I previously described how the Joint Finance Committee ignored reality and state unemployment law — particularly the state’s partial wage formula that encourages people to work part-time while STILL being eligible for and collecting unemployment benefits — to make false claims about unemployment benefits keeping people from working.
What is lost in this hubbub is the essential nature of unemployment benefits in the first place. Unemployment is an insurance system. Just like car insurance is there when there is an car accident, unemployment is supposed to be there when there is a job loss. Period. Under Wisconsin unemployment law, eligibility is presumed (at least that is what is supposed to happen).
We need to start thinking that unemployment is what it is — insurance — that must be paid out immediately whenever there is a no-fault job loss. As Wisconsin law explains:
Whether or not a given employing unit can provide steadier work and wages for its own employees, it can reasonably be required to build up a limited reserve for unemployment, out of which benefits shall be paid to its eligible unemployed workers, as a matter of right, based on their respective wages and lengths of service.
Wis. Stat. § 108.01(1) (emphasis supplied).
Despite how unemployment is designed to assist claimants and tax employers for those benefits based on each employer’s specific job loss experience, it seems the only action at reform for the moment is to help employers out.
At the June 17th meeting of the Unemployment Insurance Advisory Council, the Department introduced an emergency rule to finally get pandemic-related experience waiver right, at least on a temporary basis. Unlike in other states where any and all 2020 job losses were presumed to be pandemic-related and so not chargeable to employers, Wisconsin at first presumed all job losses were NOT pandemic-related unless an employer provided specific evidence and a form about the pandemic-nature of that job loss. Furthermore, the period for this pandemic-related waiver originally expired on 16 May 2020.
Then, after further orders and passage of 2021 Wis. Act 4, the time period for possible waiver of initial claims on employer experience-rating was extended to those claims filed before 13 March 2021. But, in general forms and reasons still need to be submitted by employers to take advantage of having any unemployment claims against their UI tax account waived because of the pandemic.
With this new rule, the Department is finally waking up to the idea that an automatic, blanket waiver for employer pandemic-related charges is more efficient and easier to administer than a case-by-case, employer-by-employer waiver application (something other states realized back in March and April of 2020). Now, more than a year after the pandemic started and several prior emergency rules:
This rule provides that the Department, in calculating an employer’s net reserve as of the June 30, 2021 computation date, shall disregard all benefit charges and benefit adjustments for the period of March 15, 2020 through March 13, 2021.
New rule at 2 (emphasis supplied). But, the Department is NOT actually forgiving these pandemic job losses on a permanent basis in light of a pandemic for which employers had no control of ability to affect. Unlike other states that sought to make the administrative burden for employers and employees easier in face of the pandemic and the ensuing massive job losses, Wisconsin is still only delaying this experience-rating. Individual and employer-based charging based on job losses in 2020 will be implemented for 2023.
The Department will, in effect, assume that all benefit charges and adjustments were related to the public health emergency declared by Executive Order 72. This assumption applies only for the purposes of setting the contribution rates for 2022. This rule will ensure that employers’ contribution rates for 2022 are calculated based on reserve fund balances as of June 30, 2021 without taking charges related to the public health emergency into account so that the policy goals of 2019 Wisconsin Act 185 and 2021 Wisconsin Act 4 are met. This rule will only affect calculation of contribution rates for 2022. Contribution rates for 2023 will be calculated in 2022 after all recharging is complete.
New rule at 3. In short, this new rule is only a delaying action for a massive administrative headache for everyone.
Note: Reimbursable employers are not being forgotten either. The Department also announced at the June 17th meeting that it was going to ask for an additional extension of the charging waiver for reimbursable employers.
Not to be outdone when thinking of employers, the Joint Finance Committee has also stepped into this game with a $60 million per year transfer from general tax revenue to the unemployment trust fund for the next two years. See item 9 of Motion 2001 that was approved on June 17th and LRB-4069, scheduled for public hearing on June 23rd. The goal here is to keep the tax rate for employers at Schedule D — the lowest unemployment tax rate schedule — for these next two years.
Note: this employer tax proposal is occurring because Republicans are proclaiming employers are still hurting and cannot afford any increase in unemployment taxes at the same time these same Republicans are proclaiming an economic recovery is being held back because “jobless workers” are refusing to go back to work and make the recovery even better. In other words, the economic picture radically changes according to the policy goal being pushed.
As I said in January 2021, maintaining a positive balance in the trust fund during times of massive job loss is economic waste. Governments need to spend money during times of recession and then raise taxes during times of economic recovery (which seems to be now and next year).
$1.1 billion is the amount available in the unemployment trust fund at the end of December 2020. $1.1 billion that is not helping anyone but just sitting in a bank account.
Unemployment in Wisconsin is recognized as an urgent public problem, gravely affecting the health, morals and welfare of the people of this state. The burdens resulting from irregular employment and reduced annual earnings fall directly on the unemployed worker and his or her family. The decreased and irregular purchasing power of wage earners in turn vitally affects the livelihood of farmers, merchants and manufacturers, results in a decreased demand for their products, and thus tends partially to paralyze the economic life of the entire state. In good times and in bad times unemployment is a heavy social cost, directly affecting many thousands of wage earners. Each employing unit in Wisconsin should pay at least a part of this social cost, connected with its own irregular operations, by financing benefits for its own unemployed workers. Each employer’s contribution rate should vary in accordance with its own unemployment costs, as shown by experience under this chapter.
So, money to pay rent and groceries, to dine out in restaurants, just to spend on consumer goods — WHEN there is a state-wide lack of consumer spending because of a worldwide pandemic — is not going out to the unemployed workers in this state who need it.
At the 18 March 2021 meeting of the Advisory Council, the Department presented its first eight proposals. These first eight proposals included the proposals that the Advisory Council originally approved of in 2019 (but which were not enacted because of the pandemic).
At the 15 April and the 20 May 2021 meetings of the Advisory Council, the Department presented another 18 proposals — D21-09 thru D21-26. Yikes. Here are those proposals, with links to the actual proposals that appeared at the May 2021 Advisory Council meeting.
D21-09, Employee Status solely determined by unemployment law
The Department seeks to amend the definition of employee and self-employment.
The Department proposes to amend sections 108.09(2)(bm) and 108.09(4s) to provide that all issues of unemployment insurance employee status may only be determined under Wisconsin unemployment statutes and rules. This proposal will provide consistency in determining individuals’ eligibility for unemployment benefits and employers’ unemployment insurance tax liability by limiting the employee status inquiry to the provisions of the unemployment insurance law.
D21-09 at 2. The actual proposed changes seem to do little more than re-arrange statutory wording, however. At present, current unemployment law prohibits consideration of licensing requirements or other state or federal law in determining employee status. So, there is a change in wording being proposed, but I cannot determine what substantively is being changed. The Department’s rationale seems to be that administrative law judges are over-turning initial determinations that held claimants to be employees (and so, concluding that the claimants truly were independent contractors) because those administrative law judges were looking to laws outside of unemployment law.
the appeal tribunal shall not take administrative notice of or admit into evidence documents granting operating authority or licenses, or any state or federal laws or federal regulations granting such authority or licenses.
