No vaccine unemployment bill introduced

A few weeks ago there were media reports about legislators circulating a bill to allow employees who quit or are discharged for refusing a vaccine to qualify for unemployment benefits.

Well, they actually did it. Meet SB 547. The bill creates a host of exemptions for those workers who refuse vaccines and lose their jobs as a result to qualify for unemployment benefits. The legislators even included a provision automatically to waive charges to employer accounts for unemployment benefits paid out to those refusing a vaccine, something the legislators failed to do in 2020 for pandemic-related job losses.

Think of all the other issues that have been ignored by the state legislature during the past year and half that have made unemployment more difficult for Wisconsin workers.

• access to regular unemployment benefits for disabled workers,
• having to quit a job for lack of childcare, like when schools close (instead, workers who lose jobs because of childcare need to argue they quit for good cause because of the illegal actions of the employer, that the employer has violated a basic term and condition of employment established for the job, or give up on claiming regular unemployment benefits and shift to PUA benefits, which end this week),
• having to quit a job because the employer is ignoring public health orders (only available to PUA claimants),
• waiving requirements that employees who are quarantined or sick with Covid-19 symptoms must still be able and available for work and must still search for jobs (these requirements were part of the job search waiver emergency rule that the legislature went out of its way to nix),
• granting an automatic experience rating waiver for all job losses during the pandemic (as happened in nearly all other states) and which has been so messed up in Wisconsin that few employers even know about it, and
• forcing the state unemployment agency to adopt one of the quarterly benefit waiver provisions to ease the quarterly benefit year eligibility re-calculation problem that puts a halt to benefit payments each quarter

There are so many, many issues that could and need to be addressed. Unemployment benefits for those refusing a vaccine is NOT one of them.

Finally, there is a claim-filing snafu on the portal today. Claimants are being told that they have already filed their weekly certification for PUA benefits for the week ending 9/4/2021 on Sept. 3rd.

Normally, the laws of time are that future events need to occur in the future, not in the past. But, for some unknown reason, the claim portal is telling PUA claimants that they have already filed their weekly certification for a week not yet over — the last week PUA benefits are available.

Sigh.

The PUA phone support line is 608-318-7100.

In any case, if you have not done so already, make sure to read the post about filing a back-up PUA initial claim (not the same as a weekly certification).

Labor and Management proposals to “reform” unemployment in 2021

The Unemployment Insurance Advisory Council has been meeting in 2021 over how to reform unemployment in Wisconsin.

To date, a Department summary and the actual written comments from the November 2020 public hearing were reported to council members at the 21 January 2021 council meeting. There has yet to be any discussion or even acknowledgment by council members of the concerns raised at that public hearing.

And, the Department has re-presented its proposals from 2019 and new proposals for 2021, including a revamped SSDI ban (a financial offset in place of an eligibility ban, even though the Department has switched its explanation from one to the other for its own convenience).

At the 15 July 2021 council meeting, labor and management representatives exchanged their own proposals. Labor representatives in general attempt to make unemployment somewhat financially viable in Wisconsin. Management representatives build on prior “reforms” to make unemployment even more difficult and rare. Here is a rundown of those proposals.

Labor proposals

1. Fix the funding for the unemployment trust fund by changing how tax schedules are applied. Currently, the tax schedule to be applied to employers is based on the amount of money in the trust fund (which was $919.2 million as of 10 July 2021). This labor proposal would change the criteria to using an unemployment trust fund health number called an Average High Cost Multiple or AHCM.

• Schedule A = When UI Trust Fund is below .5 AHCM
• Schedule B = When UI Trust Fund is between .5 – 1.0 AHCM
• Schedule C = When UI Trust Fund is between 1.0 – 1.25 AHCM
• Schedule D = When UI Trust Fund is above 1.25 AHCM

Prior to the pandemic, when the trust fund had nearly $1.7 billion, the average high cost multiple was just under 1. In April 2021, when the trust fund still had slightly over $1 billion, the multiple was around 0.5.

2021 Wis. Act 59 is unnecessarily keeping unemployment tax rates at Schedule D for 2021 and 2022, and this labor proposal would also keep the tax rates at Schedule D. Per Wis. Stat. § 108.18(3m), tax schedules are based on the following trust fund balances (as of June 30th of the preceding calendar year):

• Schedule A: less than $300 million
• Schedule B: less than $900 million
• Schedule C: less than $1.2 billion
• Schedule D: more than $1.2 billion

In general, the actual tax rates for Wisconsin employers continued to fall in 2021 from 2020 tax rates because of fewer claims being paid to employees of Wisconsin employers. With fewer claims being paid, employers’ account balances are growing. As a result, employers have been moving to lower tax brackets within Schedule D.

2. Gradually Increase the maximum weekly benefit rate for unemployment benefits to $450 per week.

This proposed change would not take effect for another two years, however.

Current weekly maximum UI benefit   $370
2023 Benefit Year   $20 increase    $390
2024 Benefit Year   $20 increase    $410
2025 Benefit Year   $20 increase    $430
2026 Benefit Year   $20 increase    $450

This increase is half of what the Department proposes in D21-22 and needs to include a repeal of the $500 or more earnings prohibition to be effective, which the Department also proposed in D21-21. For further explanation, see the examination of these Department proposals here. As already noted, Wisconsin’s weekly benefit rate is the second lowest 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

3. Eliminate the one-week waiting period, which is also included in Department proposal D21-19 and previously discussed here.

4. Expand worker mis-classification to all industries and make the penalties identical to claimant fraud. Here, labor representatives support adoption of Department proposal D21-26 and the recommendations of the governor’s misclassificaton task force. As noted in this discussion of the Department’s 2021 proposals, there are administrative and criminal penalties for claimant fraud as well as a different standard of proof for claimant fraud versus mis-classification by employers. It is not clear what the labor representatives are referring to with their proposal about identical penalties.

5. Request the Department to review tax schedules to assess the tax equity of those schedules.

What the labor representatives mean by tax equity is unknown.

Management proposals

1. When upgrading the Department’s mainframe, make sure employers have the ability to verify immediately any work search information that refers to that employer as well as the ability to report immediately any kind of work refusal, a missed job interview, or a decline of a job offer.

Employer’s currently have the ability to report all of this information as well as other kinds of information through the Department’s fraud reporting system.

Also, job search audits done pursuant to Wis. Stat. § 108.14(20) catch the interview and job offer information. This proposal would essentially give employers a direct avenue for challenging claimant eligibility when those claimants are NOT their former employees. For temp companies that have already seen their unemployment tax bills markedly reduced, this proposal secures an additional tool for cutting that tax bill even further. When claimants cannot collect unemployment benefits, then unemployment tax bills decline even further.

2. End the exclusion of union members from weekly job search requirements. Claimants who are working part-time, starting a new job in four weeks or less, will return to their current employer in the next eight weeks or so, AND union members who register on their union’s out-of-work list are exempt from doing four job searches per week. This proposal would require union hiring halls and union members who are on out-of-work lists with their unions to do four job searches per week through the union hiring hall.

This proposal does not make sense in light of how union hiring halls work. Hiring halls function based on the employers who contact them for available workers. But, that is not the point. Rather, this proposal is to draw media attention to this benefit union members enjoy and thereby create a further divide between them and most other workers in the state.

