14% tax rate (for comparison, the highest tax rate applicable in the current Schedule D tax schedule is 12%, and the new employer tax rate for a large business in that schedule is 3.25%).

But, using that $1000 in unemployment taxes per employee figure would mean that clinical lab companies have 2,800 clinical lab “employees” for which unemployment taxes are being paid. The November 2023 jobs report for Wisconsin has all of 416,900 employees in health care and social assistance in the entire state (every hospital, doctor’s office, social worker, and other health-related employee). Using a 3.25% tax rate to get $455 in unemployment tax revenue means that there are nearly 6,200 clinical research subjects in Wisconsin based on the Department’s $2.8 million figure. And, a likely tax rate of 1.05% (for $147 in revenue per “employee”) means there are just over 19,000 participants in lab tests in Wisconsin.

All three of these numbers of clinical research subjects would make them a major job sector of the state economy. Maybe there are a few hundred clinical lab test volunteers every year in Wisconsin. But, are there 2,800 let alone 19,000 such volunteers every year? Given that laboratory research has never been seen as an economic engine in the state’s economy, something is off with the Department’s $2.8 million annual tax revenue figure.

Finally, this whole issue turns on the Department treating participants in lab tests as employees because they are allegedly performing services for pay for another. But, the Department also has explicit guidance that payments for blood and plasma donations do NOT qualify as income. I have yet to see any explanation from the Department that explains how a payment for blood in general is not income but a payment for blood for a laboratory test does count as income for unemployment purposes.

A hearing on AB398, a companion bill to SB387 is scheduled for January 10th before the Assembly Committee on Health, Aging and Long-Term Care. Here is hoping that some of these issues can be ironed out and some real change made with this bill.

PUA documentation notice is legally defective

In Colleen Koch, PUA Hearing No. 21603562MD (28 Jan. 2022), the Commission held that the Department’s notice for the PUA documentation requirement is legally defective, as the notice lacked notice language for filing the documentation late with good cause. The Department, however, has never corrected its PUA documentation notice. Accordingly, the deadline for satisfying the PUA documentation requirement has been extended indefinitely, since all notices of this requirement are legally defective.

So, all claimants who have allegedly failed to satisfy the PUA documentation should be allowed to resubmit their documentation at any time, as the deadline for submitting the required documentation is legally defective.

Note: A lack of a timely appeal of a PUA documentation determination may still prevent a claimant from getting a second chance to submit the required PUA documentation. For the standards to determine whether a late appeal is allowable or not, see the discussion of late appeals in the unemployment primer.

Note: Why the Department has not applied for a blanket waiver in regards to its inadequate notice per the provisions in UIPL 20-21 (5 May 2021) 7-10 and UIPL 20-21 Change 1 (7 Feb. 2022) at 9-18 (specifically noting that an inadequate notice by the state agency constitutes grounds for a blanket waiver, id. at I-4) for this PUA documentation requirement is a mystery. Given the legally defective notice, this issue would certainly qualify for a blanket waiver, saving both the Department and claimants a great deal of headache.

Full details regarding the PUA documentation requirement (with an update for this information about the defective notice) are available at Documentation for PUA claims.

No primary income test for PUA benefits in Wisconsin

Unique among the states, Wisconsin implemented PUA benefits during the Covid-19 pandemic with specific restrictions that did NOT match any actual statutory or regulatory requirements. One of these was a primary income test to deny PUA benefits to part-time workers who had other sources of income outside of their pandemic-related job losses.

The Commission’s argument was that the “primary income” of 20 CFR § 625.2(n) is not the same as the “principal income” in 20 CFR § 625.2(s) and (t), that the definition of self-employed individual in 20 CFR § 625.2(n) trumps the definition of an unemployed worker, 20 CFR § 625.2(s), and an unemployed self-employed individual, 20 CFR § 625.2(t), and that the federal program letters continue to maintain the primacy of the “primary income” test for PUA eligibility because subsequent program letters did not directly repeal this “essential” DUA eligibility requirement and because the requirement was still referenced in a US Dep’t of Labor reporting form in UIPL No. 16-20 Change 6 (3 Sept. 2021) at IV-5.

Contra the Commission’s claims, PUA eligibility did not wholesale incorporate DUA regulations. The CARES Act, Pub. L. 116-136, § 2102(h), 134 Stat. 281, 317, codified at 15 USC § 9021(h), indicated that DUA regulations only apply where expressly provided for in this sub-section of the CARES Act, where there was no conflict between the DUA regulations and this sub-section concerning PUA benefits, and then by substituting the terms “COVID–19 public health emergency” for “major disaster” and “pandemic” for “disaster.” In calling for the primary income test from DUA regulations to still apply for self-employed individuals, the Commission ignored the fundamental issue that PUA benefits were explicitly created, in large part, for part-time self-employed individuals who were not eligible for regular unemployment benefits because of their part-time, self-employed status.

When the CARES Act was enacted, eligibility for self-employed individuals was a specific eligibility category left to the discretion of the US Dep’t of Labor to define. See Pub. L. 116-136, § 2102(a)(3)(A)(ii)(I)(kk), 134 Stat. 281, 314, codified at 15 USC § 9021(a)(3)(A)(ii)(I)(kk) (“the individual meets any additional criteria established by the Secretary for unemployment assistance under this section”). This category was first set forth as follows in UIPL No. 16-20 (5 April 2020):

The Secretary has determined that, in addition to individuals who qualify for benefits under the other criteria described above, an individual who works as an independent contractor with reportable income may also qualify for PUA benefits if he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities, and has thereby forced the individual to suspend such activities. For example, a driver for a ridesharing service who receives an IRS Form 1099 from the ride sharing service may not be eligible for PUA benefits under the other criteria outlined above, because such an individual does not have a “place of employment,” and thus cannot claim that he or she is unable to work because his or her place of employment has closed. However, under the additional eligibility criterion established by the Secretary here, the driver may still qualify for PUA benefits if he or she has been forced to suspend operations as a direct result of the COVID19 public health emergency, such as if an emergency state or municipal order restricting movement makes continued operations unsustainable.

UIPL No. 16-20 at I-6 (emphasis supplied). As set forth here, this new category was intended as a catch-all to provide PUA benefits to individuals, particularly self-employed individuals, who could not claim regular unemployment benefits and who might not be eligible for PUA benefits for any of the reasons listed in the statute. Accordingly, the US Dep’t of Labor explained:

The eligibility criteria for PUA are different from DUA. An individual, in addition to having no entitlement to regular UC or EB, must also have no entitlement to Pandemic Emergency Unemployment Compensation (PEUC) under section 2107 of the CARES Act. An individual must self-certify that he or she is unemployed, partially unemployed, or unable or unavailable to work because of a COVID-19 related reason listed in section 2102(a)(3)(A)(ii)(I) of the CARES Act. Unlike DUA, an individual filing for PUA does not need to provide proof of employment or self-employment to qualify, nor does PUA take into account the individual’s principal source of income as part of the self-certification process.