So, the actual goal of this proposed change is unclear at the moment.
This proposals adds a provision — required by federal law — to prevent employers from re-organizing themselves and thereby reducing their tax rate significantly and restoring a positive account balance as a “new” employer — a practice called SUTA dumping.
SUTA dumping is a major problem that can easily “cost” thousands of dollars (and maybe even tens of thousands) per employer, especially when extended beyond one year. The proposed penalties are a $5,000 forfeiture, a possible $10,000 civil penalty, and possible criminal charges as a class A misdemeanor (up to 9 months in jail and up to a $10,000 fine).
So, these penalties are chump change and unlikely to discourage any employer but the smallest from SUTA dumping. A large employer who might save $70,000 or more in three years will not bat an eye at these proposed penalties.
Moreover, the penalties for claimant concealment are much more severe. Alongside the financial penalties that claimants incur for the claim-filing mistakes, per 2017 Wis. Act 147 the criminal penalties for claimant concealment are:
For benefits up to $2,500: An unclassified misdemeanor with a fine up to $10,000, imprisonment up to nine months, or both.
For benefits up to $5,000: A Class I felony, for which the penalty is a fine upto $10,000, imprisonment up to three years and six months, or both.
For benefits up to $10,000: A Class H felony, for which the penalty is a fine up to $10,000, imprisonment up to six years, or both.
For benefits over $10,000: A Class G felony, for which the penalty is a fine up to $25,000, imprisonment up to 10 years, or both
And, unlike claimant concealment, actual and specific intent to commit SUTA dumping needs to be proven. Proposed Wis. Stat. § 108.16(8)(mm)3 will read:
For the purposes of this paragraph and par. (m), “knowingly” means having actual knowledge of or acting with deliberate ignorance of or reckless disregard for the statute violated.
D21-10 at 3. Claimant “intent” for the purpose of unemployment concealment is shown for any claim-filing mistakes by the following factors:
a. Whether the claimant failed to read or follow instructions or other communications of the department related to a claim for benefits. b. Whether the claimant relied on the statements or representations of persons other than an employee of the department who is authorized to provide advice regarding the claimant’s claim for benefits. c. Whether the claimant has a limitation or disability and, if so, whether the claimant provided evidence to the department of that limitation or disability. d. The claimant’s unemployment insurance claims filing experience. e. Any instructions or previous determinations of concealment issued or provided to the claimant. f. Any other factor that may provide evidence of the claimant’s intent.
Wis. Stat. § 108.04(11)(g)2 (setting forth a claimant’s duty of care to provide accurate and complete responses to Department inquires).
These standards are hardly comparable. They should be. They need to be.
Work-share has been one of the few unemployment success stories in Wisconsin during this pandemic. In light of federal changes to work-share programs during the pandemic, this proposal seeks to expand work-share options and flexibility in light of those federal changes so that more employers and employees can take advantage of these benefits.
This proposal is a no-brainer and should have been adopted months ago.
The Department wants to hear about other changes needed to work-share efforts in Wisconsin. Other than a reduction in the complicated paperwork (a universal complaint for work-share), contact me with your suggestions. I will pass them on to the Advisory Council.
D21-12, Secretary waiver of provisions for the sake of funding flexibility
This proposal expands the general savings clause (the Department’s secretary can waive compliance with any specific state requirement should that state requirement be found to conflict with federal law) to also allow the Department secretary to waive requirements that prevent the state from taking full advantage of federal funding opportunities (like immediately waiving the waiting week when the pandemic struck, as the legislative delay costs Wisconsin employers’ millions of dollars).
D21-13, Initial tax rates for construction employers
Unemployment taxes have been declining so rapidly in Wisconsin that the initial tax rates for construction employers — one of the few booming industries from before and during the pandemic — are now lower than the initial rates of non-construction new employers.
D21-13 at 1. Because construction work is generally seasonal work, initial tax rates in construction should in theory be higher than for general, non-construction employers. The Department’s solution is to amend “the initial tax rate for construction employers to be the greater of the initial rate for non-construction employers or the average rate for construction industry employers as determined by the department on each computation date, rounded up to the next highest rate.” D21-13 at 2.
Until construction work no longer has seasonal layoffs because of winter, this proposal makes sense.
Current regulations, however, still prioritize in-person hearings over hearings by phone. In this proposal, the Department wants:
to amend chapter DWD 140 to provide that, while parties may continue to request in-person hearings, it is the hearing office’s discretion whether to grant that request. The Department also proposes to clarify language in DWD chapter 140 regarding hearing records, Department assistance for people with disabilities at hearings, and to correct minor and technical language in DWD chapter 140.
D21-14 at 2. As currently worded, the proposal simply justifies what the Department wants to do and provides no actual reasons or justification for these changes. For instance, the Department lacks space for in-person hearings because the Department previously closed three out of four hearing offices.
Even more troubling, the substances of the proposed changes is lacking. Wis. Admin. Code § DWD 140 is THE set of regulations for how hearings are conducted. Any changes to this chapter could have long-term repercussions to claimants and employers about what happens at unemployment hearings and their access to the hearing files connected to these cases.
When presenting this proposal, the Department indicated that the changes to DWD 140 are needed as well as to DWD 149 to reflect the Department’s current practices in responding to open records requests. So, it begs the question of what exactly is in conflict between these regulations and the Department’s current hearing practices. Wis. Admin. Code DWD 149.03 provides:
(1) Claimants and employing units. Except as otherwise provided under s. DWD 140.09, the department shall make the following records available to the following persons upon request:
(a) An unemployment insurance record concerning an individual is available to that individual.
(b) An unemployment insurance record concerning an individual’s work for an employing unit is available to that employing unit.
(c) An unemployment insurance record concerning a determination to which an employing unit is identified as a party of interest under s. 108.09, Stats., is available to that employing unit.
(d) An unemployment insurance record concerning an employing unit’s status or liability under ch. 108, Stats., is available to that employing unit.
In legal circles it is generally understood that phone hearings favor employers, as employer witnesses can gather in one room and share a set of notes during their testimony without an administrative law judge witnessing those notes being passed.
Finally, for comparison, here is a 1998 Department notice (from a 2000 training about unemployment hearings) about opting for a phone hearing. If the Department is going to go forward with this change, it should address these points it put forward in 1998 for why phone hearings are problematic.
Currently, summer camp counselors are generally ineligible to receive unemployment benefits because they are usually full-time students. But, summer camps must still pay unemployment taxes for the wages paid to summer camp counselor.
This proposal applies the federal definition of excluded employment for camp counselors to state law.