3. Redefine who an employee and independent contractor is for all fields of law to apply a single, common definition built around gig-work.

This proposal would completely upend almost all workplace law in Wisconsin, as one of the main changes being proposed is a person would be an independent contractor whenever a person signs a contract with an employer that states it is their intent to be independent contractor. In contrast to current law that specifies that such an arrangement can NOT be decided subjectively by the parties to the agreement, the proposal here is to give the parties the unilateral authority to create an independent contractor relationship on their own through a services contract.

Note: In practical terms, this authority is unilateral in the sense that individual employees have little to no bargaining power to set the terms and conditions of their employment.

Various “factors” are proposed to assess if a person is an independent contractor or not, but these factors are written so broadly and with so many loopholes that independent contractor status is all but assured. For instance, the services contract can still include a final schedule for delivery and a range of work hours as long as the time personally spent on providing services is left open. And, if costs for licenses, insurance, and certifications are borne by the person, then all is dandy with this gig-worker arrangement. In short, these criteria are not limitations but a road map for how to craft this independent contractor agreement.

Moreover, only four out of ten of these “factors” are needed for an independent contractor relationship to be established. So, an employer can make plenty is mistakes and still succeed on making their employees into gig-workers. A garbage truck driver, a machinist in a metal shop, and even a police officer could easily meet at least four of these factors and so be classified as independent contractors under this proposal.

Finally, this proposal also contains a poison pill that prevents any county or municipality from limiting this sweeping change to employment status in Wisconsin.

Regardless of any state law, however, this proposal if implemented would be a massive headache for employers, as federal wage and hour law, discrimination law, and collective bargaining law would still classify numerous “independent contractors” as employees for federal purposes. This proposal, in other words, is just plain silly and not serious at all.

4. End the 30-day quit-to-try a new job provision.

This proposal is another change that would greatly benefit temp companies by eliminating one of the main mechanisms employees may still qualify for unemployment benefits after trying out a job and quitting within the first 30 days.

By eliminating this provision, employees of temp companies would have to remain at every assignment regardless of fit, skill, wage, and working conditions until the assignment is ended by the employer to retain any hope of qualifying for unemployment benefits at some future date. Indentured servitude, in short, is making a comeback with this proposal.

5. Link the number of weeks of unemployment benefits available to the unemployment rate.

This proposal has been a bugaboo since 2010, as it essentially undermines the ability and scope of unemployment programs to respond in times of crisis. States that have implemented this linkage, like Florida and North Carolina, have been unemployment disaster zones, in part, because regular unemployment benefits were cut off prematurely during the pandemic.

One major point to unemployment benefits — “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” — is ignored and completely undercut by this proposal. Who would think that the penalties for first degree murder, for instance, should be linked to a state’s crime rate? Yet, management representatives are making a similar linkage here.

6. Numerous misconduct and substantial fault modifications.

For misconduct, management representatives want to add additional disqualifications concerning employer or customer information while also removing a requirement that employees act intentionally for any alleged “violation.” Absenteeism and tardiness violations will also be both more stringent and applicable regardless of actual reason for the absence or tardiness. Finally, employees would be strictly liable for a violation of an employer’s social media policy, once the employees are made aware of that policy.

As previously noted, these changes would directly run afoul federal requirements and loose Wisconsin employers their federal unemployment tax (FUTA) credit.

Note: A state’s administration of unemployment is funded through the Federal Unemployment Tax Act on their payroll (the first $7000 paid to each employee) that employers pay, called FUTA. Should a state be found to be applying the loss of claimant wage credits for “unintentional” misconduct, Wisconsin employers would lose their FUTA tax credit and be subject to the full 6.0% unemployment tax rate rather than just 0.6%.

In regards to substantial fault, management reps want to undue the court decisions in Operton v. LIRC, 2017 WI 46, and Easterling v. LIRC, 2017 WI App 18, by redefining inadvertent error into harmless error that does not also violate an employer’s written policies. In other words, any error that does not qualify as misconduct would now almost assuredly qualify as substantial fault.

Given that the Department still pretty much ignores these court precedents, this substantial fault proposal repeats previous “reforms” that seek align unemployment law with the Department’s current practices rather than accomplish an actual change.

Beres, absenteeism, and a temporary change of heart

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

• Beres/absenteeism at the Wisconsin Supreme Court, Part 1
• Beres, agency deference, and Lochnerism, Part 2
• TetraTech: Agency discretion and “process”
• Beres: Agency discretion to undo a statutory scheme
• Making factual findings subject to never-ending review: Wisconsin Bell
• Agency deference and a quick note on the briefs
• Oral arguments over agency deference

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

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

* * *

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

Beres, 2018 WI 77 at ¶19 and ¶23.

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

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

Stangel.

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

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

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

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

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

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

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

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

Beres: Agency discretion to undo a statutory scheme

In Beres, the case turns on a dispute between the Department and the Commission over whose interpretation of the absenteeism disqualification is most reasonable. In its quest to get its interpretation adopted, the Department is willing to subject all agency decision-making to heightened scrutiny.

Taking effect in January 2014, Wis. Stat. § 108.04(5)(e) provides that a claimant will be disqualified for misconduct when an employee is absent “on more than 2 occasions within the 120 day period before the date of the employee’s termination, unless otherwise specified by his or her employer.”

The employer nursing home in Beres apparently took advantage of the “unless otherwise specified by his or her employer” provision and had an attendance policy which indicated that employees would be terminated for a single absence during their 90-day probationary period if they were a no call, no show. The claimant in this case, Ms. Beres, was extremely ill and did not report to work or call in her absence. The employer called her home, and her spouse indicated that she was too sick to work. The employer then terminated her employment, and the Department denied her claim for unemployment benefits as misconduct because of absenteeism.

So, unlike the long-standing statute being applied in a new situation at issue in TetraTech, the statute in question in Beres is brand new, poorly drafted, and in conflict with what was originally proposed. See Beres, part 1. The language in question literally makes no sense for purposes of unemployment law. Cf. Wis. Stat. § 108.01.

Confronted with this nonsensical provision, the Commission reasonably concluded that the “unless otherwise” provision for an employer absenteeism policy cannot set a threshold lower than the statutory “more than two absences in 120 days.” Because the claimant in Beres was not responsible for her illness and a single illness did not meet the threshold disqualification of more than two absences within 120 days, the Commission explained, she was NOT disqualified. See Absenteeism decision excludes zero-tolerance policy as misconduct (8 Match 2017) for discussion of the court of appeals decision.

The Wisconsin Supreme Court is now considering this case alongside the question of what level of deference is constitutionally and statutorily due. At the court of appeals (which sided with the Commission 2-1), due weight deference was given the Commission’s position. Under this standard, the court would only affirm the Commission if there was NO other reasonable interpretation proffered.

So, there is no reason per se in this case to create a new deference standard. The justices will find either the Commission or the Department interpretation of the absenteeism to be the reasonable one.

But, there is a long-game for what the Department is doing in this case. If there is no more “great weight” deference given to long-standing Commission interpretations, then the Department (along with all employers and employees) can challenge any and all of the Commission’s prior precedents. The Commission will need to defend its prior decisions as the most reasonable interpretation available rather than relying on their previously established reasonableness to stop the challenge in its tracks.

