Employer misclassification videos

The Department has new videos about worker mis-classification — mistakenly employing someone as an independent contractor rather than as an employee for unemployment purposes.

The original mis-classfication website is still available and very much worth checking out by employers and employees to see whether someone really is an employee under the various tests for workers’ compensation, labor standards, unemployment, and discrimination law.

For a gander at legal strategy employers should consider, especially when the independent contractor issue is being litigated in an employee benefits hearing (as opposed to an employer tax hearing), see this prior post.

 

UI solvency done on backs of the unemployed

The CapTimes and Madison.com just published my letter to the editor about a recent AP report on the solvency of the state’s UI fund.

Dear Editor: Recent concerns over the solvency of the Unemployment Insurance fund are misplaced.

As stated in a recent article, “The state could also further cut down on benefit payments to address the fund’s solvency,” and the state has been doing just that. Benefit payments in Wisconsin have plummeted to record lows. In early 2013, the Department of Workforce Development projected UI benefits to be $797 million in 2014 and $696 million in 2015. The actual benefit payments in 2014 were $732,327,104 and only $605,481,027 in 2015, $91 million less than expected.

Why have benefit payments plunged from what was expected? First, the department has set up a series of obstacles for folks to overcome when filing their claims, including poor phone support, mandatory internet registration, cumbersome job search busy work, and an increasingly complex filing process. Second, until the recent appeals court decision in Operton v. LIRC, substantial fault allowed DWD to disqualify claimants for inadvertent mistakes they make on the job. Finally, DWD has been charging claimants with unemployment fraud for making mistakes when trying to follow the increasingly complex process DWD has set up.

Recent DWD statistics showcase how unemployment fraud is becoming a major operation within DWD. In 2014, unemployment fraud charges jumped 44 percent from the previous year even as benefit payments markedly declined. For 2015, collection for unemployment fraud was up nearly 81 percent from 2013 collection efforts.

Since it is now so oppressive and dangerous to collect unemployment benefits, the risk of the fund going insolvent is minimal. But this concern for fund solvency ignores the whole point of unemployment benefits: to help those in need (and the state as a whole) when folks lose jobs through no fault of their own. In place of employers paying their taxes, the state has essentially achieved solvency on the backs of the unemployed.

Update on UI legislation

Advisory Council Bill AB819
Yesterday, the state senate passed the bill and messaged it to Governor Walker for his signature. This law consists of the following proposals:

  • A second SSDI prohibition, D15-01, to replace the current prohibition was approved in April 2015 and back-dated in May 2015. But, after the Department started winning the court cases challenging the old SSDI prohibition (see this post for the details), this proposal disappeared from the Department’s legislative draft at the council’s September 2015 meeting. But, after the Labor and Industry Review Commission ruled in November 2015 that departmental error had occurred when appeal tribunals (but not the Commission) had originally ruled in favor of claimants regarding dual receipt of SSDI and UI benefits (and so no repayment of UI benefits previously received was proper), this proposal re-emerged at the November 2015 council meeting in the Department’s legislative drafts. Why? This second SSDI prohibition is back-dated to January 2014, the effective date of the original SSDI prohibition.
  • D15-04 sets up essentially a backup insurance program for reimbursable employers who get their unemployment accounts swindled by identity fraud (and so have little to no hope of ever recovering the stolen benefits). The final recommendation from the council was for reimbursable employers to be taxed initially in order to create a fund of $1 million for covering themselves against identity fraud, essentially the second option of the three presented.
  • D15-05 corrects a hole in the statutes that accidentally left LLPs out of the definition of employer (see also this DWD memo on this issue).
  • The Advisory Council approved the Department’s appeals modernization proposal, D15-06, at the 7 January 2016 meeting. LRB draft language was prepped soon thereafter. Perhaps the most significant change in this proposal — notice by Internet in place of postal mail — has NOT received any discussion of comment from council members, however.
  • Proposed changes to the definition of claimant concealment in D15-08 are described in this previous post and described in a Department memo (discussed in this post), Additional criminal penalties for concealment in AB533 passed the Assembly but has yet to be passed by the Senate. To see what all the fuss is about, take a look at this January 21st Assembly Committee on Public Benefit Reform hearing regarding AB533 and other UI bills or read this LIRC memo on the proposed concealment changes. You can see and hear testimony against these concealment changes via this previous post.
  • Technical changes in D15-09 will allow the Department to distinguish able and available determinations from separation determinations.
  • D15-10 eliminates the publication of the claimant benefit tables within the statutes.
  • Major changes to the process for getting unemployment decisions reviewed in circuit court are set forth in D15-11. These changes were previously described here and here. The Labor and Industry Review Commission opposed these changes, which essentially reverses the 2016 Appeals Court decision in DWD v. LIRC.
  • D15-12 allows the same protocols for unemployment taxes in regards to fiscal agents in adult care to apply to fiscal agents in child care situations.
  • D15-13 ends the sunset date in 2034 for the program integrity fund (i.e., the fund for receiving some of the monies from concealment enforcement) since the Department now expects concealment monies to continue in perpetuity. See the next two proposals for why.
  • The Department’s proposals for a program integrity slush fund, D15-14 and D15-15.