The result of this change is that summer camps will no longer pay unemployment taxes for the wages paid to their summer camp counselors. And, some summer camp counselors who are not students may lose the ability to include their summer camp wages in establishing a benefit year.
This proposal repeals the drug testing provisions the Walker administration kept trying to institute. Recall that the drug testing efforts came in three parts: (1) voluntary employer testing and reporting, (2) mandatory testing of claimants based on to-be-determined federally designated occupations for testing, and (3) mandatory testing of claimants based on a future, state-based list of designated occupations. Only the voluntary employer testing and reporting was ever implemented.
The big news here is that as of 31 March 2021, the Department has received 171 drug test reports (either a failed test or failing to take a test) from potential employers. Previously, the Department had reported none or just a couple of voluntary testing reports from employers. In any case, the impact of these 171 voluntary employer reports remains nil. “No claimants have been determined to be ineligible for UI benefits under the pre-employment drug testing statutes and rules and denied benefits because of the employers’ reports of a failed or refused drug test as a condition of an offer of employment.” D21-16 at 1. So, there has been no opportunity for claimants to maintain their eligibility by enrolling a drug treatment program at the state’s expense.
Because employers have no idea of whether a job applicant is receiving or not receiving unemployment benefits OR because employers are failing to provide the necessary drug-testing paperwork and follow the necessary protocols for reporting a drug test OR a combination of these two factors, the voluntary drug testing has been a complete bust. In more than five years, this effort has not led to a single disqualification or enrollment in a drug treatment program. Ending a program that is doing nothing should make sense.
D21-17, Repeal of the substantial fault disqualification
This proposal seeks to repeal the substantial fault disqualification. There are two issues with this proposal, however.
Second, court decisions in Operton v. LIRC, 2017 WI 46, and Easterling v. LIRC, 2017 WI App 18, have limited the scope of substantial fault in important ways from how the Department applies this disqualification. But, the Department continues to ignore those court precedents. Indeed, as of May 2021, I have come across two cases of employees disqualified for substantial fault because of unintentional mistakes where the mistakes in question are nearly identical to the mistakes in Operton (inadvertent job mistakes) and Easterling (unintentional mistakes while attempting to satisfy employer demands).
D21-18, Expansion of the relocating spouse quit exception
This proposal restores this quit exception to allow any claimant who has to quit a job because his or her spouse has to relocate. Prior to 2013, Wisconsin allowed claimants to receive unemployment benefits when they had to relocate because of a spouse transferring to another job for any reason. In proposal D12-19, the Department limited this quit exception to the spouses of military personnel who had to relocate.
So, this proposal restores the expansive nature of this quit exception.
The problem here, like with substantial fault, is that the Advisory Council previously rejected this Department proposal to limit this quit exception to the spouses of military personnel. Here is what the Advisory Council actually agreed to back in 2013. So, this proposed change should be included as a matter of course in the council’s agreed-upon bill.
The waiting week was enacted as part of the 2011 budget act, 2011 Wis. Act 32 and without any input from the Advisory Council.
The concept of a waiting week exists because state unemployment agencies originally could not act quickly on a claim for benefits, and so a waiting week was needed to give the state agency time to process the necessary paperwork. With the advent of claim-filing by phone, however, that additional time was no longer needed. The waiting week effectively became a vehicle for reducing the total amount of benefits paid out to a claimant, since claimants did not receive any unemployment benefits for the first week of their claim.
The Department estimates that the waiting week costs claimants $26.1 million each year. D21-19 at 3. Given the purpose of unemployment benefits to provide immediate economic stimulus to workers in time of need after losing their jobs, a waiting week makes no sense.
D21-20, Repeal of the lame duck work search and work registration changes
In light of Wisconsin’s partial wage formula, a claimant with a weekly benefit rate of $370 could in theory have as much as $574 in wages and still qualify for at least $5 in unemployment benefits. D21-21 at 1. In other words, the partial wage formula indicates that anyone with $575 or more in wages would NOT receive any unemployment benefits.
As a consequence, the $500 cutoff actually discourages some work, as any employee who receives $500 or more in wages loses all unemployment benefits. For instance, a person with a WBR of $370 who earns $550 in wages would receive $22 in unemployment benefits that week, if the $500 wage cap was eliminated.
In other states, the gap between earnings and unemployment eligibility is called an “earnings disregard.” In some of these states, a worker who earns just $200 in a week loses unemployment eligibility dollar for dollar, so the earnings disregard in those states is sizable. See Massachusetts, for example, in this table. Because of Wisconsin’s partial wage formula, the earnings disregard in Wisconsin is limited to this $500 wage cap and only applies for claimants receiving the highest weekly benefit rate.
So, at present this $500 wage cap has a very limited effect. But, should the weekly benefit even be increased, it will become a major problem. And, as indicated in the next proposal, Wisconsin now has the second-lowest weekly benefit rate in the mid-west. So, this artificial cap needs to go if Wisconsin is going to raise its weekly benefit rate.
Finally, as noted by the Department, D21-21 at 3, the eligibility ban when working 32 or more hours in a week remains in place.
Currently, Wisconsin has the second-lowest maximum weekly benefit rate in the mid-west.
State Max. WBR Max. w/ dependents
IL $484 $667
IN $390 $390
IA $481 $591
MI $362 $362
MN $740 $740
OH $480 $647
WI $370 $370
A listing of the weekly benefit for all the states is available here.
Note: this data is different from what the Department reports in its proposal, and these numbers are current as of October 2020. These numbers have changed since then. Ohio, for instance, currently has a maximum WBR of $498 and $672 with dependents.
The highest WBR available is in Massachusetts, at $823 ($1,234 with dependents). The second highest is in Washington state at $790.
This proposal sets forth a series of increases in the weekly benefit rate.
For benefits paid for weeks of unemployment beginning on or after January 2, 2022, but before January 1, 2023, the maximum weekly benefit is capped at $409.
For benefits paid for weeks of unemployment beginning on or after January 1, 2023, but before December 31, 2023, the maximum weekly benefit is capped at 50% of the state’s annual average weekly wages.
For benefits paid for weeks of unemployment beginning on or after December 31, 2023, the maximum weekly benefit is capped at 75% of the state’s annual average weekly wages, or the maximum weekly benefit amount from the previous year, whichever is greater.
Wisconsin’s weekly benefit rate relative to the wages being paid in this state has never been all that good and has become essentially a token reimbursement in the last few decades.
Using the average weekly Wisconsin wage of $951 in 2019, the maximum WBR in 2023 would be $475, and in 2024 the maximum WBR would be $713. So, this proposal would basically make the maximum weekly benefit rate actually useful and relevant again in Wisconsin.
D21-23, Expanded flexibility in searching for suitable work
Here, the Department proposes two changes. First, the Department wants to expand the canvassing period from six weeks to eleven weeks.