And, the first target of this attack will certainly be on the Commission’s unemployment concealment decisions that mandate the alleged unemployment fraud in question be intentional rather than accidental. As noted numerous times here, the Department and the Commission have been at odds on this issue since 2014, and the dispute led in 2017 to the Department pushing for the elimination of the Commission in the state budget.

Finally, if the court should agree with the Department and find that an employer gets to set an absenteeism disqualification based on a single absence regardless of reason, then the court will essentially be creating a disqualification that swallows all of unemployment law. Under the Department’s interpretation, any employer can replicate this “single absence provides the basis for a discharge” provision and then apply this disqualification whenever an employee is absent in order to keep an employee from receiving any unemployment benefits connected to that employer. The limited misconduct disqualification that should never apply when employees lose work through no fault of their own essentially becomes a no-fault disqualification for absenteeism.

And, an employer has much to gain from this broard disqualification. Whenever there is a finding of misconduct in Wisconsin unemployment law, the employee guilty of that misconduct loses all of his or her income from the employer for determining both current and future benefit year eligibility for unemployment benefits. Hence, this broad reading of the absenteeism provision enables an employer to discharge employees for misconduct purposes for any of their absences and thereby insulate itself from ever having its experience rating increased.

All the posts in this series

• Beres/absenteeism at the Wisconsin Supreme Court, Part 1
• Beres, agency deference, and Lochnerism, Part 2
• TetraTech: Agency discretion and “process”
• Beres: Agency discretion to undo a statutory scheme
• Making factual findings subject to never-ending review: Wisconsin Bell
• Agency deference and a quick note on the briefs
• Oral arguments over agency deference

UPDATE (12 Dec. 2017): Added links for all the posts in this series.

Beres, agency deference, and Lochnerism, Part 2

In three cases set for oral argument on December 1st — TetraTech v. DOR, Appeal No. 2015AP2019, DWD v. LIRC (Beres), Appeal No. 2016AP1365, and Wisconsin Bell, Inc. v. LIRC, Appeal No. 2016AP355 — the Wisconsin Supreme Court is re-considering the whole field of agency deference in what could be a legal revolution that up-ends modern governance.

In a previous post, I described the statutory text at issue in Beres, the unemployment case among the three. Here, I want to deal directly with why the Wisconsin Supreme Court might scuttle agency deference and what is at stake in such an event.

Why agency decision-making is being questioned

The decisions of administrative agencies are the building block for modern government. In 19th-century America, there was no government bureaucracy available for enforcing much of anything. There were no requirements for food to be safe to eat, for instance, or for protecting worker safety. Cities had water and sewer services that in some instances were collectively run or in other instances were operated by private companies. But, outside of police, there were little to any regulations for: (1) how public services were to be provided or (2) how private companies and individuals could interact with each other. Hence, snake oil salesmen abounded, and companies and individuals could do what they want with the land they owned and the people they hired.

The modern world we know today is built on the idea that there needs to be some organization to how businesses and people interact. Health and building codes are needed to prevent cows from starting fires that burn entire cities to the ground or to stop epidemics and food poisoning from becoming rampant. And, safety and health and other regulations are needed to make sure people get paid the wages promised them, that companies sell the products they proffer, and that products and workplaces are generally safe for workers and the public in general.

As modern living has grown more complex, so has the scope and complexity of the administrative agencies needed to regulate the interactions among people and among people and companies. The legislatures in the late 19th and early 20th centuries that created these administrative agencies recognized this complexity of modern life. The administrative agencies that were created were not only literally drafted into existence by these laws, but these agencies also were given the responsibility and power to manage these laws through the regulations the agencies issued. As such, these agencies took on this combination of responsibilities and authority that joined legislative, executive, and even judicial functions together because the complicated reasoning and scope of their actions (like setting safety standards or usage rates that would apply across thousands of different companies and types of businesses) needed this combination of actions simply in order to function.

NOTE: Courts were initially reluctant to follow along with these legislative endeavors and struck many of them down as violations of individual liberty to contract (what become known as Lochnerism, after a famous case with that name). Eventually, judges realized that modern living required legislative regulation to some extent of that ‘liberty.’ More on *Lochnerism below.*

Unemployment was one such effort to overcome the problem of individual companies laying people off. Layoffs could easily accelerate a decline in economic growth when the laid-off workers lacked monies for rent and groceries and thus turned an economic decline into a recession or even a depression.

Today, to accomplish this legislative goal in unemployment matters, the Department of Workforce Development drafts and publishes regulations that fill in the details of the unemployment laws passed by the state legislature and Congress. The Department is also charged with handling investigations into unemployment claims, managing the unemployment taxes paid by employers, and “helping” claimants understand the unemployment system and apply for unemployment benefits. Finally, the Department also has the judicial responsibility for running hearing offices that adjudicates employee and employer disputes over unemployment claims. In this way, the Department — an executive agency that exists as an arm of the governor — has legislative, executive, and judicial responsibilities.

Because the Department has so many responsibilities in the field of unemployment benefits, the Labor and Industry Commission is a second administrative agency that has judicial oversight of the Department: decisions by administrative law judges can be appealed to the Commission. Moreover, the Commission’s decisions in unemployment cases should provide guidance to the Department about how to manage the unemployment law and the Department’s regulations. Naturally, the Commission also has to create its own regulations to indicate how its judicial-like decision-making is administered. So, the Commission — an executive agency that is independent of the governor as the Commissioners serve set terms and cannot be removed from office except in limited circumstances — has judicial and legislative functions.

Keep in mind that all of this bureaucracy is intended to provide guidance and transparency into what these administrative agencies do and offer reasonably clear expectations into how unemployment benefits operate (at least, these are the goals).

But, the past forty or so years have seen a growing push against all of this bureaucracy connected to the “administrative state.” Rather than making the modern world easier to manage, the argument goes, bureaucracy has become over-grown and has started to strangle innovation and economic growth. In the last decade, these attacks exploded to become a diatribe against all regulation rather than targeted attacks against specific instances of over-regulation.

Moreover, in legal circles connected to the Federalist Society there has been a push to re-visit the earlier court decisions that accepted the existence and need for administrative agencies. The center-piece of this attack has been on the deference courts give to administrative agencies.

In Wisconsin, courts have generally granted administrative agencies “great weight” deference when the agency decision or action turns on a long-standing legal issue that the agency has addressed numerous times before. Under this standard, the court will affirm the agency interpretation if the court finds that interpretation reasonable or rationale. State agencies get “due weight” deference when the issue has previously been addressed by the administrative agency. Under this standard of deference, a court will affirm an agency interpretation if the court determines that there is no more reasonable interpretation available to the court. Finally, when the issue is a matter of first impression, the court will NOT defer to the agency at all.

The three justice concurrence in Operton called into question this deference standard. For them, great weight and even due weight deference could no longer be followed because:

• courts are constitutionally and statutorily obligated to interpret statutes independent of any administrative agency,
• the prevailing scheme of great weight and due weight deference hamstrings courts and thereby thwarts the constitutionally-mandated separation of powers,
• the accumulation of legislative, executive, and judicial powers within a single administrative agency runs counter to the constitutional framework of dispersing governing power among the three separate branches of government, and
• a judicial check is needed against executive interpretations that harm citizens’ liberty interests.