UIPL No. 16-20 Change 1 (27 April 2020) at I-1 (italics supplied). Furthermore:

42. Question: UIPL No. 16-20 provides an example of a driver for a ridesharing service who is forced to significantly limit his or her performance of customary work activities because of the COVID-19 public health emergency, such as if a state or municipal order restricting movement makes continued operations unsustainable, indicating that he or she may be eligible for PUA under section 2102(a)(3)(A)(ii)(I)(kk) of the CARES Act. Does this apply to other types of independent contractors?

Answer: Yes. An independent contractor may be eligible for PUA if he or she is unemployed, partially unemployed, or unable or unavailable to work because of one of the COVID-19 related reasons listed in section 2102(a)(3)(A)(ii)(I) of the CARES Act. This includes an independent contractor who experiences a significant diminution of work as a result of COVID-19.

UIPL No. 16-20 Change 1 at I-11. As indicated here, self-employed individuals with a significant loss of work because of the Covid-19 pandemic could qualify for PUA benefits. There was no mention or requirement here concerning a primary or principal income test. Indeed, as explained in this same program letter, a person could be eligible for PUA benefits without any prior income at all.

Even with no wages in the base period, the individual must meet the requirements under section 2102(a)(3)(A)(ii)(I) of the CARES Act — he or she must be unemployed, partially unemployed, or unable or unavailable to work because of one of the COVID-19 related reasons. The individual must have an attachment to the labor market and must have experienced a loss of wages and hours or was unable to start employment following a bona fide job offer.

UIPL No. 16-20 Change 1 at I-6 (emphasis supplied). As stated here, there is no requirement that the pandemic-related job loss be to the individual’s primary or principal source of income. Indeed, it is explicit here that a PUA qualifying individual could even have no previous (base period) income at all from their “part-time” work but still be eligible for PUA benefits.

In two circuit court decisions — one in Vernon county and another in Milwaukee County — circuit courts have now ruled that there is no legal basis whatsoever for a primary income test.

Williams v. LIRC, Milwaukee County Circuit Court Case No. 2022-CV-5868 (slip op., 31 May 2023), provides the most detailed explanation of why the primary income test is wrong for PUA eligibility. Judge Colon (recently appointed to an appeals court position) concludes:

In this case, LIRC erroneously interpreted the applicable statutes in a manner that thwarts the full purposes and objectives of Congress. At all relevant times Williams remained attached to the job market and was able and willing to continue working, but was unable to do so for reasons related to the COVID-19 pandemic. As “an individual who works as an independent contractor with reportable income, she was a self-employed individual within the meaning of the CARES Act. When LIRC applied its overly narrow definition of self-employed individuals, it ignored the Secretary’s criterion that one’s principle source of income has no bearing on PUA eligibility, in direct conflict with the text and purpose of the CARES Act. To hold otherwise would make the language regarding independent contractors superfluous, contrary to legislative intent to provide benefits for workers who “otherwise would not qualify for regular employment,” and contrary to the canon against surplusage.

Williams, slip op. at 12-13.

So, any decision that denied PUA benefits pursuant to a “primary income test” should be revisited. Whether the Department will do so remains unknown. Also unknown is whether the Commission or the Department will appeal these circuit court decisions. Appeals are due the end of August.

Letter to Governor Evers

For the unemployment bills — AB147, AB149, AB150, and AB152 — recently passed by the legislature, I am urging Governor Evers to veto these bills in this letter.

---

I understand you are busy with the budget bills recently passed by the legislature.

But, the above-referenced unemployment bills recently passed by the legislature are also on your desk, and I urge you to veto them for the reasons indicated in my analysis of the bills at Legislature pushes a bunch of no-reform unemployment proposals (11 April 2023) and for the reasons noted by the Department of Workforce Development. A summary of this criticism is provided here.

AB147 (various changes to unemployment eligibility criteria)

These modified criteria have not been vetted or examined in any way, and so what these proposed modifications mean legally and practically is unknown. Indeed, some of the proposed changes already reflect current Department practices for which no legal basis can ever exist (e.g., requiring work registration in states that have no work registration requirements, a requirement the Department currently enforces despite it being impossible to accomplish in those states that lack a work registration process). Finally:

in a pique over the PUA and MEUC benefits and supplemental PUC benefits that were made available during the pandemic, the legislature wants the Joint Committee on Finance to have a voice in whether similar funds and benefits become available in the state in the future. As evident here, the legislators simply fail to understand that Wisconsin has a partial wage formula that encourages people to work while claiming unemployment benefits. Indeed, raising the benefit levels and removing the current $500 cap would probably lead to more people working while collecting unemployment, not less. Apparently, basic economics is not needed for unemployment legislation.

AB149 (mandating already existing employer reporting tools and even more work search audits)

These proposed changes essentially duplicate current Department practices and disqualifications under state unemployment law, while also mandating a level of work search auditing that would be impossible to accomplish without hiring thousands of additional state employees to accomplish such auditing (even at the record low claim-filing occurring in 2023). Current Department policies and practices are to audit some of the work searches for every claimant paid benefits, and the result has been a significant drop in claimants paid unemployment benefits:

As NELP points out, work search requirements have become an incredibly effective mechanism for keeping benefits out of claimants’ hands. Job searches themselves are easy, but the online-only reporting requirements are difficult to satisfy. As the 2023 Fraud Report at 6 reveals:

In 2022, DWD completed 22,012 work search audits. The audits resulted in 9,045 adverse decisions with benefits denied, including when claimants failed to conduct four valid work search actions. An additional 27,404 adverse determinations were issued for failure to answer the work search question or failure to provide required information on the weekly claim before the claim paid.

Nearly 28,000 claimants in 2022 (out of 263,248 initial claims, or one out of every nine claimants) lost out on benefits because they did not supply required job search information in the first place, even before an audit took place. When one out of every nine people fail to finish something, that reporting requirement is, by definition, NOT easy and understandable.

AB150 (changing unemployment to re-employment)

This bill would essentially transform the Department into a state agency for micro-managing the work search efforts of claimants. In so doing, this proposal creates a big government program to interfere with and control the labor market by directing the unemployed to those industries and jobs where the government itself determines is most important, rather than relying on the labor market itself and employer’s own efforts to recruit workers through wages, benefits, and working conditions that are attractive to those workers. Instead of state government as a backstop and support for private enterprise, this bill seeks to replace private employers’ worker recruitment efforts with a massive and all-encompassing government program. As such, this bill fundamentally misunderstands why private enterprise within regulated limits is an essential component of American society.

AB152 (additional customer service and employee transfer mandates)

As with AB149, this bill either duplicates already existing Department practices or pushes additional hiring/transfers that are a known failure point (because inexperienced staffers cannot be adequately trained in time to provide correct advice and decision-making that is needed during a time of crisis). What is actually needed is simplification and ease of use by reducing the amount of forms and complexity of information now being required by the Department.

What should be required is that DWD be mandated to do cross-matches with the quarterly unemployment tax reports the Department receives from employers in April, July, October, and January of each year for all weekly certifications filed during the previous four months (the Department’s current practice is to do a cross match on employer’s quarterly unemployment tax reports from nine to twelve months after the weekly certifications have been filed).