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

On the management side, there will be significant changes to what will be considered suitable work:

  • During the first six weeks of a job search, suitable work that a claimant MUST accept will be those jobs that (1) do not have a lower grade of skill than one or more of his or her most recent jobs and (2) have had an hourly wage that is 75 percent or more of what the claimant previously earned in his or her most recent, highest paying job.
  • After the first six weeks, suitable work means any work the claimant is capable of performing regardless of prior experience, skills, or training, as long as the wages for that job are above the lowest quartile wage-level in the claimant’s relevant labor market.

Once a job offer is considered suitable work for a claimant, then the claimant only has good cause for declining the job offer if the claimant’s personal safety is at risk, the claimant’s sincerely held religious beliefs conflict with the work, the work entails an unreasonable commuting distance, or some other compelling reason makes accepting the offer unreasonable. These changes to what will be considered suitable work will also apply to those who tentatively accept a job and then quit within the first thirty days.

In addition, this accepted management proposal will either eliminate unemployment eligibility entirely for anyone receiving temporary or partial workers’ compensation benefits or mandate offsets against UI benefits for those receiving these kind of workers’ compensation benefits (the specific type of workers’ compensation benefit being received leads to the different kinds of treatment). In other words, the SSDI prohibition is being expanded to workers’ compensation benefits. Also, anyone making a mistake in how they report their specific workers’ compensation benefits will, under the new on-line filing system, likely face a concealment charge for his or her mistake in reporting the kind of workers’ compensation benefits he or she is receiving.

These management-sponsored changes will take effect four weeks after enactment.

The labor proposals that the council agreed to include:

  • repealing the mis-classification prohibitions in workers’ compensation and fair employment law,
  • creating an administrative penalty for mis-classification for unemployment purposes of $500 per employee (capped at $7,500) when construction employers (and only construction employers) knowingly and intentionally provide false information to the Department (NOTE: compare this definition with the proposed changes to claimant concealment) for the purpose of misclassifying or attempting to mis-classify an employee,
  • fining employees in painting and sheetrock work $1,000 per incident (capped at $10,000 per calendar year) when coerced into accepting non-employee status for unemployment purposes, and
  • fining construction employers $1,000 per employee (with a maximum of $25,000) for subsequent violations as well as possible referral for criminal prosecution.

These mis-classification changes will take effect six months after passage.

Budget Bill Fixes
The LIRC funding fix bill, discussed here, was enacted as 2015 Wisconsin Act 194.

The call in the budget bill for the Department to create suitable work rules for claimants has been eliminated by the management-sponsored changes to suitable work described above.

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

unemployment is not mentioned once in the [Browning-Ferris Industries decision this law is intended to undo], so the applicability and purpose — let alone its effectiveness — of the state law changes in this proposed legislation are muddled at best. And, as DWD notes in its memo, the changes could be extremely problematic for some Wisconsin employers.

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

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

  • D15-02 is a house-keeping change that allows the Department to issue determinations against out-of-state employers in combined wage claims for being at fault for an erroneous benefit payment to a claimant.
  • D15-03 applies the Treasury offset program to employers, as described previously in this post.
  • A renewed work-share program, D15-07.

NELP commentary on Obama Administration UI proposals

Rick McHugh of the National Employment Law Project has two posts describing the Obama Administration’s unemployment proposals.

In the first post, he notes that the Administration wants to mandate a norm of 26 weeks of state UI benefits, which currently exists in Wisconsin after the waiting week, use of an alternative base period for determining eligibility for UI benefits (also currently available in Wisconsin), opening up UI eligibility to those looking for part-time work (currently NOT available in Wisconsin), and requiring states to allow workers to quit jobs for compelling family circumstances without losing unemployment benefits (currently available in Wisconsin but not well-enforced).

The Administration is also offering $5 billion in funds to states for modernization efforts and an option to create a volunteer work option — aka Georgia Works — for claimants.

In the second post, McHugh describes how the administration wants to: (a) institutionalize a four-tiered extended benefits program and the triggers for such benefits; (b) mandate minimum UI taxes, index the taxable wage base for unemployment taxes to inflation, impose a minimum state UI tax rate, and create new triggers for an increase in federal UI taxes when a state’s UI reserves fall below certain thresholds; and (c) make work-share options a permanent feature of the unemployment system.

DWD/Advisory Council bill going forward

The official Advisory Council/DWD bill has just been introduced, AB819. So, here is a rundown of what has been happening with unemployment law over the last several months, organized by proposal.