Operton (J. R.Bradley, concurring); see also Gillian E. Metzger, “Forward: 1930s Redux: The Administrative State Under Siege,” 131 Harv. L. Rev. 1 (Nov. 2017), for a detailed discussion of the history and current forms of this attack on the administrative state.

As these points from Operton demonstrate, this criticism of administrative agencies is built on a didactic view of the law: each branch has their own distinct set of prerogatives that cannot be mixed and that courts alone have the predominate and sole responsibility for judicial interpretation.

Operton, however, did not lead to a fundamental re-working of agency deference. While three justices supported this change, four justices either rejected this change outright or held that the time was not yet ripe for such a fundamental change in the law.

In TetraTech, Beres, and Wisconsin Bell, however, it appears that the time is now ripe for a fundamental change in agency deference. In each of these cases, the Wisconsin Supreme Court has added a question about agency deference.

Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?

Whether the administrative decision in each case represents some kind of administrative abuse that the court needs to correct, however, remains to be seen.

What is central to this push for a new standard of deference is the empowerment of courts and judges to decide on their own how state agencies should decide legal disputes. Before most of the modern administrative agencies existed, judges following Lochnerism claimed that economic qua constitutional rights based on “substantive due process” or “liberty of contract” overrode legislation that sought to regulate the conduct of corporations. For judges of this era, government could not show any favoritism or hostility to any class or special interest.

Over time, there was a recognition that this Lochnerism was allowing judges essentially to legislate economic outcomes from the bench, and even Conservative jurists lambasted these decisions as judicial gerrymandering of the law. The “neutrality” of Lochner judges was simply a mask to hide real intentions of judges to write their own policy preferences into the law.

The new assault of administrative law seen in Operton decries any connection to the Lochnerism of old. But, the emphasis on contractual liberty and the preeminence of judicial acumen over the reasonable discretion of administrative agencies belies any substantive distinction from Lochnerism of old. The attack on agency discretion at issue in these cases is little more than old wine in a new bottle. Certainly, some of the tenets of legal interpretation have changed (substantive due process is probably NOT going to be revived any time soon), but the basic objectives and tactics — economic and contractual liberty alongside basic doubts about any and all economic regulation — remain the foundation for empowering judges to insert their own policy preferences into the law.

TetraTech, Beres, and Wisconsin Bell are simply the front line of a revolution that could return governance to the days of 1890 when judges reigned supreme over legislators and the executive branch. The judges on the Wisconsin Supreme Court essentially want to return court jurisprudence to the time when judges got to determine economic winners and losers. As described in other posts, each of these cases has some clear winners and losers to pick from.

All the posts in this series

• Beres/absenteeism at the Wisconsin Supreme Court, Part 1
• Beres, agency deference, and Lochnerism, Part 2
• TetraTech: Agency discretion and “process”
• Beres: Agency discretion to undo a statutory scheme
• Making factual findings subject to never-ending review: Wisconsin Bell
• Agency deference and a quick note on the briefs
• Oral arguments over agency deference

UPDATE (12 Dec. 2017): Added links for all the posts in this series and updated title of post.

Beres/absenteeism at the Wisconsin Supreme Court, Part 1

I previously described an Appeals Court decision in DWD v. LIRC (Beres), 2017 WI App 29, 375 Wis.2d 183, 895 N.W.2d 77, where the Department argued that a new definition of absenteeism qua misconduct allowed an employer unilaterally to determine a claimant’s eligibility for unemployment benefits by setting an employer that disqualified an employee for a single absence. In a 2-1 decision, the Court of Appeals concluded that such an outcome contradicted the entire point of unemployment law and sided with the Commission that the employer cannot define for itself what absenteeism will constitute misconduct.

The Department subsequently asked the Wisconsin Supreme Court to get involved, and the state court accepted the invitation. Furthermore, the justices added this case to their push to re-examine the deference given administrative agencies.

In Operton v. LIRC, 2017 WI 46, 375 Wis.2d 1, 894 N.W.2d 426, three justices issued a concurrence calling into question whether judicial deference to administrative agencies violated the constitutionally-mandated separation of powers among the three branches of government.

In Beres and two other cases — TetraTech v. DOR, Appeal No. 2015AP2019, and Wisconsin Bell, Inc. v LIRC, Appeal No. 2016AP355 — the Wisconsin Supreme Court has decided to address the following question:

Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?

This question represents a RADICAL restructuring of jurisprudence that could essentially transform state court judges into super-legislators whose own preferences and desires supplant the reasoning and knowledge of state agencies and even their expert opinions and information-gathering. As such, this change is so fundamental that it requires its own separate, post to describe.

What first needs to be done, however, is to describe the statutory framework of the unemployment law at issue in Beres so that we at least have some idea of how we are getting to this fundamental re-thinking of administrative law in general.

Absenteeism as misconduct

At issue in Beres is the following absenteeism and tardiness provision in Wis. Stat. § 108.04(5)(e):

(e) Absenteeism by an employee on more than 2 occasions within the 120 day period before the date of the employee’s termination, unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature, or excessive tardiness by an employee in violation of a policy of the employer that has been communicated to the employee, if the employee does not provide to his or her employer both notice and one or more valid reasons for the absenteeism or tardiness.

This change in unemployment law began at the 29 November 2012 meeting of the Unemployment Insurance Advisory Council when the Department, on its own initiative, dropped more than a dozen substantive changes to unemployment law. See this post for the memo that originally describes all of these changes. Proposal D12-01 included numerous changes to disqualification standards, including the elimination of the absenteeism and tardy provisions in Wis. Stat. § 108.04(5g) by adding a new disqualification called “substantial fault” and the addition of a new, specific absenteeism provision that would qualify as misconduct. This proposed absenteeism and tardiness qua misconduct provision in Proposal D12-01 stated:

Excessive absenteeism or tardiness in violation of a known company policy and the individual does not provide to the employer both notice and a valid reason or reasons for the absence or tardiness.

See D12-01 at 3.

At the 1 April 2013 meeting of the Advisory Council, the Advisory Council rejected the proposed substantial fault provision and made some changes to the absenteeism and tardiness thresholds set forth in Wis. Stat. § 108.04(5g) for triggering a disqualification. The specific changes, however, were not announced to the public.

NOTE: The minutes of the 1 April 2013 meeting of the Advisory Council only state the following:

(A) Department Proposal D12-01 (Misconduct Standard) the Council supported this Department proposal with modifications. The Council agreement enumerated within the statute the standard taken from the Wisconsin Supreme Court decision of Boynton Cab and amended the proposal to solely provide four examples of conduct that would qualify as misconduct, but not limit misconduct to these four examples. The four examples relate to employee conduct concerning:

1. Illegal Use of Drugs and Use of Alcohol While on the Job;
2. Larceny;
3. Crimes Related to the Job; and,
4. Violations that would lead to Fines or License Suspension of the Employer.

The Council also agreed to amend the language of section 108.04(5g) of the Wisconsin Statutes with respect to absenteeism and tardiness to make it easier for either reason to disqualify a claimant from benefits.

After the meeting ended, I asked Robert Andersen if he could send me a copy of what the Advisory Council had specifically agreed on.