The Department should also be mandated to do cross-matches with employer’s payroll tax withholding reports submitted to the Department of Revenue on a monthly basis. In this way, any over-payments of unemployment benefits would be minimized to a month or less. Moreover, employers would no longer need to submit UCB-23 Wage Verification/Eligibility reports, as the Department would already have this information from the wage/tax withholding reports from the Department of Revenue.

* * *

Rather than hiring and training attorneys properly, the Department wants to force attorneys who handle environmental regulation cases, discrimination matters, or workers compensation cases into hearing and deciding unemployment cases. What the Department should be focused on is adequate training and hiring, not another kind of quick fix. As I have pointed out elsewhere, the skyrocketing number of denials and over-payments is largely because of inadequate information available to claimants. So, getting claimants educated with concrete, specific advice in place of legalisms so as to avoid all the denials in the first place is what is needed here.

In 2007, weekly certifications for unemployment benefits required answering 11 questions (and which could be done on the phone). By 2017, the number of questions asked on a weekly certification had mushroomed to 120+, which can generally only be answered on-line (for current questions, see Claim-Filing questions in Wisconsin as of June 2022 (30 May 2023). There is no legal reason for this complexation of the claim-filing process, and efforts at plain-language claim-filing need to return claim-filing to the basic and simple process it once was. These bills propose the exact opposite: to complicate the claim-filing process so that fewer and fewer will be able to navigate the process successfully. Accordingly, these proposed changes should be rejected out of hand.

The November 2022 public hearing

At the January 2023 meeting of the Advisory Council, the Department presented the public testimony from the November 2022 public hearing. As has happened in the past, there was no discussion or examination of that testimony.

Note: Examination of the last three unemployment public hearings and the testimony provided in 2020, 2018, and 2016 are available: Recap of the 2020 public hearing, Advisory Council meeting — 17 Jan. 2019, and Winter work search concerns.

Here is what the official minutes of the January 2023 Advisory Council meeting state:

Ms. Knutson stated that the Public Hearing was held by WebEx on November 17, 2022, in afternoon and evening sessions. An email box was available for comments. Comments could also be sent by US mail.

Ms. Knutson stated that 40 people attended the WebEx meeting. Ms. Knutson stated that a summary of attendees’ comments can be found in members’ packets.

Mr. Gotzler asked if there were common themes.

Ms. Knutson stated common themes included UI benefit increases, the decrease of the duration of benefits, what constitutes a valid work search, and benefits for migrant workers.

The actual testimony of 47 pages and a summary table indicate that there were numerous, detailed concerns raised in this public testimony.

For instance, Barbara Santiago raised questions about why job centers were being closed rather than kept open in order to provide essential in-person claim-filing and job assistance to claimants. Ms. Santiago even pointed out the statutory requirements for keeping those job centers open. And, Ms. Santiago pushed for mis-classification penalties for workers to be expanded to all occupations from just construction trades right now.

Ann McNeary pointed out how job search requirements as implemented right now are ineffective and cumbersome. Harry Richardson explained that the claim-filing process is too confusing and complicated, that in-person support and hearings need to be re-instated, and that contracted out claim-filing support was more than problematic.

Jason Childress of Foley and Lardner and others from Spaulding Clinical pushed for laboratory test subjects to be excluded as employees (that the subjects in a laboratory test are NOT performing any services for pay for the laboratory).

An administrative law judge even pushed for the number of initial determinations, especially in concealment cases, be reduced so that filing an appeal is easier to do and understand. At present, not all initial determinations are being appealed, which is leading to conflicting decisions/issues that cannot easily be resolved.

Legal Action of Wisconsin presented lengthy and detailed concerns on numerous issues involving migrant workers, including work search requirements for workers expected to return to their same employer (see Winter work search concerns), access barriers to claim-filing are not computer problems at all, and denials of over-payment waivers where there is no claimant filing fault.

There were also complaints from a few employers — G&G Lumber, Greenscapes, State Theaters, and an astroturf entity called Wisconsin Independent Businesses — about job search requirements needing to be enforced more rigorously in order to push people from unemployment into the labor force. As noted for a group of bills again being proposed, these requirements already exist; the problem employers are having with hiring has nothing to do with unemployment — claim-filing set a new record low in 2022 and is on pace for another record low in 2023 — but with a labor force that is shrinking.

As with the prior public hearings, however, none of this testimony will apparently have any impact with the members of the Advisory Council. Sigh.

The legal and illegal unemployment collections in Wisconsin

A person contacted me about his unemployment debt of around $15,000 (generally a low amount for the cases I am seeing). There was nothing that could be done about that debt other than to repay it. But, there were some issues in his case that everyone should be aware of.

The first thing to know are what the Department will do to collect an unemployment debt.

Department collection tools

The Department will apply the following mechanisms to collect any over-payment, whether the over-payment is related to a charge of fraud or not, to collect unpaid unemployment debts.

Note: None of these collection efforts should occur while an appeal to an administrative law judge or the Labor and Industry Commission is pending. Unfortunately, these collection efforts often occur regardless of any appeal. And, warrants and tax intercept notices have even been issued within days of the first initial determinations, before any appeals can even be filed. In such circumstances, immediately contact collections and inform them that an appeal has been filed and that you are waiting on a hearing or decision. If collection efforts continue despite the pending appeal, the Department is violating federal law.

• Offsets against future unemployment benefits you claim are the main mechanism available to the Department. Note, if fraud/concealment has been charged, however, these offsets will be Benefit Amount Reductions, and so the actual unemployment debt and concealment penalties will have to be repaid some other way.
• Repayment plans should be used whenever possible. Collections staff will agree on paying a lesser amount — what you can afford for six month periods of time. Then the entire remaining amount will be due. If you have not won the lottery in the meantime, Collections staffers will subsequently agree to another six-month repayment plan. That process will continue to repeat.
• Warrants (aka property liens) will be appear when the unemployment debt is large or when repayment is not happening regardless of the amount. Note, despite the use of the word “warrant,” these notices are not actual arrest warrants but property liens that affect your credit rating. Because warrants are public documents, however, others learn about them and will try to take advantage of the situation (more on this problem below).
• Intercept of state tax refunds are applied for in generally all cases, even when a payment plan is in place. There is little you can do to fight these, other than to leave Wisconsin so that you do not file state income taxes anymore.
• Intercept of federal tax refunds are limited by law to over-payments created by the misreporting of wages by a claimant or alleged fraud/concealment. But, the Department routinely ignores this restriction and issues notices to intercept federal tax refunds for any kind of unemployment debt. If that happens to you, you should immediately protest this illegal debt collection.
• Wage garnishments almost never happened ten years ago but now are routinely used if there is no repayment plan and the Department discovers that you are working (through the unemployment taxes that employers file each quarter with the Department). These garnishments will be for 20% of your wages.
• Levies of bank accounts in Wisconsin will occur if there has been no repayment activity for several months. Any Wisconsin bank account with your social security number attached to it will be subject to a levy, and the Department will take as much as needed to repay the debt, except for a base $1000 in the account.
• Bankruptcy is NOT an option, as the Department monitors all bankruptcy filings nationwide and will intervene in any action to make sure that the unemployment debt is NOT written off via bankruptcy.
• Criminal prosecution is likely for any fraud-related over-payments for which debt collection has not happened for a year or more. See Criminalizing unemployment benefits (27 Nov. 2018), and The targeting of African-Americans for criminal prosecution continues in 2020 (10 Feb. 2020). Over 70% of these cases were against African-Americans.
• Over-payment waivers are available IF two conditions are met. First, you need to have been found NOT at fault for the over-payment. Being found not at fault is exceptionally rare, however. Here is some claim-filing data from 2018 and 2019 that explains just how common claimant error is.