The canvassing period is the time when you can reject a job offer which is a lower grade of skill or at a significantly lower rate of pay (less than 75%) than you had on one or more recent jobs without losing your eligibility for benefits. SeeTips for filing for unemployment benefits in Wisconsin for more information about your canvassing period.
Second, the Department proposes expanding the trial time period for quitting a job without being disqualified from receiving unemployment benefits from 30 days to ten weeks (the original time period). The Advisory Council originally approved of the change from ten weeks to 30 days.
This trial time period provides various ways for an employee to still qualify for unemployment benefits when quitting a job regardless of the employee’s actual reason. The main reason found in this category usually is that the job fails to meet established labor market standards (e.g., wages are 25% or less than what is normally paid in that specific labor market for that occupation). But, any reason that would have allowed the employees to refuse the job offer in the first place as well as any reason for quitting the job with good cause applies here. Only the last reason — having good cause for quitting the job — is still available to employees after the trial period has expired.
D21-24, changing the SSDI eligibility ban to an offset
This proposal was previously discussed here, along with the entire history of the Department’s SSDI eligibility ban qua offset. Whether as an eligibility ban or an offset, it still makes no sense. There should be no SSDI offset, just like there should be no SSDI eligibility ban.
Here is hoping the Advisory Council can fix this crazy proposal and end this discrimination against the disabled.
At present, large employers (those with annual unemployment taxes of $10,000 or more) must e-file their reports and e-pay their unemployment taxes.
This proposal would mandate e-filing and e-pay for ALL employers.
The problem is that many one or two person LLCs and other self-employed individuals have no conception of unemployment taxes and the reports that need to be filed. Given the lack of broadband access in the state, this mandate for these small employers is likely difficult to impossible to implement.
Without a broad-based, educational media campaign, this mandatory e-filing will accomplish little more than allowing the Department to levy administrative penalties against small employers who have no idea what is going on and fail to provide their forms and payments via e-file and e-pay. The fact that implementation will be delayed until the Department actually has the technology in place to support this proposal offers little assurance. In short, this proposal should be rejected out-of-hand. After all, those who push for ease-of-use indicate that multiple kinds of access need to be maintained and fully supported. So, mandatory e-filing and e-pay actually runs counter to making unemploymeny more modern and easier-to-use.
This proposal seeks to replace the token employer penalties for mis-classifying construction workers (1) with penalties that at least some have some dentures to them and (2) to expand this issue to all industries rather than limiting it to just construction.
The Advisory Council at the urging of Mark Reihl, then the head of the carpenters’ union in Wisconsin (and now division director for unemployment) originally approved the original penalties proposed by the labor caucus.
$500 civil penalty for each employee who is misclassified, but not to exceed $7,500 per incident.
$1,000 criminal fine for each employee who is misclassified, subject to a maximum fine of $25,000 for each violation, but only if the employer has previously been assessed a civil penalty for misclassified workers.
$1,000 civil penalty for each individual coerced to adopt independent contractor status, up to $10,000 per calendar year.
D21-36 at 1.
With this proposal, the Department explains:
The proposal removes the $7,500 and $10,000 limitations on these penalties and provides that the penalties double for each act occurring after the date of the first determination of a violation. The proposal also removes the limitations on the types of employers to which the penalties apply, allowing them to be assessed against any type of employer that violates the above prohibitions.
(b) The department shall consider the following nonexclusive factors in determining whether an employer described under par. (a) knowingly and intentionally provided false information to the department for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee:
1. Whether the employer was previously found to have misclassified an employee in the same or a substantially similar position. 2. Whether the employer was the subject of litigation or a governmental investigation relating to worker misclassification and the employer, as a result of that litigation or investigation, received an opinion or decision from a federal or state court or agency that the subject position or a substantially similar position should be classified as an employee.
Under this standard, it is well nigh impossible to charge an employer with mis-classification for a first-time violation. On the other hand, claimants are given no such leeway for their claim-filing mistakes. As noted above with proposal D21-10 (SUTA dumping), claimants who have filed for unemployment insurance previously and been given notice to read the claimants’ handbook are presumed to know everything about how to file an unemployment claim and to not make any claim-filing mistakes. But, here, employers are not liable for mis-classification (a far more serious problem economically) until after their first instance of mis-classification. In other words, these mis-classification penalties can only apply to employers when prosecuted a second time for the same mis-classification. Having two bites of the apple sure is nice.
Either employers should be held to the same claim-filing standards as employees, or the intent requirements used against employees for their claim-filing mistakes needs to be seriously redone.
Claimants are not the only folks having trouble with unemployment.
Many employers think that incorporation protects them from individual liability. Not so. In particular, for unpaid unemployment taxes there are specific provisions for holding an individual owner of a company (and others, see below) responsible and liable for unpaid unemployment taxes. Besides interest and penalties, the Department will work out payment plans, intercept tax refunds, place liens on property, revoke professional licenses, levy bank accounts, and even garnish wages from later employment to recoup unpaid unemployment taxes.
In 2013, the Department proposed several changes to make it easier for employers to get the administrative penalties and interest connected with unpaid unemployment taxes waived. SeeMemorandum RE: 27 November 2012 DWD legislative proposals to Advisory Council (13 Jan. 2013) at 46-50. And, prior to the Great Recession, the Department had created a special work group to assist new employers with understanding unemployment issues and taxes.
The Department also began changing the law of personally liability in ways that were not acknowledged at the time.
Wis. Stat. § 108.22(9) sets forth the personal liability provision in unemployment law. Under this provision, a person is personally liable for unpaid unemployment taxes when the following four criteria are met:
That person is an officer, employee, member, manager, partner, or other responsible person of an employer,
That person has control or responsibility for paying unemployment taxes,
That person willfully fails to pay those unemployment taxes, and
That person was subject to proper collection efforts by the Department.
Prior to 2015, Wis. Stat. § 108.22(9) (the 2013 version) varied significantly from its current form. The requirement for being a “responsible person” was first put forward statutorily by the Department itself in proposal D15-05 (19 Feb. 2015) to the Unemployment Insurance Advisory Council and was enacted in § 91 of 2015 Wis. Act 334. While the proposed change was described as a way of making sure members of a partnership could be found liable for unpaid unemployment taxes, the proposal also indicated that the scope of personal liability was limited to “responsible persons.” As explained in the Department’s proposal:
This proposal will create a more level playing field because it will ensure that responsible persons are not able to avoid personal liability for unpaid UI contributions simply because they chose a particular form of business entity. It also provides flexibility for the department to impose personal liability if the Legislature creates other business forms (such as a Low-Profit Limited Liability Company or “L3C”).
Proposal D15-05 at 2. In a memorandum dated 19 March 2015 that was provided to the Advisory Council, the Department offered an explanation of what it considered to be a responsible person based on both state income tax rulings as well as Commission precedent.