NOTE: Robert Andersen, worked with the members of the Advisory Council’s labor caucus during non-public discussion of proposed changes to unemployment law, and he helped facilitate agreement between the labor and management caucuses.

On 2 April 2013, I received an e-mail message from Mr. Andersen that contained the specific provisions agreed upon by the Advisory Council in an attachment. That attachment indicates that the Advisory Council agreed to to amend sub-section (5g) in the following manner:

(5g) DISCHARGE FOR FAILURE TO NOTIFY EMPLOYER OF ABSENTEEISM OR TARDINESS. (a) If an employee is discharged for failing to notify his or her employer of absenteeism or tardiness that becomes excessive, and the employer has complied with the requirements of par. (d) with respect to that employee, the employee is ineligible to receive benefits until 6 weeks have elapsed since the end of the week in which the discharge occurs and the employee earns wages after the week in which the discharge occurs equal to at least 6 times the employee’s weekly benefit rate under s. 108.05 (1) in employment or other work covered by the unemployment insurance law of any state or the federal government. For purposes of requalification, the employee’s weekly benefit rate shall be the rate that would have been paid had the discharge not occurred.

(b) For purposes of this subsection, tardiness becomes excessive if an employee is late for 6 4 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(c) For purposes of this subsection, absenteeism becomes excessive if an employee is absent for 5 2 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(d) 1. The requalifying requirements under par. (a) apply only if the employer has a written policy on notification of tardiness or absences that:

a. Defines what constitutes a single occurrence of tardiness or absenteeism;

b. Describes the process for providing adequate notice of tardiness or absence, and, regarding tardiness, which gives the employee a reasonable time for providing notice and which at least allows the employee the opportunity to provide notice as soon as practically possible; and

c. Notifies the employee that failure to provide adequate notice of an absence or tardiness may lead to discharge.

2. The employer shall provide a copy of the written policy under subd. 1. to each employee and shall have written evidence that the employee received a copy of that policy.

3. The employer must have given the employee at least one warning concerning the employee’s violation of the employer’s written policy under subd. 1. within the 12 month period preceding the date of the discharge.

4. The employer must apply the written policy under subd. 1. uniformly to all employees of the employer.

This memorandum does not appear in the Department’s supportive materials for Beres, however.

Janell Knutsen is the director of the Bureau of Legal Affairs for the Department’s Unemployment Division and serves as the non-voting chair of the Advisory Council. In her affidavit included in the record in this matter, Ms. Knutsen states:

12. The April 1, 2013 resolution recommending legislative change to the absence and tardiness statute was the only action by the UIAC on a proposal to change the disqualification for absence or tardiness during my tenure as UIAC Chair. I do not find in the Minutes of the April 1, 2013 UIAC meeting or in the Minutes of subsequent meetings in 2013 any other or additional recommendations or other action of the UIAC regarding disqualification for absence and tardiness. A copy of the five-page Minutes of the April 1, 2013 meeting of the UIAC is attached to this affidavit and identified as Exhibit 4. The attached minutes were formally approved by unanimous vote of the UIAC members at the April 18, 2013 UIAC meeting.

* * *

16. As the UIAC files show, there is no evidence in the UIAC files regarding the development of the language that became Wis. Stat. § 108.04(5)(e) and no evidence of involvement of the UIAC in the choice of words by the Legislature in its enactment of Wis. Stat. § 108.04(5)(e), except as generally reflected in the UIAC resolution of April 1, 2013, that stated “The Council also agreed to amend the language of section 108.04(5g) of the Wisconsin statutes with respect to absenteeism and tardiness to make it easier for either reason to disqualify a claimant for benefits.”

R.18-4 and 18-5. Ms. Knutsen also states in ¶15 of her affidavit (R.18-5) that she and Department staff searched Department records for “all written materials in those files relating to the action that the UIAC took to recommend changes to the unemployment law regarding disqualification for absenteeism and tardiness” and that she believes she has “identified in this Affidavit all such materials in the UIAC files.”

Michael Duchek is a legislative attorney at the Wisconsin Legislative Reference Bureau who was directly involved in drafting unemployment legislation in 2013. In his affidavit, part 1 included in the record in this matter, Mr. Duchek states:

10. I understand that the Unemployment Insurance Advisory Council considered the D12-01 proposal (Exhibit 7) and that on April 1,2013 the Advisory Council voted to recommend to the Legislature amendments to Wis. Stat. §§ 108.04(5) and (5g), although the Council’s recommendation departed from the statutory language that the Department had proposed in its D12-01 proposal.

11. The language that LRB incorporated in draft bills to amend Wis. Stat. §§ 108.04 (5) and (5g), although similar in general to D12-01 and the recommendation of the Council, was developed by LRB in consultation with the legislative requestor and did not match the amendments which were recommended to the Legislature by the Council.

12. It is evident from the proposals by the Department and the Council that each of them was drafted to strengthen the disqualification provisions related to misconduct, absenteeism and tardiness. The same is true of Wis. Stat. § 108.04(5)(e) and the other misconduct provisions as drafted by LRB and enacted in Act 20, although the enacted provisions went further to achieve this objective than did the Department and Council proposals.

R.19-3. Mr. Duchek indicates in ¶18 of his affidavit that his first draft of a new absenteeism and tardiness qua misconduct disqualification occurred on 13 May 2013. R.19-5. As indicated throughout the supporting materials attached to Mr. Duchek’s affidavit, this language was drafted at the request of Rep. Knodl and his legislative assistant, BJ Dernbach. See also the available drafting requests.

There is no indication in Mr. Duchek’s affidavit or in the 800+ pages of supporting materials that any action was undertaken to enact the changes to Wis. Stat. § 108.04(5g) approved by the Advisory Council (fyi, part 2 of Mr. Duchek’s affidavit is also available).

The Department bill that purportedly set forth what the Advisory Council had proposed was introduced as 2013 SB200. That bill did NOT include any of the recommended disqualification changes to the misconduct or quit provisions of unemployment law approved by the Advisory Council. When the first public hearing for 2013 SB200 was under way on 29 May 2013, the Joint Finance Committee also met that day in regards to the budget bill at issue then, 2013 AB40. At that meeting, the Joint Finance Committee introduced an amendment via Motion #506 to 2013 AB40. Motion #506 included the absenteeism language Mr. Duchek had drafted. See ¶¶23 and 24 of Mr. Duchek’s affidavit, R.19-7, and R.19-14 to 19-27 for a copy of Motion #506; see also Advisory Council — 2 May 2013 meeting — and legislative actions today (29 May 2013).

As evident in her affidavit, Ms. Knutson has studiously avoided any mention or description of the actual language the Advisory Council specifically had adopted in regards to new absenteeism and tardiness disqualification thresholds in Wis. Stat. §108.04(5g).

Neither affidavit by Mr. Duchek or Ms. Knutsen indicate how and why the clause “unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature” was added to the draft legislation, as this clause was NOT part of: (1) the original Department proposal, (2) what the Advisory Council adopted, or (3) the 1 April 2013 letter and proposals from legislators featured prominently in Ms. Knutsen’s affidavit at ¶¶10-11, R.18-3 to 18-4, and also noted in Mr. Duchek’s affidavit at ¶¶7, 8, and 10 (the legislator’s letter is available in the record at 18-23 to 18-36 and in partial form at 19-35 to 19-46).