		                                         2018           2019
		Initial claims                          279,912        287,022
		Claimants paid                          130,710        129,888
		Claimants paid/initial claims          46.70%         45.25%
		Benefits paid                      $402,315,700   $394,247,432
		Non-fraud over-payments assessed     $8,202,583     $8,614,761
		Non-fraud over-payments collected    $9,419,356     $9,230,066
		Non-fraud cases                          44,634         41,197
		Non-fraud cases/Claimants paid          34.15%         31.72%

In other words, one out of every three claimants who filed a successful, paid initial claim in Wisconsin in these two years ended up having to repay unemployment benefits because of a non-fraud claim-filing mistake. Because they were “at fault” for a claim-filing mistake, they were automatically precluded from any kind of waiver.

This statistic also indicates that claim-filing mistakes are rampant and that a vast number of claimants cannot successfully navigate the claim-filing process without making an error. A system this error-prone is not a well-designed system in the first place.

The second condition varies based on the kind of benefit at issue. For regular unemployment benefits and EB benefits, that other condition is departmental error. See McKay v. Always Construction LLC, UI Hearing No. 13604640MW (13 Sept. 2013) (failure in the unemployment tax case to answer the questionnaire could not be applied to the benefits case, and so there was no claimant fault; and so eligibility in benefits case had no legal or factual basis, so there was departmental error).

For federally funded benefits paid out during the Covid-19 pandemic — PUC ($600 supplemental benefits in 2020 and $300 supplemental benefits in 2021), LWA ($300 FEMA payments for six weeks in 2020) PEUC (extensions of regular unemployment benefits in 2020 and 2021), MEUC ($150 supplemental benefits for independent contractors who were nevertheless collecting regular unemployment benefits or PEUC benefits), and PUA (benefits for pandemic-related job losses to those not eligible for regular unemployment benefits) — the other condition is whether you qualify right now for an equity and good conscience waiver. See also the waiver form and this spreadsheet as a substitute for the third page of the waiver form.

Non-Department collection scams

The person who contacted me had already had a collection warrant/lien filed against him in December 2022 by the Department. I encouraged him to enter into a payment plan for that unemployment debt. In March of this year, he received eight notices about that unemployment debt (click on the image to see a full-sized version).

All but the seventh notice — DWD’s actual repayment plan notice — are fraudulent. By law, the Department cannot negotiate or settle any claimant unemployment debt. Even if the Department writes off an unemployment debt as noncollectable for accounting purposes, the Department will never actually stop trying to collect.

Note: Sadly, the only way to stop debt collection by DWD — other than repayment — is death.

So, the promise in these notices to settle the claimant’s $15,000 debt for $1400 or so has no basis in fact or law. These notices, in other words, are scams and should be avoided.

Legislature pushes a bunch of no-reform unemployment proposals

Update 11 July 2023: Jacob Resnick of Wisconsin Watch has done some digging on the billionaire lobbying groups pushing these no-reform proposals. One of the key quotations from the article:

“One of the fastest ways that we can deal with Wisconsin’s ongoing workforce shortage is to keep people who are still in the labor market, those recently unemployed, productively engaged in the workforce,” Gibbs told members of the Assembly Committee on Workforce Development and Economic Opportunities.

The problem that this billionaires’ lobbyist fails to acknowledge, as noted below, is that unemployment has nothing to do with any worker shortage.

Update 17 April 2023: I testified at the committee hearing on April 12th for most of these bills. For some unknown reason, my written testimony has not been included in the committee materials for any of the bills.

Updated 12 April 2023 (added links to various policy briefs from NELP and a quotation from the 2023 fraud report).

---

With the April 2023 election, an incredibly general, state-wide advisory ballot question about people on welfare needing to work passed by wide margins.

The Wisconsin legislature has taken that passage as a message to suddenly revamp and fine tune unemployment eligibility without actually fixing any of the problems with unemployment claim-filing in this state.

First some background.

It is vital to know that unemployment claim-filing is now in 2023 much, much different from what used to occur.

Year    Claimants Paid Benefits     Initial Claims
2007    332,982                     638,548
2008    386,574                     736,245
2009    566,353                   1,125,127
2010    530,886                     826,872
2011    445,538                     722,018
2012    366,829                     613,667
2013    312,325                     550,050
2014    233,129                     488,472
2015    197,070                     423,858
2016    168,006                     385,405
2017    144,727                     305,813
2018    130,710                     279,912
2019    129,888                     287,043
2020    603,459                   1,202,700
2021    295,249                     529,476
2022    116,302                     263,248

As this data reveals, claim-filing in Wisconsin had plummeted just before the Covid-19 pandemic in 2020. In 2018, there was a record low of initial claims filed by individuals, and in 2019 there was a record low in the number of people who were paid unemployment benefits in Wisconsin.

Compare these numbers with what existed in 2007, a “normal” economic year when initial claims and weekly certifications were around 10 questions each and could be filed via a phone call. In that year, there were 638,548 initial claims, and 332,982 claimants were paid benefits that year (more than one out of every ten workers received unemployment benefits that year).

Obviously, the Covid-19 pandemic reversed that trend. But, that reversal was incredibly short-lived. In 2022, new record lows for claimants paid benefits and for initial claims filed in the state were set. Initial claims in 2022 were roughly 89% of the number of initial claims filed in 2019, and paid claimants in 2022 were under 90% of 2019 levels. And, this trend of ever declining unemployment has continued into 2023. As of week 13 of 2023, initial claims are running at around 84% of 2022 levels. So, 2023 is likely going to set still another record low for initial claims and in benefits paid to claimants.

At the same time that unemployment claim-filing has declined and declined and then declined some more, the labor force in Wisconsin has been relatively stagnant and unchanging throughout this time period.

In 2007, there were 2,732,290 workers in Wisconsin, and in 2022 there were 2,754,514 workers, an increase of only 22,224 after 15 years.

So, unemployment has become less and less an issue for Wisconsin workers. The data right now indicates that the vast majority of claims are filed in the winter months, when scores of businesses like landscaping, road building, some construction, and others cannot operate because of winter conditions.

Into this picture of unemployment claim-filing comes the state legislature now with a bunch of sticks to beat over the head of the few people still seeking unemployment benefits. Here is a rundown of these proposals.

AB147

This bill provides new ways to disqualify claimants for misconduct for:

• any damage to employers’ property and records done unintentionally, by accident,
• possible violations of employers’ social media policies, and
• violations of employers’ absenteeism policies pursuant to Beres.