Department Proposals

  • A second SSDI prohibition, D15-01, to replace the current prohibition was approved in April 2015 and back-dated in May 2015. But, after the Department started winning the court cases challenging the old SSDI prohibition (see this post for the details), this proposal disappeared from the Department’s legislative draft at the council’s September 2015 meeting. But, after the Labor and Industry Review Commission ruled in November 2015 that departmental error had occurred when appeal tribunals (but not the Commission) had originally ruled in favor of claimants regarding dual receipt of SSDI and UI benefits (and so no repayment of UI benefits previously received was proper), this proposal re-emerged at the November 2015 council meeting in the Department’s legislative drafts and is now part of AB819. Why? This second SSDI prohibition is back-dated to January 2014, the effective date of the original SSDI prohibition.
  • D15-02 is a house-keeping change that allows the Department to issue determinations against out-of-state employers in combined wage claims for being at fault for an erroneous benefit payment to a claimant. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86.
  • D15-03 applies the Treasury offset program to employers, as described previously in this post. This proposal is part of AB416 and has been enacted in 2015 Wisconsin Act 86. Because of this quick enactment, employers will be subject to treasury offsets for their 2015 tax returns for any unemployment taxes for which they have been found individually liable.
  • D15-04 sets up essentially a backup insurance program for reimbursable employers who get their unemployment accounts swindled by identity fraud (and so have little to no hope of ever recovering the stolen benefits). The final recommendation from the council was for reimbursable employers to be taxed initially in order to create a fund of $1 million for covering themselves against identity fraud, essentially the second option of the three presented. This proposal is part of AB819.
  • D15-05 corrects a hole in the statutes that accidentally left LLPs out of the definition of employer (see also this DWD memo on this issue). This proposal is part of AB819.
  • The Advisory Council approved the Department’s appeals modernization proposal, D15-06, at the 7 January 2016 meeting. LRB draft language was prepped soon thereafter. Perhaps the most significant change in this proposal — notice by Internet in place of postal mail — has NOT received any discussion of comment from council members, however. This proposal is now part of AB819.
  • A renewed work-share program, D15-07, is part of AB416 and has been enacted as 2015 Wisconsin Act 86.
  • Proposed changes to the definition of claimant concealment in D15-08 (described in this previous post and described in a Department memo (discussed in this post) are part of AB819. Additional criminal penalties for concealment in AB533 continue to advance in the legislature. To see what all the fuss is about, take a look at this January 21st Assembly Committee on Public Benefit Reform hearing regarding AB533 and other UI bills or read this LIRC memo on the proposed concealment changes.
  • Technical changes in D15-09 and included in AB819 will allow the Department to distinguish able and available determinations from separation determinations.
  • D15-10 eliminates the publication of the claimant benefit tables within the statutes and is included in AB819.
  • Major changes to the process for getting unemployment decisions reviewed in circuit court, set forth in D15-11, are part of AB819. These changes were previously described here and here.
  • D15-12 allows the same protocols for unemployment taxes in regards to fiscal agents in adult care to apply to fiscal agents in child care situations. This proposal is part of AB819.
  • D15-13 ends the sunset date in 2034 for the program integrity fund (i.e., the fund for receiving some of the monies from concealment enforcement) since the Department now expects concealment monies to continue in perpetuity. See the next two proposals for why.
  • The Department’s proposals for a program integrity slush fund, D15-14 and D15-15, are part of AB819.

Labor and Management Proposals
At the Advisory Council’s 19 January 2016 meeting, the council took action on various management and labor proposals and the agreed-to changes have been incorporated in AB819.

The management proposals that the council agreed to include significant changes to what will be considered suitable work:

  • During the first six weeks of a job search, suitable work that a claimant MUST accept will be those jobs that (1) do not have a lower grade of skill than one or more of his or her most recent jobs and (2) have had an hourly wage that is 75 percent or more of what the claimant previously earned in his or her most recent, highest paying job.
  • After the first six weeks, suitable work means any work the claimant is capable of performing regardless of prior experience, skills, or training, as long as the wages for that job are above the lowest quartile wage-level in the claimant’s relevant labor market.

Once a job offer is considered suitable work for a claimant, then the claimant only has good cause for declining the job offer if the claimant’s personal safety is at risk, the claimant’s sincerely held religious beliefs conflict with the work, the work entails an unreasonable commuting distance, or some other compelling reason makes accepting the offer unreasonable. These changes to what will be considered suitable work will also apply to those who tentatively accept a job and then quit within the first thirty days.