In contrast to Ms. Knutson’s statements omitting the existence of any specific absenteeism proposals by the Advisory Council, Mr. Duchek’s affidavit provides evidence that the Advisory Council’s specific proposals existed, were circulated beyond the Advisory Council, and indeed were reviewed by Mr. Duchek himself. Mr. Duchek states that the “Council’s recommendation departed from the statutory language that the Department had proposed” and also that the Legislative Reference Bureau’s draft bill that would become Wis. Stat. § 108.04(5)(e) “did not match the amendments which were recommended to the Legislature by the Council.” Ducheck Aff. at ¶¶10-11.

Mr. Ducheck also states in his affidavit that it is “evident from the proposals by the Department and the Council that each of them was drafted to strengthen the disqualification provisions.” Ducheck Aff. at ¶12. While the Advisory Council’s April 1st proposal did make it easier to disqualify claimants, nowhere in the Advisory Council’s proposal were employers given the unilateral power to determine employees’ eligibility for benefits via employer policies.

Finally, neither Ms. Knutsen nor Mr. Duchek explain how the Advisory Council’s threshold for absenteeism of “2 or more scheduled workdays” became “more than 2” absences in the enacted legislation. In other words, the three absences in 120 days provision that was enacted is less strict than what the Advisory Council had adopted and includes a number that was completely absent from the original Department proposal.

What next?

Today, December 1st, is scheduled for oral arguments in Beres, TetraTech, and Wisconsin Bell.

This legislative history for the absenteeism changes in unemployment law will probably NOT come up, however. This legislative history has not been part of the Wisconsin Supreme Court briefing, and the acclaimed focus of judges on the statutory text does not seem to hold much water in comparison to the policy issues at stake in such legislation. Indeed, what has featured prominently in the briefing is the marker laid down in Operton about agency deference and the ability/responsibility of judges to determine on their own constitutional initiative the reasonableness of what administrative agencies decide.

So, in follow-up posts I will delve into this question of agency deference, and I will attempt to explain what happened in oral arguments today in these three cases.

But, the complete mess of the statutory text at issue in Beres should matter, especially when that statutory text will likely serve as a vehicle for probably proclaiming how administrative agencies cannot provide, according to newly empowered judges, rationale applications of that statutory text. For these judges (as the Department of Justice claimed in its briefing), the Commission is being accused of not transforming a nonsensical absenteeism disqualification into something rational, let alone provide an interpretation that is so reasonable that no judge could ever disagree with it. In short, a **ed-up statute is being used as the vehicle for requiring administrative agencies to provide explanations for their interpretations that survive heightened scrutiny.

All the posts in this series

• Beres/absenteeism at the Wisconsin Supreme Court, Part 1
• Beres, agency deference, and Lochnerism, Part 2
• TetraTech: Agency discretion and “process”
• Beres: Agency discretion to undo a statutory scheme
• Making factual findings subject to never-ending review: Wisconsin Bell
• Agency deference and a quick note on the briefs
• Oral arguments over agency deference

UPDATE (11 Dec. 2017): Added links for all the posts — expanded from the original plan.

UPDATE (12 Dec. 2017): Added links for all the posts in this series.

Absenteeism decision excludes zero-tolerance policy as misconduct

Today’s appeals court decision in DWD v. LIRC (hereafter referred to as Beres), Appeal No. 2016-AP-1365 (recommended for publication) holds that an employer’s absenteeism policy of one discharge in the first 90 days of a probationary period does NOT qualify as per se misconduct.

In this case, the employee landed a job at a nursing home. Flu-like symptoms, however, led her to miss work, and the employer let her go because she missed a day of work during her 90-day probationary period. When the employee filed a claim for unemployment benefits, the Department found misconduct because she violated the employer’s zero-tolerance absenteeism policy. Per Wis. Stat. § 108.04(5)(e) (emphasis supplied):

Absenteeism by an employee on more than 2 occasions within the 120-day period before the date of the employee’s termination, unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature . . .

The Department has concluded that this italicized portion of this statute allows employers to decide for themselves how many absences will constitute misconduct for unemployment purposes.

NOTE: This position is a stunning development in contradiction of the rest of unemployment law that presumes employee eligibility for unemployment benefits and establishes the economic importance of unemployment benefits for addressing macro-economic issues in the state’s economy. The Department’s stance means that employers gain the unilateral ability under this provision to determine for themselves when an employee commits misconduct for unemployment purposes.

The Commission reversed, holding that the more than two absences in 120 days provisions without notice sets a floor for a finding of misconduct. The employee was not responsible for her illness, the Commission noted, and so she missed work through no fault of her own — the classic formulation about when employees are eligible for unemployment benefits.

After a circuit court over-turned the Commission’s decision and agreed with the Department, the Commission appealed the case to the appeals court. The appeals court agreed with the Commission that its interpretation of Wis. Stat. § 108.04(5)(e) was more reasonable than the Department’s. The appeals court in Beres at ¶¶18-20 explained:

The purpose of unemployment insurance benefits is to serve as a bridge for employees from one job to the next or “to cushion the effect of unemployment,” absent “actions or conduct evincing such willful or wanton disregard of an employer’s interests.” Wis. Stat. § 108.04(5); Boynton Cab, 237 Wis. at 258-59.

An example illustrates the reasonableness of LIRC’s interpretation that Beres’ actions did not rise to the level to deny benefits. Assume Beres was found to be in a tavern during her scheduled shift and, when called, lied about being sick. At the opposite end of the spectrum, assume that Beres was involved in a serious car accident within two hours of the start of her shift due to no fault of her own and required hospitalization. In both of these examples, Beres would be in violation of [the employer’s] attendance policy. LIRC’s interpretation of Wis. Stat. § 108.04(5) and (5)(e) allows an examination of the employee’s conduct in relation to both the employer’s policy as well as the policy that unemployment benefits should only be denied if the employee engages in actions constituting misconduct or substantial fault. The first example would likely qualify as misconduct under both § 108.04(5) and [the employer’s] written attendance policy, whereas the second example is a technical violation of [the employer’s] attendance policy, but is not an act of misconduct or substantial fault.

Employers are free to adopt a “zero-tolerance” attendance policy and discharge employees for that reason, but not every discharge qualifies as misconduct for unemployment insurance purposes. As our supreme court explained, “The principle that violation of a valid work rule may justify discharge but at the same time may not amount to statutory ‘misconduct’ for unemployment compensation purposes has been repeatedly recognized by this court.” Casey, 71 Wis.2d at 819-20. Similarly, this court found in Operton that employers have “the right to have high expectations of its employees and also [have] the right to discharge an employee for not meeting their expectations,” but we concluded that high expectations were insufficient to deny unemployment benefits. See Operton, 369 Wis.2d 166, ¶31.

A few additional comments about this decision are warranted. First, the appeals court gets the legislative history of this new absenteeism provision wrong. In Beres at ¶2, the appeals court describes the history this way:

Prompted by concerns within the employer community that eligibility for unemployment benefits was too generous, the legislature, in 2013, made wholesale changes to the unemployment benefit law, including modifying the absenteeism ineligibility criteria from “5 or more” absences without notice in a twelve-month period to “more than 2” absences without notice in a 120-day period, “unless otherwise specified by his or her employer in an employment manual.” Compare Wis. Stat. § 108.04(5g)(c) (2011-12), with § 108.04(5)(e) (emphasis added). It is this final clause that is at the heart of the dispute.