This expansion of Beres and accidental damage raise a serious risk of Wisconsin employers losing their FUTA tax exemption, because the misconduct penalty of lost wages in a benefit year can only be applied to intentional employee conduct.

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.

As to the social media violation, this proposed change is basically incomprehensible. As written, this proposed statute makes any social media violation by an employee into misconduct. Accordingly, any employer discharge for a social media policy can now subject an employee to a misconduct disqualification. Hence, this provision is also likely to put state employers at risk of losing their FUTA tax exemption.

AB147 also mandates that employees with combined wage claims (also called interstate claims) who live outside of Wisconsin must register with the job center in their state. The problems with this proposed change are two-fold. First, the Department already requires claimants to do this registration. Second, this requirement ignores the fact that not all states and territories have job registration systems. Indeed, Minnesota, just next door, has no such requirement or system. As a result, Wisconsin is requiring claimants to do something that cannot actually be done in a state that lacks a job center like Wisconsin’s.

AB147 continues with still more nonsense. At present, the Department audits about 10% of all work searches. This proposal wants to increase the number of work searches being audited to 50%. As a result, it would either require the Department to quintuple its workforce or force current employees to do nothing but work search auditing.

Finally, in a pique over the PUA and MEUC benefits and supplemental PUC benefits that were made available during the pandemic, the legislature wants the Joint Committee on Finance to have a voice in whether similar funds and benefits become available in the state in the future. As evident here, the legislators simply fail to understand that Wisconsin has a partial wage formula that encourages people to work while claiming unemployment benefits. Indeed, raising the benefit levels and removing the current $500 cap would probably lead to more people working while collecting unemployment, not less. Apparently, basic economics is not needed for unemployment legislation.

AB149

• Requires the Department to allow employers to report people who do not show up for interviews, who declines a job interview, who miss an interview, who miss work, or who fail to return to a job after being recalled. The Department, however, already encourages employers to report this information. See, e.g., Refused Work, Work Available with Current Employer, and Report Unemployment Fraud. All of these employee actions would also lead to a loss of benefits, IF the person was claiming benefits at the time.

So, this portion of the bill changes nothing that it purports to do. Claimants who fail to attend a job interview for reasons that do not relate to illness or finding another job are likely to be found ineligible for benefits and perhaps even guilty of fraud/concealment. Indeed, this proposal actually makes claim-filing less onerous by allowing a person to have one such report as NOT counting against their eligibility (when right now, all such reports are investigated and ineligibility found if the claimant lacks the required legal justification).

Furthermore, this proposal ignores the fact that claimants are already doing four job searches a week in an economic climate where employers are desperate for finding employees to hire. Accordingly, employees may well find new jobs and skip interviews or offers to return to jobs after finding new jobs that pay more. And, as shown already, in 2022 and 2023, claim-filing is at record lows. In short, this proposal pretends that the labor supply is growing and that there are numerous unemployed people looking for jobs while claiming unemployment benefits, when the claim-filing data indicates the exact opposite.

• Require the Department to provide various employer information in its fraud reports and job search information to claimants.

This proposal adds: (a) some mandatory employer-reporting information to future Department Fraud Reports about missed job interviews and the like to the Department, and (b) a requirement to provide claimants with vital work search information that they now have to search for on their own.

As NELP points out, work search requirements have become an incredibly effective mechanism for keeping benefits out of claimants’ hands. Job searches themselves are easy, but the online-only reporting requirements are difficult to satisfy. As the 2023 Fraud Report at 6 reveals:

In 2022, DWD completed 22,012 work search audits. The audits resulted in 9,045 adverse decisions with benefits denied, including when claimants failed to conduct four valid work search actions. An additional 27,404 adverse determinations were issued for failure to answer the work search question or failure to provide required information on the weekly claim before the claim paid.

Nearly 28,000 claimants in 2022 (out of 263,248 initial claims, or one out of every nine claimants) lost out on benefits because they did not supply required job search information in the first place, even before an audit took place. When one out of every nine people fail to finish something, that reporting requirement is, by definition, NOT easy and understandable.

AB150

This bill is a repeat of the re-employment bill from the previous session, and is still misguided, liberal, big government intervention into micro-managing people’s work lives.

AB152

This bill appears to be a Department-sponsored initiative and mandates things already being done by the Department or which the Department would like to do.

• Identity verification — mandates identity verification for claimants (currently based on Wisconsin-issued IDs).
• Mandatory unemployment training for employers that are free to attend and videos for claimants. What should be required here is that the Department again mail out printed copies of the claimants’ handbook rather than just a sheet of paper — a claim confirmation — with a URL for the handbook on it.
• Expanded call center hours whenever there is a declared state of emergency or call volume has increased by 300% from the previous level of a year ago. At present, numerous claimants are reporting to me that 15-20 phone calls a day are all leading to busy signals, so perhaps an increase of 50% should lead to expanded call center hours.
• Mandatory comparison with death records, new hire reporting, and prison records on a weekly basis. The Department already does this cross-match, though delayed by weeks or months.

What should be required is that DWD be mandated to do cross-matches with the quarterly unemployment tax reports the Department receives from employers in April, July, October, and January of each year for all weekly certifications filed during the previous four months (the Department’s current practice is to do a cross match on employer’s quarterly unemployment tax reports from nine to twelve months after the weekly certifications have been filed).

The Department should also be mandated to do cross-matches with employer’s payroll tax withholding reports submitted to the Department of Revenue on a monthly basis. In this way, any over-payments of unemployment benefits would be minimized to a month or less. Moreover, employers would no longer need to submit UCB-23 Wage Verification/Eligibility reports, as the Department would already have this information from the wage/tax withholding reports from the Department of Revenue.

• Unilateral transfer of administrative law judges from other state agencies to DWD for handling unemployment hearings.

Rather than hiring and training attorneys properly, the Department wants to force attorneys who handle environmental regulation cases, discrimination matters, or workers compensation cases into hearing and deciding unemployment cases. What the Department should be focused on is adequate training and hiring, not another kind of quick fix. As I have pointed out elsewhere, the skyrocketing number of denials and over-payments is largely because of inadequate information available to claimants. So, getting claimants educated with concrete, specific advice in place of legalisms so as to avoid all the denials in the first place is what is needed here.

AB153

This proposal seeks to limit the number of weeks of unemployment benefits available according to the state unemployment rate. An unemployment rate of 3.5% or less would mean only 14 possible weeks of unemployment benefits would be available. Only when the unemployment rate was higher than 9% would the full 26 weeks of benefits be available.

This proposal fundamentally misunderstands how unemployment works and why it exists. Unemployment benefits are not something that workers earn. Rather, unemployment is an insurance benefit for maintaining consumer demand for which employers pay a premium, based on their experience rating. As explicitly stated in Wis. Stat. § 108.01 (emphasis supplied):

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

(2) The economic burdens resulting from unemployment should not only be shared more fairly, but should also be decreased and prevented as far as possible. A sound system of unemployment reserves, contributions and benefits should induce and reward steady operations by each employer, since the employer is in a better position than any other agency to share in and to reduce the social costs of its own irregular employment. Employers and employees throughout the state should cooperate, in advisory committees under government supervision, to promote and encourage the steadiest possible employment. A more adequate system of free public employment offices should be provided, at the expense of employers, to place workers more efficiently and to shorten the periods between jobs. Education and retraining of workers during their unemployment should be encouraged. Governmental construction providing emergency relief through work and wages should be stimulated.