The proposed amendment to section 108.22(9) is designed to permit an assessment of personal liability for unpaid unemployment insurance contributions against individuals who, by nature of their “status, duty and authority,” are responsible for filing the contribution reports and paying the taxes. This is similar to the way that LIRC currently interprets section 108.22(9) and is consistent with the federal IRC and the Wisconsin Revenue Statute.
the Tax Appeals Commission, which reviews assessments of the Wisconsin Department of Revenue, has interpreted the term “responsible person” broadly and it “gauges responsibility by examining whether the person had the actual or de facto authority to withhold, account for, or pay the taxes, the duty to pay the taxes, and whether the person intentionally breached that duty.” Sandberg v. Wisconsin Department of Revenue, Wisconsin Tax Appeals Commission, ¶401-491, (Nov. 18, 2011).
And the Tax Appeals Commission held that “the responsible person determination is pragmatic and based on considerations of substance, rather than form. It boils down to the fact that the crucial inquiry is whether the person had the effective power to pay the taxes — that is, whether he had the actual authority or ability, in view of his status within the corporation, to pay the taxes owed.” Id (internal citations omitted). The Tax Appeals Commission in Sandberg found that the son of the business owner was not a “responsible person” for the purposes of the Wisconsin Revenue Statute because “evidence showed that the business, in fact, was a ‘one-man show’ where his father, Kenneth Sandberg, was ‘that man.'” Id.
Id. (footnote omitted).
So, it would seem that individual liability should be limited to those owners and individuals who have designated or actual authority for unemployment tax matters, regardless of the title or status of that person. After all, the persons actually responsible for paying unemployment taxes should be the person liable for those taxes when they go unpaid, not any possible director or even employee of the company.
And, that perspective made sense until Proposal D17-07, in which the Department proposed eliminating the 20% ownership threshold. The change was explained this way:
And, the fiscal impact, according to the Department, was minimal:
Trust Fund Impact: This proposal would have a negligible but positive impact on the Trust Fund. Without the 20% threshold, this change would streamline investigations into assigning the debt. Some nonprofits do not have a clear owner, so this may make assigning personal liability in cases involving nonprofits easier. However, in general, individuals the department is trying to assign personal liability to already meets the 20% threshold and thus would not result in a significant impact to collections.
So, because the Department re-wrote this individual liability law broadly, it is now free to ignore its own arguments about how the targets of the Department’s collection efforts would be limited. So, the Department for the past several years has expanded who it targets for debt collection to include ANY employee or individual in its discretion it thinks it can collect from.
A December 2020 decision by the Labor and Industry Review Commission concerning a sprawling, for-profit enterprise illustrates just how expansive these debt collections efforts have become: Rice Mgmt., Inc. et al., UI Hearing Nos. S1900089MW-117MW (Kevin Breslin), UI Hearing Nos. SI900262MW-290MW (Robert Parkins), UI Hearing Nos. S1900291MW-319MW (Mary Jo Parkins), UI Hearing Nos. S1900320MW-348MW (Gina Mignano), and UI Hearing Nos. S1900349MW-77MW (Anthony Carriero) (30 Dec. 2020)
Note: In the briefing before the Commission, I represented one of the individuals pursued for debt collection, the assistant controller, Anthony Carriero.
The Department only pursued two out of five partners, all of whom raked in millions (the two were Kevin Breslin and Williams Burris, Jr.,, and Burris settled his case with the Department prior to hearing and withdrew his appeal) for collection efforts. But, several lower level employees and former employees were targeted (including an assistant controller, who reported to a controller, who reported to a CFO, who in turn reported to a managing partner), apparently for no other reason than that the Department had their names and contact information.
Of the four requirements for personal liability, both the administrative law judge and the Commission found that the second and third factors were obviously not met for the defendants other than Breslin. But, in examining the first requirement, the Commission provided the first extended analysis of all the changes the Department has wrought, and the result shows just how broad debt collection in unemployment law now reaches.
This part of the statute has undergone some changes in recent years. Prior to 2015, the statute provided that before a person could be found personally liable, the individual had to be “an officer, employee, member or manager holding at least 20% of the ownership interest of a corporation or of a limited liability company” subject to Chapter 108. In 2015, the legislature changed this so that the individual could be “an officer, employee, member, manager, partner, or other responsible person holding at least 20 percent of the ownership interest of a corporation, limited liability company, or other business association” subject to Chapter 108. It appears that the impetus to broaden the statute in 2015 was to include managing partners of limited liability partnerships as persons who could be found personally liable for the contributions owed by an LLP, and to ensure that those people could be found responsible even if they chose another business entity. However, if the person did not own 20% of the business, the condition still was not met. In 2018; the statute was changed again, and it now provides that before a person can be found personally liable for an organization’s unpaid unemployment insurance taxes, the first condition that must be met is that the person must be or must have been “an officer, employee, member, manager, partner, or other responsible person of an employer…”
As the appeal tribunal noted, there is little case law on the first condition with the new statutory language. Previously, the analysis for this condition was focused on whether the individual owned 20% of the business and the nature of the business. With the recent law changes, the legislature has expanded who can be found personally liable to persons beyond the listed titles and without regard to ownership, and it has expanded the application of the law to any employer rather than just to corporations, limited liability companies, or other business associations.
The appeal tribunal paraphrased this condition as requiring that the individual “has a special relationship with the company.” Under this interpretation, in addition to determining whether the individual was an officer or employee, etc., the appeal tribunal questioned whether the individual was also a “responsible person” of the employer and analyzed whether the individual’s particular duties made that owner, officer, or employee a “responsible person” of the employer. In this reading of the statute, the word “other” in the statute was read to imply that any officer or employee, etc., must also be a “responsible person” as well, and, therefore, the decision maker must decide whether the person is a “responsible person” under this first condition in addition to determining whether the person was an officer or employee, etc. In the Carriero decision, for instance, the appeal tribunal found that the words “or other responsible person of the employer” now acted to modify the word “employee” to differentiate employees who have greater responsibilities from those who do not.
While it is true that an individual may not be found personally liable unless the individual was responsible to pay the unemployment insurance taxes, the commission concludes that this analysis is generally more appropriately addressed under, the second condition, where the commission has historically examined whether an individual is a “responsible person” for purposes of personal liability. This is consistent with the federal case law, which looks at who has a duty to collect and pay over the tax as a “responsible person.” It is thus not necessary to duplicate the analysis for both the first and second conditions, as the appeal tribunal did here. With this reading of the statute, the first condition is fairly simple. If the individual is an officer, employee, member, manager, or partner of the employer, the condition is met with no ownership requirement. The appeal tribunal essentially acknowledged this in one set of decisions by noting, e.g., “Mr. Parkins had no stake in the LLC, but he was indeed an officer, so he therefore satisfies this element.” It is also possible that someone who does not have the status of an officer, employee, member, manager, or partner of the employer could be found personally liable if that person had other authority or was otherwise responsible for the business of the employer, such as a financial agent or a family member. Only if a person is not an officer, employee, member, manager, or partner of the employer, is it necessary, for purposes of this condition, to determine whether the person is an otherwise responsible person of the employer. This clarifies the first condition and also avoids unnecessary duplication of the analysis of whether a person is also a “responsible person” for the payment of unemployment insurance contributions under the second condition.