In actuality, the concerns prompted by the employer community were only what the Department noted when it — on its own initiative — originated an extensive re-write of unemployment law. See D12-01. The Advisory Council actually rejected these proposed changes and instead put forward the following changes to the then existing absenteeism provisions in Wis. Stat. § 108.05(5g):

“(5g) DISCHARGE FOR FAILURE TO NOTIFY EMPLOYER OF ABSENTEEISM OR TARDINESS.

(a) If an employee is discharged for failing to notify his or her employer of absenteeism or tardiness that becomes excessive, and the employer has complied with the requirements of par. (d) with respect to that employee, the employee is ineligible to receive benefits until 6 weeks have elapsed since the end of the week in which the discharge occurs and the employee earns wages after the week in which the discharge occurs equal to at least 6 times the employee’s weekly benefit rate under s. 108.05 (1) in employment or other work covered by the unemployment insurance law of any state or the federal government. For purposes of requalification, the employee’s weekly benefit rate shall be the rate that would have been paid had the discharge not occurred.

(b) For purposes of this subsection, tardiness becomes excessive if an employee is late for 6 4 or more scheduled workdays in the 12 month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(c) For purposes of this subsection, absenteeism becomes excessive if an employee is absent for 5 2 or more scheduled workdays in the 12-month 120 day period preceding the date of the discharge without providing adequate notice to his or her employer.

(d) 1. The requalifying requirements under par. (a) apply only if the employer has a written policy on notification of tardiness or absences that:

a. Defines what constitutes a single occurrence of tardiness or absenteeism;

b. Describes the process for providing adequate notice of tardiness or absence, and, regarding tardiness, which gives the employee a reasonable time for providing notice and which at least allows the employee the opportunity to provide notice as soon as practically possible; and

c. Notifies the employee that failure to provide adequate notice of an absence or tardiness may lead to discharge.

2. The employer shall provide a copy of the written policy under subd. 1. to each employee and shall have written evidence that the employee received a copy of that policy.

3. The employer must have given the employee at least one warning concerning the employee’s violation of the employer’s written policy under subd. 1. within the 12 month period preceding the date of the discharge.

4. The employer must apply the written policy under subd. 1. uniformly to all employees of the employer.

(e) The department shall charge to the fund’s balancing account the cost of any benefits paid to an employee that are otherwise chargeable to the account of an employer that is subject to the contribution requirements under ss. 108.17 and 108.18 if the employee is discharged by that employer and par. (a) applies.

(em) If an employee is not disqualified under this subsection, the employee may nevertheless be subject to the disqualification under sub. (5). [general misconduct law]

As obvious, this proposal is not what ended up being enacted. See “Advisory Council Meeting — 1 April 2013” (council declined to adopt proposed substantial fault standard but recommended adding various examples of misconduct). The Department, however, never acted on the Advisory Council’s recommendations. Instead, on 29 May 2013 the Joint Finance Committee added the rejected substantial fault and misconduct standards to the budget bill that eventually became 2013 Wis Act 20. See “Advisory Council — 2 May 2013 meeting — and legislative actions today” and “JFC UI amendments” (JFC motion to amend budget bill included various unemployment financing provisions and rejected substantial fault, misconduct, and quit provisions; DWD drafted bills that eventually became 2013 Wis. Act 36 never included the Advisory Council’s agreed-upon misconduct and quit proposals). Accordingly, these changes to unemployment law went against the express recommendations of the Advisory Council.

Second, the appeals court reaches its holding with either a de novo or due weight standard of deference. Beres at n.5. The proposed elimination of LIRC will likely mean that the Department replaces the Commission to whom courts defer on unemployment matters.

Third, a dissent in Beres at ¶¶22-31 essentially accepts the Department’s position that employers get to enact their own misconduct standards per this new absenteeism provision.

Given this dissent and how this argument, if accepted, essentially would undo unemployment eligibility in Wisconsin, a certiorari petition from the Department to the Wisconsin Supreme Court is likely, and I suspect such a petition will be accepted.

The actual financial impact of substantial fault

Back in April 2016, I described the confusion about the two versions of the Department’s substantial fault proposals and calculated the financial impact of substantial fault based on that estimate.

But, there is actual data available for determining the financial impact of substantial fault. Wisconsin reports its handling of unemployment claims to the Employment & Training Administration of the United State Department of Labor. This federal agency then makes this data available to the public, and quarterly numbers regarding the number and outcome of non-monetary determinations is available via the ETA 207 series.

NOTE: Non-monetary determinations are those determinations that do NOT involve calculations to determine eligibility based on prior earnings or other kinds of monetary calculations. The data for non-monetary determinations includes determinations regarding discharges, voluntary leaving (i.e., quitting), and determinations regarding claimants’ able and available status, refusals of suitable work, adequate job search efforts, and other eligibility status issues. There is both a short description and a long description of this data.

Accordingly, this data can indicate specifically the kind of impact the substantial fault disqualification standard has on unemployment claims in the state of Wisconsin.

NOTE: The misconduct label for this data is used nationally because historically misconduct was the only disqualification standard used in discharge cases. But, starting in 2014, the misconduct data here for Wisconsin includes both misconduct and substantial fault determinations.

The substantial fault disqualification began to be applied by the Department in initial determinations issued on or after 5 January 2014. See 2013 Wis. Act 20 § 9351(1q) (new misconduct and substantial fault provisions “first apply with respect to determinations issued under section 108.09 of the statutes on January 5, 2014”).

Until the first quarter of 2014, the Department denied on average about 26% of all claimants who were discharged from their jobs. From the first quarter of 2014 until the latest available (the quarter ending June 2016), however, the number of discharge cases being denied jumped to 38.47% of all discharge determinations. This increase nearly doubled the number of denials from before 2014 — a stunning and remarkable jump in the number of claims being denied.

NOTE: The actual data for creating these charts is set forth in a table, WI Separation Data, compiled from the ETA 207 data.

This jump is even more shocking in light of the decline in discharge determinations since the start of 2014.

From 2007 to the end of 2013, the number of discharge determinations averaged 19,462.43 per quarter. Not surprisingly, during the height of the last recession in 2009 and 2010, there were discharge determinations in some quarters that numbered over 21,000 or even 22,000. See Table: WI Separation Data. But, in general the number of discharge determinations per quarter hovered around 17,000 to 19,000. In the first quarter of 2014, however, the number of discharge determinations plummeted to under 14,000. And, the number of discharge determinations has continued to decline since then. From the start of 2014 to June 2016, the Department has issued on average only 12,605.50 discharge determinations per quarter.

NOTE: The total number of determinations being issued by the Department has not declined, however. Prior to 2014, the number of determinations issued per quarter averaged 58,945.25. From 2014 on, the average number of determinations being issued increased to 59,668.60 per quarter. As indicated in the table for WI Non-Separation Data, the number of determinations not connected to separation issues being issued jumped from 46.87% of all determinations per quarter prior to 2014 to 64.01% after 2014. In particular, much if not all of this increase in non-separation determinations concerns an approximately 26% increase in determinations regarding a claimant’s able and available status, a five-fold increase in determinations (from just over 3,000 determinations prior to 2014 to almost 16,000 determinations on average after the start of 2014) over a claimant’s failure to follow the Department’s reporting requirements, and a nearly 100-fold increase in determinations (around 13 cases per quarter prior to 2014 to nearly 1,200 per quarter after 2014) over a claimant’s failure to follow the Department’s job profiling services. In all three of these categories, the percentage of benefit denials has also jumped at least 10 percentage points on average after 2014.