(3) A gradual and constructive solution of the unemployment problem along these lines has become an imperative public need.

In other words, unemployment is a lot like automobile insurance. The more accidents you have (i.e., more layoffs and claims), the higher your insurance premium. And, just because a driver may have been “accident-free” for some time does not mean the driver should then cut coverage — especially just before the driver hits a busload of school children on the highway. This proposal is essentially pretending that Wisconsin will forever in the future be “accident-free.”

NELP has some excellent information on unemployment financing and why limits on the number of weeks makes no sense and is actually harmful:

Business interests often overlook the vital stabilizing effect UI has on local economies, even though this is also a foundational purpose of the program. UI is an automatic stabilizer: by temporarily replacing some of the lost wages of unemployed workers, it automatically fuels overall economic demand when private spending declines during a national recession or local downturn. Cutting benefit duration reduces this stabilizing function, making layoffs more harmful to the economy.

Department investigators are NOT true and accurate

At almost every unemployment hearing there will be document in the hearing packet that pretends to be a claimant statement. This “statement” pretends to represent what the claimant told a Department investigator in a phone call, and at the hearing the administrative law judge will almost always ask the claimant, “Is this statement true and accurate?”

Note: Many people tell me about their phone interviews being recorded. Phone interviews are never recorded, because then the pretend claimant statements describe here would not be possible.

No, a claiman statement is not true and accurate. It never is. If the statement was true and accurate it would be a transcript of the phone conversation. Or, it would at least be the original notes, without any editing, of the entire and complete phone conversation (and so qualify, for legal purposes, as contemporaneous notes, when the person who wrote those notes testifies at the hearing).

What these “claimant statements” are actually are just pretend confessions, as the only information in these statements is the information the investigator wants to include to establish the claimant’s fault or mistake.

To understand what is going on here, below is a claimant statement/confession prepared by Department investigator Anastasia-1437 and then the contemporaneous notes written by the claimant herself during that phone conversation (the claimant was a former paralegal, who made it a habit to take notes of her phone conversations with Department staffers).

Pretend claimant statement

Note: Outside of changes to names and identifying information, below is a verbatim copy of the claimant statement.

6/28/22: I call it the claimant at 8:30 AM, identify myself, indicated that I received a call from her and am presuming it is due to the “Call Me” letter that I have sent her, identify the issues and requested that the call me back no later than 8:30 AM on 6/30/22. I indicated that if she does reach my voicemail that she please leave a message indicating the best times to reach her. I provided my name, title and telephone number and explained that if I did not hear from her by the deadline, a determination will be made based on best available information.

6/28/22: I understand Pandemic Unemployment Assistance provides for the repayment of all overpaid benefits, penalties, and that I may lose Pandemic Unemployment Assistance or be referred for prosecution if it is determined I made a false statement, misrepresentation, or omitted facts in order to receive benefits not due.

I understand that the statement I am making will be used to determine my eligibility for Pandemic Unemployment Assistance (PUA) benefits. I understand that any false statement I make may result in overpayment of benefits, penalties, loss of future unemployment benefits and possible prosecution.

My name is CLAIMANT. My date of birth is XX/XX/59 . I have a Master’s Degree in YYYYYY/years of education. It was a long time ago but think that I have read the “Notice to All PUA Applicants” and “PUA Rights and Responsibilities.” I filed my own claims. I live in Walworth County. I filed my claims online from Walworth County.

I have refused the notice that you have sent me and the wages, vacation pay and holiday pay from ACME CORP looks accurate and the wages for one day of work with the GROVER’S CORNERS are accurate.

The claimant was asked why she did not report the work and wages, vacation, and/or holiday pay in each of the weeks in which she worked and/or received vacation pay and/ or received holiday pay when filing her weekly claims for PUA benefits.

Let me explain this… I have a voice studio [MARIA CALLAS Productions Inc] which is my main source of income and I only work at ACME CORP to get health insurance. I work full time at ACME but only get paid $13.50 per hour which is far less than what I make in my voice studio. Because of COVID-19, I was unable to give voice lessons because the schools have closed due to the pandemic. Even now, we may plan and an event but we have COVID outbreaks and place is still closed down. My business never recovered from the COVID-19 pandemic.

I explained to the claimant that I was not questioning as to why she filed for PUA benefits; my question is different. I explained that in order to receive pua benefits weekly, the claimant has to file a weekly claim certification in which each week she is asked if she worked in employment. I explained that in each week in which she worked for ACME CORP and/or GROVER’S CORNERS She reported that she did not work in employment and certified each week that her responses were accurate and correct.

I understand what you’re saying. I misunderstood and I thought they were only talking about my studio, my self-employment.

Explained to the claimant that the weekly claim certification system asks two questions; it asks if she worked in employment and separately asks if she worked in self-employment in which she answered no to both and asked why she answered no to both.

It was an honest and stupid mistake. I was filing for PUA for my business only, not for the job where I worked full time and I thought they were asking about my business, my voice studio [MARIA CALLAS Productions Inc].

I have nothing further to add; I have no questions

Contemporaneous notes (what was actually said)

Note: Outside of changes to names and identifying information, below is a verbatim copy of the claimant’s contemporaneous notes.

6/28/22 — 42 minutes, 35 seconds.

An adjudicator arranged a telephone conversation with me at 8:30 AM. Her name was Anastasia. We exchanged greetings and then she notified me that she was calling to discuss the benefits that I applied for and received through the PUA Unemployment Program. She told me that this conversation was to determine if I made false statements, omitted facts in a fraudulent manner, etc.

I asked her if the conversation was being recorded and she said no. Then I asked if I was being accused of a crime and should I hire a lawyer to represent me before I had any further discussions with her. She stressed that that would not be necessary, that she was just collecting information at this time, that there was no determination against me.

She asked me why I didn’t report my employment at ACME Corp.

I told her that I had never tried to conceal my job at ACME and all she had to do was read my initial application for PUA benefits and she would see that I had ACME listed as an employer.

I went on to explain to her that my small business was my major source of income and that was shut down as soon as the schools and universities were shut down- that I was a sub-contractor at those schools. I pointed out again that this was explained in initial application.

She said that they weren’t questioning if my small business was legit . . . and I interrupted her and said I hope not because during my initial application, I had to upload several years of tax returns to prove my business was legit.

She said that no one was questioning my business MARIA CALLAS Productions existed and that I definitely qualified for PUA benefits.

She then explained that I didn’t qualify to be paid any benefits because I was working at ACME.

Then I asked her then why was I paid?

She replied that I answered specific questions incorrectly and therefore was concealing the fact that I was working full time at ACME.

I asked her what question did I answer weekly that is being considered concealment?