* * *
Accordingly, each of the putative debtors was at least an officer, employee, member, manager, or partner of the employer.
Rice Mgmt., Inc. et al. at 21-2 (footnotes omitted, emphasis in original). In other words, this first requirement will only really matter when the Department is pursing an individual who has no direct, formal role with the debtor employer (such as the employer’s legal counsel or accounting form). In all other cases, it is met if the person has any connection at all with the debtor employer.
Note: This reference to legal counsel should indicate to the lawyers out there just how far reaching this individual liability could extend. I could see the Department now easily extending personally liability to the attorneys who could have prevented the unemployment taxes from going unpaid, since such a claim is similar if not identical to what the Department argued in this case for the non-partners.
As demonstrated in Rice Mgmt, the second and third requirements still follow traditional analysis and requirements. So, individuals who are not actually responsible or in control of tax liabilities may still avoid personal liability.
But, the fourth requirement — service of proper collection efforts — has, like the first requirement, in practical terms become a non-issue. Previous to all of these changes, notices of unpaid taxes to the corporate entity would be served on the corporate premises, and so those who controlled the company would also have notice. Now, with the number of possible debtors expanded to employees and even persons who have no formal connection at all to the company, they will have no idea about these unemployment debts and the associated collection efforts until charged with personal liability. In this Rice Mgmt case, for instance, Robert Parkins had left the company in early 2017, around six months before any collection efforts were undertaken. Yet, this fourth requirement was satisfied by the Department against him.
The Commission decision is lengthy (40 pages) but deserves a close and extended reading. As numerous employers may not have survived the pandemic, many may find the Department knocking on their doors — and the doors of others — about unpaid unemployment taxes. This decision is the current legal framework for these cases.
The latest rescue package signed into law on 11 March 2021 provides for:
$1,400 per person direct stimulus payments for individuals earning less than $75,000 and for couples earning less than $150,000.
PUA benefits extended 23 more weeks on top of the original 50 weeks (39 under CARES and 11 under Continued Assistance) for a total of 73 weeks until 6 September 2021.
PEUC benefits extended 29 more weeks on top of the original 24 weeks (13 under CARES and 11 under Continued Assistance) for a total of 53 weeks until 6 September 2021.
The additional $300 PUC per week starting on the week ending 1/2/2021 continued for all weeks until 6 September 2021.
Work share programs are extended thru 6 Sept. 2021.
Full federal funding of EB benefits extended thru 6 Sept. 2021.
The federal subsidy for reimbursable employers is increased from 50% to 75% for unemployment weeks beginning after 31 March 2021 until the week ending 9/6/2021.
Full, 100% funding of waived waiting week benefits retroactive to the week ending 1/2/21 (this subsidy was previously 50%) and effective through the week ending 9/6/2021. As the Department persuasively indicated on March 18th to the Unemployment Insurance Advisory Council, this federal funding means that claimants get an additional $300 PUC payment earlier into their hands as well as one week of regular unemployment benefits being funded by the federal government rather than Wisconsin employers (meaning that Wisconsin employers end up with the first week of benefits paid for by the feds rather than out of their unemployment accounts). At the March 18th meeting of the Advisory Council, labor caucus members pushed for full support of this waiting week waiver, but employer representatives for some reason had to think about whether employers would want to have one week of benefits subsidized or not.
An expanded Child Tax Credit on income tax forms that will provide $300 per month to families with children under 6 and $250 per child 17 and under.
100% coverage of any COBRA premiums for any workers laid off and maintaining health care coverage through COBRA thru 30 Sept. 2021. Details and mechanisms for this coverage are to be determined and will include employer or insurer payments for that coverage on behalf of the former employees.
Expanded subsidies for ACA health coverage that will apply to 2021 and 2022 calendar years. Anyone receiving unemployment benefits in 2021 will be automatically eligible for subsidized ACA health care coverage. The extent of those subsidies are to be determined.
Financial shoring up of the Pension Benefit Guaranty Corporation so as to keep pension payments flowing to millions of retirees.
There are income limits to many of these provisions. But, for nearly all unemployed workers in Wisconsin, those income limits will not be an issue.
As Jake observes from the report, for the twenty-year period from 1997 to 2017, Wisconsin has led the mid-west in declining tax revenues, a commensurate decline in education spending, and a comparative increase in spending on Medicaid, corrections, and highways. These changes, Jake explains, are tied directly to the policy choices of recent years.
For example, a reason Medicaid spending is higher in Wisconsin because we refuse to take the expanded Medicaid in the Affordable Care Act, which would push those expenses onto the Feds instead of us (on a related note, a Pew report earlier this year placed Wisconsin 45th in the country for federal aid).
On the Corrections side, this is an obvious effect of the “lock em up” mentality of WisGOPs that has ended up with the state spending more on Corrections than the UW System. The “6th in the US” highway spending number can be connected back to a huge increase in local wheel taxes to fix roads that Scott Walker and the WisGOP Legislature refused to pay for.
Second, several taxes are left out of this analysis completely, including unemployment taxes that employers pay on the first $14,000 of annual income paid to each employee. The 2018 Tax Measures Report has all of this tax information. Compared to the other fifty states, Wisconsin’s unemployment taxes are below average:
2018 Tax Measures Report at 64. As seen here, in 2018 Wisconsin’s average unemployment tax burden for employers was $255. For comparison, Minnesota’s was $340, Michigan’s was $352, and Iowa’s was $318.
Other measures likewise indicate that the unemployment tax burden on employers is exceptionally low in Wisconsin among mid-western states:
Average employer contribution in 2018 for every $100 in wages paid to an employee Wis. 0.54 Minn. 0.56 Mich. 0.64 Iowa 0.69
For every dollar of tax paid in 2018, the amount going to Benefits owed / Trust fund surplus Wis. 0.75 / 0.25 Minn. 0.94 / 0.06 Mich. 0.63 / 0.37 Iowa 1.08 / -0.08
So, Wisconsin has the lowest unemployment tax burden of these four states, and 25 cents of every tax dollar being paid is going into the trust fund (only Michigan is saving more monies than Wisconsin for its trust fund).
First, some apologies for the title to this post. Non-acquiescence is a ten-dollar word for disagree. Essentially, the Department has the ability per Wis. Stat. § 108.10(7)(b) to declare publicly that it disagrees with a decision of the Labor and Industry Review Commission but will not appeal that decision into the courts. The Department has this option because an appeal of a decision into the courts faces the risk of the Commission’s decision being affirmed. That affirmation would then turn that case into a precedent the Department would be required to follow.
