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.

 

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.

UI Legislative proposals active in 2016

At the 17 December 2015, several legislative proposals affecting unemployment benefits were described to the Advisory Council. This legislation includes:

  • Returning work search waivers to what previously existed — Employees and employers have begun to voice concerns about how the limitations on work search waivers previously approved by the Advisory Council do not make sense for Wisconsin. No immediate change to the current work search waivers will happen, however. And, whether Wisconsin ever returns to the original rules is uncertain. For instance, there was extended discussion by council members of perhaps allowing employers to designate certain employees for longer waivers because of their skills or high value to the employer but leaving other employees to the now 8/12 week waiver maximum. See my own comments on the proposed regulations.
  • Expanded criminal penalties for unemployment concealment — Previously discussed here.
  • UI law changes in order to counter recent NLRB decisions — Legislators want to pass legislation that will supposedly undo a recent NLRB decision called Browning-Ferris Industries that re-defined the test for determining when the employees of one company will be treated as the employees of another company (e.g., when the employees of a franchisee or temp agency are really the employees of the franchisor or client company because the franchisor or client company sets the terms and conditions of employment for the employees). NOTE: unemployment is not mentioned once in the decision, 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.
  • Exempting real estate agents from unemployment law — The proposed legislation is intended to remove real estate agents from coverage of any and all employment law and unemployment law issues.
  • Whether UI claimants will have their benefits publicly revealed — As DWD notes, this proposed legislation conflicts directly with federal law.

Also, the Department has begun publishing on its website some of the proposals being discussed by council members, including management proposals to add additional claimant disqualifications and labor proposals regarding new penalties for employers who mis-classify their employees as independent contractors and increasing the wage base and tax schedule for employers’ unemployment taxes in order to make the UI fund solvent. NOTE: This 2013 PowerPoint presentation describes what makes or does not make a UI fund solvent. The Department has yet to publish any of its proposals, so this blog remains the sole source for Department-initiated changes to unemployment law. For instance, the Department is still waiting for the Council’s decision on its UI modernization proposal, D15-06.

NOTE (8 January 2016): At the January 7th council meeting, the Advisory Council approved of D15-06 with minor changes that were not detailed.

UPDATE to Independent contractors in Wisconsin UI proceedings

Back in June 2013, there was a post about independent contractors issues in Wisconsin unemployment law. The brief included in that post went through the various factors used in determining independent contractor status for unemployment purposes as well as why that status is at issue in two separate proceedings — one proceeding to determine the claimant’s eligibility for benefits and another proceeding to determine whether the employer is responsibile for paying unemployment taxes for that claimant.

LIRC issued a decision in that case in August. In regards to the factors, there are two points of disagreement. First, the brief used the old office test. Under the current office test, this factor is satisfied “if the individual uses his own equipment and materials in performing the services, and either maintains his own office or performs most of his services in a location he chooses” (see p.11 of the LIRC decision). The old test described in the brief is only applicable in the following circumstances (see n.7 at p.11 of the LIRC decision):

If an individual does not choose where to perform his services, it must be determined whether he maintains his own office. In such a case, the analysis would proceed utilizing the longstanding interpretation that the term “office” has received in cases involving condition 3 in the pre-2011 law, albeit without reference to a “separate business.”

Second, LIRC disagrees with the position in the brief that graphic layout work is not the same as translation work. In this case, the claimant has done translation work in the past but had not done translation work which also required him to do graphic layout of the translation using certain software in order to prep the document for final publication. LIRC lumped the graphic layout work as similar to the prior translation work.

Despite these differences, a finding of employee status was still an easy call.

Since this decision, LIRC has issued another interesting independent contractor decision involving a freelance for Madison’s major newspapers. In the Martin v. Madison Newspapers, Inc., Hearing No. 13001922MD (10 October 2013) decision, LIRC offers another extensive overview of how to apply independent contractor factors for unemployment purposes.

These two situations reinforce the notion put forward in the brief that employers who hope to avoid unemployment taxes need to think strategically in these kinds of cases and perhaps not contest an employee eligibility determination pursuant to Wis. Stat. § 108.09, especially since the matter of employer tax liability will be determined in a separate proceeding under Wis. Stat. § 108.10.

Notwithstanding the difficult burden employers have in initially establishing the factors specified in sub-section (bm), employers are also faced with the added difficulty in these matters that much of the information needed in regards to these factors is in the hands of claimants and not employers. While employees and employers are in theory opposed to each other in these unemployment cases, they also depend on each other to bring forth evidence that the other side needs in order to succeed in its claims. Employers, after all, likely do not have any direct knowledge about how individual claimants qua independent contractors market their services to others, account for their business expenses and income, manage their own place of business, obtain their own liability insurance, pay for their recurring operational costs, and how many other clients they might or might not have. As a result, employers who actually hope to avoid payment of unemployment taxes for the services at issue are dependent on the claimant’s cooperation in the Wis. Stat. § 108.10 proceeding to determine whether the claimant is an employee or independent contractor.

Keep in mind as well that good guidance from DWD on independent contractor issues is available at this website. Here, you can explore the factors pursuant to the various tests in unemployment law, workers’ compensation, wage law, and equal rights law whether an individual qualifies as an independent contractor or employee.

Independent contractors in Wisconsin UI proceedings

Here is a brief I will be using for training purposes for the unemployment clinic here in Madison. It runs through the basic issues relating to deciding whether a claimant is an employee or an independent contractor. The test is still extremely difficult to meet.

Moreover, the case registers basic procedural and substantive problems with how independent contractor cases are currently handled in Wisconsin. Simply put, Wisconsin unemployment law leads to duplicate and unnecessary proceedings in regards to independent contractor determinations for both employees and employers in ways that are frustrating for both. While much is at present being changed in unemployment law in Wisconsin, real problems that the businesses and residents of Wisconsin have in regards to independent contractor issues and the ensuing long, complicated, and often unnecessary hearings over these issues are not even being mentioned.

In the case at issue in the brief, there was little at stake for either party, but four hours of hearings and now a LIRC appeal has taken place.

In this situation, both the claimant and the employer are probably justified in disputing how independent contractor law in unemployment cases are handled. The claimant in this matter has had to deal with DWD investigations not only for the $500 at issue in this case but $200 earned from serving in a chorus in a show. The employer is stuck with any of its freelancers being subject to UI taxes and an intrusive DWD examining all of its employees.

Until this portion of UI law changes once again, there are ways for making these kinds of cases a little less problematic and burdensome for all involved. What the attached brief does in part is demonstrate the circumstances and issues that employers and employees need to be aware of before simply fighting each other.

UPDATE available.