In addition, this accepted management proposal will either eliminate unemployment eligibility entirely for anyone receiving temporary or partial workers’ compensation benefits or mandate offsets against UI benefits for those receiving these kind of workers’ compensation benefits (the specific type of workers’ compensation benefit being received leads to the different kinds of treatment). In other words, the SSDI prohibition is being expanded to workers’ compensation benefits. Also, anyone making a mistake in how they report their specific workers’ compensation benefits will, under the new on-line filing system, likely face a concealment charge for his or her mistake in reporting the kind of workers’ compensation benefits he or she is receiving.

These management-sponsored changes will take effect four weeks after enactment.

The labor proposals that the council agreed to include:

  • repealing the mis-classification prohibitions in workers’ compensation and fair employment law,
  • creating an administrative penalty for mis-classification for unemployment purposes of $500 per employee (capped at $7,500) when construction employers (and only construction employers) knowingly and intentionally provide false information to the Department (NOTE: compare this definition with the proposed changes to claimant concealment) for the purpose of misclassifying or attempting to mis-classify an employee,
  • fining employers in painting and sheetrock work $1,000 per incident (capped at $10,000 per calendar year) when coercing employees into accepting non-employee status for unemployment purposes, and
  • fining construction employers $1,000 per employee (with a maximum of $25,000) for subsequent violations as well as possible referral for criminal prosecution.

These mis-classification changes will take effect six months after passage.

Budget Bill Fixes
The LIRC funding fix bill, discussed here, is also right now being considered by the legislature.

The call in the budget bill for the Department to create suitable work rules for claimants has been eliminated by the management-sponsored changes to suitable work described above.

White House announces new UI reforms

The President has announced several initiatives and proposed changes to unemployment law, including federally-funded wage insurance (up to $5,000 a year for two years available to workers who accept jobs that pay less than $50,000 and which is less than their previous position), expanding eligibility for unemployment benefits to part-time workers (many states, including Wisconsin, limit unemployment benefits only to those seeking full-time work), mandating 26 weeks of state UI benefits (several states have reduced the maximum weeks of available benefits), creating a trigger for federally-funded Extended Unemployment Compensation (EUC) benefits, and mandating employer’s UI taxes are sufficient to a certain extent. Initial details about these proposals are available here.

These proposals are for the most part limited tweaks to the unemployment system. The biggest changes are making wage insurance broadly available and making UI benefits available to those seeking part-time work.

The wage insurance proposal provides an economic stimulus at a time when consumer spending and wage gains remain flat. But, this insurance also provides structural support for pushing wages down by creating a cushion for workers’ loss of income in subsequent jobs.

Expanding unemployment benefits to those limited to part-time work is a boon for those in part-time jobs, including many women who can only work part-time because of family and child-care responsibilities.

Such a change, however, presumes that unemployment benefits are generally a benefit to folks making unemployment claims. As evident in Wisconsin (and other states such as Michigan), receipt of unemployment is too often leading to concealment charges and penalties that turn unemployment benefits into a millstone of debt. As the numbers in Wisconsin reveal, benefit payments are declining and now are at record lows. Because claimants in Wisconsin can no longer collect unemployment benefits because of easy disqualifications like substantial fault or end up repaying benefits they do receive because of concealment charges arising from simple filing mistakes, unemployment taxes are collecting into a fund and will never be paid out. Until the feds address these kinds of changes in state unemployment systems, any expansion of UI eligibility will likely only make things worse for most claimants.

LIRC funding fix

Recall that in the latest Wisconsin budget, not only was LIRC’s budget cut and its general counsel made a political appointee of the Governor, but the Labor and Industry Review Commission was also transferred from DWD to the Department of Administration for budgetary purposes.

The problem with this change is that administration of unemployment law is funded through a federal tax that employers pay. The funds are then channeled from the feds to the state agency responsible for unemployment law in the state, namely DWD in the case of Wisconsin. Since LIRC is now no longer part of DWD for budgetary purposes, LIRC faces the prospect of losing all of its federal unemployment funding (as well as some equal rights funding that also comes from the feds).

So, AB685 and SB560 create a mechanism for transferring federal funds from DWD to LIRC for its federally funded work.

As the LRB explains:

Under prior law, the Labor and Industry Review Commission (LIRC) was attached to the Department of Workforce Development (DWD) and moneys were appropriated to DWD for the activities of LIRC. 2015 Wisconsin Act 55 (the 2015-17 biennial budget act) attached LIRC to the Department of Administration and appropriated moneys directly to LIRC.

This bill provides for the transfer of federal moneys received by DWD to LIRC for unemployment administration and equal rights functions performed by LIRC and of other moneys transferred to LIRC for other purposes.

The mechanism for accomplishing this transfer of unemployment funds?

to transfer to the appropriation account under s. 20.427 (1) (k) an amount determined by the treasurer of the unemployment reserve fund. [emphasis supplied]

In other words, the treasurer of the unemployment reserve will now have the statutory authority to determine independently what LIRC’s funding from federal monies will be.