NOTE: The Department is supposed to follow Commission decisions as precedent. This non-acquiescence process provides a mechanism for the Department to declare officially that it will NOT follow a Commission decision as precedent.
Second, from May 2018 to January 2019, the Department began regularly issuing notices of non-acquiescence in employer tax cases where personal liability for those taxes were at issue. In all of these cases, the Commission found that personal liability was NOT justified largely because the individuals being pursued were not actually the owner/controlling person of the employing entity. These fact specific inquiries, however, somehow led the Department to believe that the Commission was not applying unemployment law in the way the Department wanted these cases decided. Here are the cases:
In the Matter of Drake, UI Hearing Nos. S1500396EC and S1500400EC (21 Dec. 2018) (Non-acquiescence 18 Jan. 2019)
In almost all of these decisions, the Commission found that there was NO personal liability for unpaid employer unemployment taxes because the person targeted in these cases essentially did not qualify as the owner or manager responsible for those unemployment taxes.
NOTE: Keep in mind that corporate protection and limited liability does NOT apply to unpaid unemployment taxes. See, e.g., EOG Environmental Inc., UI Hearing No. S1100346MW (27 Aug. 2013) (the Department filed a notice of non-acquiescence in this case as well) and Henry Warner, UI Hearing No. S9100679MW (16 July 1993) for excellent descriptions of the personal liability issues that attach to individuals regardless of incorporation when unemployment taxes go unpaid.
In other words, the Department is pursuing in these cases additional liability for unpaid unemployment taxes. The Department is arguing that the named person is the manager or owner responsible for paying unemployment taxes and that he or she failed to meet that responsibility. The Corley case provides an excellent example of what is going on with these cases (I spoke with the attorney who represented the defendant individual in that case).
In Corley, a father had sold his trucking business decades before to his son who took over day-to-day management of the operation, The father remained a figurehead director of the company, however, for the sake of assuring customers and others that the father’s experience and judgment were available to the son. The father had little to any active involvement with management by 2008 or so but continued to staff office and personnel matters as a favor to his son.
With the great recession, the company came on hard times and went under by 2011 or 2012. During the course of going under, unemployment taxes went unpaid. Collection efforts by the Department ensued against the son (not mentioned in the Commission’s decision, as the collection efforts at issue here were against the father).
Apparently, those collection efforts were not going as well as the Department wanted, so it targeted the father, who at the time was working as a trucker again and living out of his tractor-trailer cab because of the economic losses and debts he had incurred from the recession. This targeting of the father for additional revenue/collection explains why the record is so spotty about the father’s actual role and involvement in the company’s unpaid unemployment taxes and what was allegedly owed by the father.
The Commission in its decision essentially finds that there is no proof of any unpaid debts for which the father was responsible. This lack of factual evidence in the record about the father’s personal liability, however, is a principle the Department does not want to accept as a limit on personal liability. So, the Department filed its notice of non-acquiescence in this matter. The Department does not want “actual evidence” to serve as a limit on its claims of personal liability. On that basis, this declaration by the Department is shocking.
So, in this light this flurry of non-acquiescence declarations by the Department signals a state agency targeting small employers and the individuals connected to them in any way possible as sources for continued and never-ending debt collection. Claimants in concealment cases are not the only folks who have experienced the unforgiving and relentless push by the Department to collect no matter what and to collect even and ever again simply because the Department asserts that monies are owed. Should another recession occur, there are many, many employers who will feel this bite from the Department and face the unending and pervasive debt collection the Department wants.
Note: of course, benefit payments continue their decline, dropping 6.7% from 2018 numbers to $330.9 million as of April 2019. Employer taxes are also down $23.9 million, to $330.9 million, for January to April 2019.
As evident here, the trust fund is at a near record high while claimants’ benefits and employers’ taxes are dropping like rocks down the proverbial well. Two charts showcase how benefits and taxes have markedly declined since 2011 (benefits) and 2012 (taxes) relative to total payroll in the state.
So, what Wisconsin has experienced the last eight to nine years is ahistorical — only around 37% of claimants applying for unemployment benefits end up receiving any benefits rather than the more typical 55% of applicants.
Note: Department personnel continue to remark about how benefit payments are at record lows without offering any explanations or theories for why these record low benefit payments are occurring. As noted in this blog, this problem of record-low benefit payments is not unique to Wisconsin. But, it does seem from this same note that changes in how states are administering their unemployment law disqualifications are responsible for much if not all of this decline. Shouldn’t the Department finally take ownership of its own culpability for what has been going on the last eight to nine years or at least explain why the legal changes and administrative practices adopted under the prior governor to make it more difficult to claim unemployment benefits are somehow NOT connected to this decline in unemployment benefits?
At a minimum, Department staffers need to read Andrew Stettner’s excellent analysis of state unemployment systems and the changes in eligibility standards and application rates describes the impact of these changes and why these changes should be re-examined and most likely reversed.
To understand how healthy the unemployment trust fund actually is, three different scenarios for the future were played out in this presentation.
In one scenario, the economy continues along its current course, benefit payments remain anemic, and the unemployment rate returns to the normal 4-5% for Wisconsin. Here, the trust fund continues to be robust in the short-term. But, growth of the fund eventually slows, and the fund begins to decline slightly in the long-term.
In the second scenario, the economy continues along its current course, but benefit payments return to the historical experience of Wisconsin. While no recession is assumed to take place, the trust fund balance starts to take a hit in 2020 and a switch to the more aggressive tax schedule C will be needed by 2026 or so.
In the third scenario, a mild recession in 2020 occurs. Even with the anemic level of benefit payments continuing — 37% — the bottom of the trust fund drops out such that less than $500 million is left in the fund by 2022. And, in the long-term, the most aggressive tax schedule — Schedule A — needs to be triggered to start pumping money back into the trust fund.
In other words, these scenarios indicate that the trust fund balance — despite being at record levels — is wholly inadequate given the current size and scope of Wisconsin’s economy. Only a Pollyanna desire for the economic equivalent of sunshine and rainbows to continue indefinitely keeps the unemployment trust fund from imploding.
The current fetish with minimizing employers’ taxes is just one culprit behind this carefree thinking. Economists have begun explaining, that there is no correlation whatsoever between employers’ tax rates and business success. What remains to be seen is what the Advisory Council will do about all these problems: keep current policies and administrative practices in place or begin the process of changing these policies and practices. As many of these simply relate to the Department’s bureaucratic preferences in how it administers unemployment law (and, in numerous places represents a sharp conflict with that law), there is much that can be done immediately to correct at least the unparalleled decline in benefit payments before we find ourselves in the middle of a recession and with no oar available to avoid the waterfall towards which we race.