She read me a question that I explained to her after was always unclear to me and I answered it in accordance with the facts of my business that was shut down. There was never any intent to conceal facts in order to collect the $173.00 per week.

She said that it was my responsibility to read and interpret correctly the PUA Rights and Responsibilities.

I told her that I had read those and that they were also unclear and left me more confused than before so I started calling PUA agents several times (9 all together) to ask them to interpret the rules of PUA — specifically about my situation with the ACME job. Each and every one of these agents — who supposedly are professionals and know PUA benefits thoroughly — told me that I should keep claiming weekly just like I had that the ACME job was totally separate from PUA benefits. That PUA was being paid to me for my lost self-employment.

Anastasia said that that was most unfortunate, but unfortunately, I, the claimant, was responsible for knowing what to do, not the agents.

I got angry and said, Are you trying to tell me that your agents aren’t responsible for giving the correct answers to the claimants?

Then she got nervous. And gave me an 8-minute speech on the conditions for the workers at Unemployment. “CLAIMANT, I have been working 7 days a week since the pandemic started in 2020. I was here before the pandemic. No one could have been prepared for what happened and how we were grossly under-staffed and how our technology was way outdated to handle the numbers of claims that came in on a daily basis. We had to hire scores of workers and we had no time to train any of them. It usually takes one whole year to fully train a worker here. What we ended up doing is training groups of people for a part of the system and then other groups for another part of the system and so on. So none of these new workers could begin to answer questions outside of their area that they were trained. The best one could do is transfer the call to another new agent, hopefully that was trained in the area that the claimant needed to get info.

I interrupted her and told her that on one of the calls I made, I talked to three agents and never got my question answered.

She said, yes, that she believed me. Then I asked her — then why are you trying to accuse me or charge me with concealment when I just told you that I tried to get the correct instructions from your department.

She told me that it all came down to how I answered the questions.

I said but the question wasn’t clear. The questions are not clearly stated. She said that she disagreed with me.

I asked her if there were other PUA claimants that were tripped up on some of the questions and also answered regarding their self-employment. I said you know Anastasia, a lot of people have two jobs, it is very common. Especially with single people.

I then asked her if any suits had been filed against the DWD Unemployment Dept. for giving false information, or not being able to give any information, or for harassment and punitive damages to an already terribly stressed and financially devastated population of self employed and small business owners.

She said she wasn’t aware of any such suits.

And I said, I believe that there may be some in the future. I think what has happened today is illegal, unethical and down right criminal. If you ask me the State is trying to get their money that they gave during the pandemic to pay for the new computer system they had to get because the one they had was not able to handle the number of claims. WI made us wait much longer than other states to get our first payments which made great hardship on many folks. And now WI is going to get it all back and jack up a lot of fines so they can get even more money. Shame on them. And Anastasia, you are wrong, I do need to lawyer up. Big time.

She replied, Oh no not necessarily. Lawyers are very expensive. Look you need to go to your portal and appeal everything. I’m sure if you do, you can represent yourself and have the concealment lifted because you did not intend to conceal. I believe that, CLAIMANT. I figure they’ll drop also drop all of the 40% penalties as well. I figure you will be looking at around $6000.00 that you’ll have to pay back.

I said, Hm, that’s about what I got paid all together. She said yes, you shouldn’t have been paid anything because you were working at ACME.

I said, I wish I’d quit claiming when I couldn’t get a straight answer. Well, I have to get back to work. And she said that she did too but she had decided to retire at the end of this year. She said that the stress was getting to her because she was one of the very few that actually knew the system and the workload was killing her.

I said good luck and happy retirement. I have to go back to work but I will appeal every count against me and I will hire a lawyer.

The takeaway

Naturally, the claimant was charged with concealment, and supposedly owed $29,992.20 ($20,223.00 in PUA, LWA, and PUC benefits she was paid + $9,769.20 in concealment administrative penalties). But for her contemporaneous notes and the fact that she had other notes of when she told Department staffers about her work at ACME and they told her to ignore that work when filing PUA claims the concealment allegations were tossed at the hearing.

But, notice what Anastasia is doing in her “claimant statement.”

First, she presents a statement that the claimant has complete understanding of what is going on. Second, Anastasia establishes that the claimant is highly educated and has no disabilities, so cannot claim a lack of understanding in some way.

Third, Anastasia sets forth that the claimant provided wrong information on her weekly certifications, namely wages that went unreported.

Fourth, Anastasia indicates that the claimant understand that she failed to report wages accurately.

For the Department, unemployment fraud — aka concealment — is now established. That is all that is needed, as far as the Department is concerned (for why, see The profit in unemployment concealment.

But, Anastasia — being an experienced investigator — goes a step further and “engages” the claimant on why wages were not reported correctly. The confession for having fraudulent intent is this quotation:

It was an honest and stupid mistake. I was filing for PUA for my business only, not for the job where I worked full time and I thought they were asking about my business, my voice studio [MARIA CALLAS Productions Inc].

For the Department, the admission of an unintentional/negligent claim-filing mistake, for purposes of unemployment concealment, establishes an intent to commit fraud.

Of course, this admission is fabricated and what was actually said during this phone call was much, much different. In place of this alleged confession, the claimant presented solid evidence about how she told Department staffers about her work at ACME and was mistakenly told by them to NOT report those wages and hours of work when filing her weekly certifications for PUA benefits. Anastasia was not interested in that information about how the claimant was misled by the bad advice of Department staffers, however. Anastasia’s goal was to draft a “confession” to committing unemployment fraud, and so that is what Anastasia drafted.

At the hearings in these cases, administrative law judges are trained to follow the same agenda that Anastasia is following: the claimant understood what was going on, the claimant provided wrong information, the claimant admitted to being responsible for that wrong information, and the claimant was negligent. Should the claimant admit at the hearing to the “claimant statement” being true and accurate, the case is closed, and that is why claimants are almost always asked at these hearings about these statements being true and accurate. Without that admission, a “claimant statement” does not count as any actual evidence.

The saddest part of this episode is that what Anastasia did here is all too common. Indeed, the “advice” Anastasia offered about how the concealment charges would easily be dismissed at a hearing and that legal representation was completely unnecessary is something I often hear from claimants about these investigations. The only unique facet to what happened here is that the claimant herself took contemporaneous notes of her conversation with Anastasia and so could present those notes at her hearing about what really was said.

Note: And, those notes allowed the claimant to recall the details of that phone conversation that had taken place months prior to the unemployment hearing.

So, all parties to the unemployment process need to understand that truthfulness and accuracy are NOT the responsibility of the Department. As a result, you need to track independently what information is told to you and to be prepared to challenge at any time what a Department investigator or administrative law judge is telling you about what “actually” happened.

Claim filing after the pandemic

In late 2022, it is time to see what has happened in Wisconsin with unemployment claim-filing.

Note: The charts presented here are from the Unemployment Insurance Data Explorer, which takes DOL unemployment data obtained from the states and provides a quick way to see what this data means.

Why claims are denied

First, some basic facts need to be introduced. Far too many people think that unemployment claims are approved or denied because of a dispute over a job separation between employee and employer.

That has not been the case since the Great Recession, however. Since before 2014, most initial determinations have denied a claim for reasons that have nothing to do with a job separation reason.

The green line on this chart shows the proportion of initial determination denials that are based on a job separation reason. From 2013 to 2015, roughly 20% of denial reasons were because of a dispute over the job separation. By 2016, that percentage was down to just over 10% and stayed there until the pandemic. Then the percentage climbed steadily to around 30% of all denials. This increase was because the Department examined all lay-offs arising from the pandemic for a prior disqualifying separation within a claimant’s benefit year to find a reason for denying that pandemic-related layoff claim. Yes, even though experience-rating charges were supposed to be waived during the pandemic, the Department still looked for disqualifying reasons from a prior job loss in which to deny eligibility.

So, with the pandemic now over, denials based on separations have declined markedly. With the hot job market, separation reasons are now below 10%.

So, the real story of why claims are denied has nothing to with a dispute between employer and employee over the job separation. The red line showing non-separation reasons is where most denials now happen. In 2013, over 40% of the initial determinations denying a claim were for reasons that had nothing to do with a job separation, and this percentage began climbing steadily due to new job search requirements, the move to on-line only claims-filing for initial claims and weekly certifications, and confusing and legalistic guidance about claim-filing. By 2016 to 2017, that percentage had climbed to 60%, but fell back down to just over 50% by 2018 (with no change in the law, election year anyone?). In 2019, still without any changes in law, the percentage began climbing again and was back at around 60% when the pandemic started. Yikes.

With the pandemic, this percentage declined back down to 2013 levels of just over 40%. In 2021 and 2022, however, there has been a rapid rise in these non-separation denial reasons, and Wisconsin is back at around 60% of all initial determination denying eligibility for non-separation reasons.

So, for many years now, the hurdle for eligibility has had little to do with job separation reasons and much to do with satisfying Department claim-filing requirements.

The true significance of the role of non-separation reasons can be seen in what happens per initial claim.

Note: An initial claim is what a claimant files to report a job loss for which he or she wants to claim unemployment benefits. No benefits are paid, however, based on an initial claim. Claimants must then file weekly certifications (called continuing claims in other states) for each week they want to be paid unemployment benefits. Because initial claims start an unemployment claim, they measure job losses and the claimants affected by those job losses. Weekly certifications, on other hand, only measure the number of people still successfully filing unemployment claims or who are still seeking to file such claims.

Outside of a slight dip in the pandemic and a recent increase in 2022, the green line for separation reasons hardly changed at all. The red line for non-separation reasons, however, began to nearly double in 2015 from 25% to almost 50%. By 2018, this denial rate for initial claims had declined slightly to just over 40%. And, there was a steep decline that began in 2019 just before the pandemic struck, and that steep decline continued into the pandemic, such that in 2020 the denial rate was almost the same as the denial rate for job separations. Since then, however, the denial rate for non-separation reasons for initial claims has sky-rocketed and is nearing 80% by the end of 2022. Together with the separation denial rate for initial claims climbing slightly to 15% at the end of 2022 (a seasonal climb every fall because, you know, winter), nearly 95% of initial claims were being denied at the end of 2022. Wow!

Just what are non-separation reasons

So, separation reasons (misconduct, substantial fault, or quitting a job without good cause) are not why the Department is finding the vast majority of claimants not eligible for unemployment benefits. The real reason the Department is finding claimants not eligible for unemployment benefits has to do with non-separation reasons.

Non-separation reasons usually are reasons directly related to a claimant not satisfying Department-mandated eligibility requirements. Other than an increase in job searches (from two to four in 2011) and the Department-initiated end of winter work search waivers, these mandates have been unchanged legally since before 2010. What has changed significantly is how the Department has implemented these requirements. Here is what has been happening since 2013.

The red (able and available for work), yellow (satisfying job search requirements), and green (other) have gone up and down dramatically over the past ten years.

Since 2016, able and available requirements have led to nearly 30% of all determinations being a denial. This large number of denials is happening because the Department ignores its own legal requirements for determining able and available.

Since 2015, denials because claimants fail to satisfy job search requirements have hovered over 40% and even over 50% except for a rock-like drop at the end of 2021 (discussed below). The job search requirements are leading to all of these denials through a combination of factors, notably the fact that all job searches must be reported on weekly certifications, and that mandated RESEA training and job registration are on-line only, even though the on-line guidance and assistance for accomplishing these goals are meager at best.

Other denial reasons — a catchall category — was at an over 40% denial rate in 2013, but declined steadily to around 15% by 2017 outside of a significant bump to around 25%/30% when the pandemic started. This denial category has been declining since then, however, and is approaching 10% by the end of 2022.

The impact of these changes can truly be seen when looking at these reasons per initial claim.

Both the job search (yellow line) and able and available (red line) plunged when the pandemic started, only to begin steep climbs in 2021. By the end of 2022, able and available reasons were leading to the disqualification of nearly 25% of all initial claims and job search issues were leading to the disqualification of over 45% of initial claims. These two reasons alone account for approximately 65% of all initial claims being denied at the end of 2022.

To understand just what is going on with these numbers, here are Wisconsin’s actual numbers for the second quarters of 2020 (57,466 initial determinations issued) and 2022 (59,564 initial determinations issued).

Update 23 April 2023: Replaced numbers nearly impossible to read with a graphic of those numbers. Click on the numbers to see a larger version.

Thousands of claims were denied at the start of the pandemic because claimants failed to register themselves at the jobcenter website. See “Missed job center registration” at Unemployment delays, part 2. While Wisconsin waived actual job searches, the state did not waive this registration requirement, and so far too many people had their claims denied for this reason. With this data, we now have a number for those denied for failing to register: more than 33,000. Only at the end of 2020 did the Department realize this job registration snafu was its own fault and stopped processing denials for this reason for a short time (until job searches were re-instated). What happened in mid-2020 was an tidal wave of determinations on this one issue of failed job registration.

By the second quarter of 2022, job search requirements and RESEA training were back in place, so job registration is again just one of many ways a claimant can be disqualified. When they complete these requirements, an initial determination finding them eligible as of the date the requirement is completed is issued. Hence, there are thousands of initial determinations now finding claimants eligible after they are originally denied eligibility for a few weeks.

As obvious in this data, a great deal of work and effort by both the Department and claimants is being spent on these requirements because claimants do not understand what is required of them in the first place.

And, as for the able and available disqualifications, in these situations the Department is simply ignoring its own law and applying a disqualification as it understands it — a claimant must be able to work 32 or more hours in a week in order to qualify for unemployment benefits — rather than what the actual requirements pursuant to unemployment law are — a claimant must be able to work as many hours in a week as physically or mentally capable of working, and will be able and available for work even if that number is less than 32 hours in a week. Most claimants in Wisconsin with a disability are being denied eligibility for no legal reason.

Overall, what this data shows is that the vast majority of people in Wisconsin filing unemployment claims today are being denied eligibility, and these denials almost always are based on claimants failing to satisfy Department claim-filing requirements. That is the story of unemployment in Wisconsin.