Department of Workforce Development Announces Upgraded Unemployment Insurance Employer Online Services
MADISON (9/27/18) – Today, the Department of Workforce Development announced enhancements that will make it easier for employers to interact and correspond with the Department’s Unemployment Insurance program.
The first improvement is a streamlined and an easy to use UI Employer Online Services and SIDES E-Response sign-on. The second improvement permits employers to view benefit determinations and to file benefit appeals electronically.
“Wisconsin was the first state in the nation to offer unemployment insurance benefits,” said Secretary Ray Allen. “Now, we are leading again as the first state to provide an electronic method for employers to appeal benefit cases through the SIDES Exchange.” Allen noted that unemployed workers already have the ability to appeal such cases electronically.
Unemployment Insurance (UI) SIDES E-Response is a web-based system that allows electronic transmission of information requests from UI agencies to employers and/or Third-Party Administrators (TPAs), as well as transmission of replies containing the requested information back to the UI agencies.
Prior to the enhancements, employers had to use different login credentials for each response sent through SIDES. Employers are now able to use their UI Employer Online Services credentials to respond to inquiries through SIDES. This enhancement makes the system more user-friendly, saving employers time and money.
Essentially, these changes expand what is currently available to employer representatives via SIDES to allow all employers to have the same kind of access to their accounts. For small employers who do not have an agent handling their unemployment accounts, this added access is an obvious improvement.
The changes, however, will not be obvious without some exploring of the employer accounts by the employer. So, employers: log into your accounts at the link in the press release above and do some exploring.
The first and probably only hearing on the Advisory Council agreed-on bill, SB399, is slated for 12:30 today, 4 October 2017, at the Committee on Labor and Regulatory Reform in 201 Southeast of the Capitol.
This bill contains the Department’s proposals that the Advisory Council has approved (previously described in this post). Prior drafts of the bill are available here and here.
NOTE: The Advisory Council rejected Department proposals D17-03 (assessing employers for failing to provide employee records) and D17-06 (changing the burden of proof in certain unemployment cases) at the 9 August 2017 council meeting.
During discussions, management members of the Advisory Council made the following proposals:
Repeal the quit exception in Wis. Stat. § 108.04(7)(e). Under this provision, a claimant who quits a job within 30 days of being hired may retain their eligibility for unemployment benefits if the job that the claimant quit was not “suitable work” to begin with under Wis. Stat. § 108.04(8) OR the claimant could have refused to accept the under the federally-required labor standards provisions of Wis. Stat. § 108.04(9).
Treat state and federal holidays as working days for partial benefits if the employer is closed on those holidays. This provision is similar to what the Governor previously vetoed when added to the 2013 budget bill and which the council declined. See this post and this post.
Reduce the maximum number of benefit weeks based on the unemployment rate to 22 weeks when the unemployment rate is below 7% and 18 weeks when the unemployment rate is below 5%. The Council previously rejected this proposal from legislators. See this post and this post.
Amend definitions of misconduct and substantial fault in some way.
Labor representatives on the council made the following proposals:
Increase maximum weekly benefit rate (WBR) by $10 in 2018 and by another $10 in 2019.
Amend the trigger for tax schedule D to $1.8 billion. The current threshold for schedule D (the schedule with the lowest unemployment taxes) is $1.2 billion in the trust fund as of June 30th of the proceeding tax year.
Increase the taxable wage base in 2019 to $16,500 and then index that wage base in subsequent years.
The only available information about these proposals is available from this Department memorandum and a limited fiscal analysis. The Management proposals are not detailed in either document, and the description of the labor proposals is very general.
NOTE: An explanation for why management wanted changes to substantial fault and misconduct is provided, however:
Due to recent decisions of the Wisconsin Supreme Court and Court of Appeals regarding discharge for misconduct and substantial fault, the Management members of the Council propose to amend the definitions of “misconduct” and “substantial fault” in order to clarify legislative intent.
At the 9 August 2017 council meeting, the Advisory Council decided that none of these proposals would be taken up.
Finally, the fiscal estimate from the Department for SB399 has this information:
Assumptions Used in Arriving at Fiscal Estimate The bill makes various changes in the unemployment insurance (Ul) law, which is administered by the Department of Workforce Development (DWD). Compliance to the bill’s components will require one time IT work of 3,930 hours and one time administration work of 1,180 hours costing a total of $444,500. The funding will come from the UI Federal Administration grant. It is expected that the proposed changes will increase collections and save the UI Trust Fund $1,250,000 annually.
Long-Range Fiscal Implications It is expected that the proposed changes will increase collections and save the UI Trust Fund $1,250,000 annually.
These savings are largely due to the changes set forth in proposal D17-07 regarding new mechanisms for intercepting tax refunds, lottery payments, state vendor payments, and unclaimed property of taxpayers. See D17-07 at 19 (but note that the original estimates in D17-07 called for much more debt collection from employers to the tune of ~$3 million in light of all the changes being enacted in that proposal).
The claimed cuts are allegedly about fraudulent SSDI claims by people who can supposedly work. Actual SSDI fraud is minuscule, however.
Furthermore, SSDI benefits represent crucial wages for disabled individuals based on their prior earnings. As the blog post explains:
Through their contributions to Social Security, workers earn a measure of protection against disability retirement and death. (Disability insurance protects a worker against loss of earnings due to a significant work limiting impairment, and workers earn this protection by having worked and contributed to Social Security.) Many of my work-injured employees ultimately end up on Social Security Disability and this protection is particularly important to older Americans. Most people receiving Social Security Disability benefits are in their 50s or early 60s and most had only unskilled or semi-skilled jobs. Without a college degree, benefits are not significant (averaging about $1,200 per month). However, over half of Social Security beneficiaries rely on these benefits for 75% or more of their total income.
There is also already an existing and widespread program in place to encourage and facilitate SSDI benefit recipients returning to regular work. Ticket to work is a free and voluntary program by the Social Security Administration to assist SSDI benefit recipients with returning to the workforce. The employment support efforts available for SSDI benefit recipients are extensive. Presentations and training about the program are also available. The budget proposal from the current President appears to be little more than a massive cut to benefits and training and support without any acknowledgment of the difficulties disabled folk have in the workplace. Because of Ticket to Work efforts, many SSDI benefits recipients are already working limited jobs. They just cannot find the kind of full-time, regular work they once had prior to their disabilities.
NOTE: Because prohibitions on regular Social Security benefits are not allowed, the prohibition on unemployment benefits when receiving SSDI benefits also ends when an individual’s SSDI benefits become regular Social Security benefits — i.e., when the claimant reaches his or her Social Security retirement age.
Accordingly, Wisconsin employers have a financial incentive to hire SSDI benefits recipients, as these employees are prohibited from receiving unemployment benefits when laid off regardless of the layoff reason.
For those receiving SSDI benefits, however, the budget proposal represents a second strike: having already lost eligibility for unemployment benefits in Wisconsin, they are now slated to lose their SSDI benefits as well.