It should also be noted that these non-separation denials generally do not disqualify a claimant for an extended period of time. For instance, a denial of benefits because of failing to report to Department-mandated profiling services or provide requested information is usually cured by reporting for those services or providing the needed information. As a result, the disqualifications from receiving unemployment benefits pursuant to these denials are generally short-term denials. A denial of benefits because of substantial fault or misconduct, on the other hand, lasts 7 weeks at a minimum and requires new earnings of 14X a claimant’s weekly benefit rate in order to re-qualify for unemployment benefits.

This decline in discharge determinations, however, does not indicate that the impact of substantial fault should be discounted in some way. Quarterly reports on each state’s unemployment system from the Employment & Training Administration indicate both the average weekly benefit rate for claimants during the previous twelve months and the average number of weeks unemployment benefits are being received during the last twelve months. The report for Wisconsin for the first quarter of 2015 indicates an average weekly benefit rate of $288.04 for the previous twelve months and an average duration for benefits of 14.8 weeks, leading to $4,262.99 in unemployment benefits at issue. Applying the pre-2014 25.99% denial ratio to the post-2014 12,605.50 discharge determinations that take place on average in each quarter means only 3,276.17 cases would be denied rather than the 4,852.00 being denied with substantial fault in place — a difference of 1,575.83 cases. Multiplying this number of cases by the $4,262.99 of unemployment benefits at issue leads to an amount of $6,717,747.53 per quarter being denied claimants currently under this new substantial fault standard. As substantial fault has now been in effect for ten quarters, the amount of unemployment benefits “saved,” or not paid to claimants, amounts to $67,177,475.32.

It is expected that substantial fault will also, on the whole, lead to employees filing fewer claims because claimants will learn how broad the substantial fault disqualification is and stop filing claims altogether. The data supports this trend. In the second quarter report in 2016, the weekly benefit rate for the last twelve months is $306.43, and the average duration of benefits for the previous year is 13.3 weeks. With these figures, the amount of benefits at issue is $4,075.52. Multiplying this amount by the 1,575.83 average number of cases per quarter denying unemployment benefits to claimants because of substantial fault leads to an amount of $6,422,326.68 per quarter being denied to claimants and a ten quarter amount of $64,223,266.82. As a result, the range of lost benefits because of substantial fault is between $67 and $64 million.

NOTE: The Department’s original estimate of $19.2 million per year, after 2.5 years, amounts to $48.4 million — approximately $15-$20 million less than what the actual data reveal.

So, even as fewer and fewer discharged employees are filing claims for unemployment benefits, the new substantial fault standard that become effective in 2014 is leading to thousands of claimants being denied millions in unemployment benefits.

Employer UI taxes declining because more UI claims being denied

Wisconsin employers are having their unemployment tax rates slashed in 2017 because the fund from which unemployment benefits is reaching ever higher solvency metrics. The Walker administration is heralding this news here and here.

Understandably, there are two possible explanations for what is going on with the state’s unemployment fund. The state’s unemployment funds are positive because either job growth is booming or because fewer folks are claiming benefits despite NOT having jobs.

Is job growth booming in Wisconsin?

The July state jobs report reveals that job growth in Wisconsin continues to be anemic. This report indicates that, initially, in July 2016 5,000 private-sector jobs were added to Wisconsin payrolls. But, June 2016 numbers for private-sector job growth were revised downward, from 10,900 to 5,600. This loss of 5,300 jobs from the June report means that the initial number for July does not even get the state back to what was first reported for June 2016.

Neither does the quarterly data offer any better news. From March 2015 to March 2016, the quarterly data indicates that the state added 37,432 jobs during that time frame. But, this number is a few thousand less than what was reported for the March 2015 to March 2015 time frame in the July 2015 jobs report: 39,652 private-sector jobs.

So, without adding new jobs to the state’s economy, the decline in unemployment claims must be coming from fewer folks claiming unemployment benefits. In two bullet points, the July 2016 jobs report actually acknowledges this development.

• Year 2016 initial UI claims are running at their lowest level since 1989.
• Continuing unemployment claims in Wisconsin are running the lowest in at least the past 30 years.

But, the question remains: if jobs are not being created, why are claims now so low?

Why are unemployment claims so low?

Actual claims data is available from ETA 207, Non-monetary Determinations Activities Report. See DOLETA data downloads generally for UI data. The 207 data series has all determinations issued by a state compiled on a quarterly basis going back several decades until the most recently completed quarter, June 2016.

Here are some charts from that data for Wisconsin starting in the first quarter of 2007 through the second quarter of 2016.

This chart shows that most initial determinations issued by the Department lead to the denial of unemployment benefits. But, starting in the first quarter of 2014, the denial rate for initial determination jumped markedly. Prior to 2014, 59.90% of all initial determinations denied benefits to claimants. Since the start of 2014, 77.45% of all initial determinations issued by the Department have been to deny unemployment benefits. In other words, currently only one of four initial determinations being issued by the Department allows unemployment benefits, and three out of four initial determinations deny unemployment benefits in some way.

Keep in mind that these numbers are based on the initial determinations issued by the Department in regards to a new unemployment claim. In most states, these determinations would consist almost entirely of separation determinations — whether claimants are disqualified because their discharge was their fault in some way or they lacked good cause for quitting their jobs. In Wisconsin, these separation decisions are only a part of what the Department decides. And, increasingly separation decisions are becoming a smaller and smaller part of what the Department does in disqualifying claimants.

Here, initial determination concerning separation issues (i.e., quits and discharges) were around 60% of all initial determinations until 2009, when they declined and hovered around 50% of all initial determinations until the first quarter of 2014. At that point, the percentage of separation initial determinations being issued by the Department plummeted to 40% of all initial determinations. In the last two quarters of 2015, the number of separation initial determinations fell again to under 30% of all initial determinations. So at present, less than 30% of the initial determinations being issued by the Department concern separation issues related to a discharge or a quit. And, since most of these other determinations (and probably all of them given the analysis below) are denying unemployment benefits, many of these probably include some kind of concealment allegation, given the Department’s push to allege concealment against claimants.

In regards to denying claimants unemployment benefits, the Department consistently denied about 26% of all claimants who were discharged from their jobs until the first quarter of 2014.

From the first quarter of 2014 until the latest, however, the number of discharge cases being denied jumped to 38.47% of all discharge determinations. This increase nearly doubled the number of denials from before 2014 — a stunning and remarkable jump in the number of claims being denied.

The magnitude of this jump is seen when it is compared the number of quit denials over this same time frame.

Here, a slight increase in denials occurs in the first quarter of 2014. But, this increase is part of a general increase in denial rates that appears to have started in the second half of 2010. So, while denial rates for those quitting their jobs are high and gradually increasing, there is no sudden or striking shift in denial rates in quit cases at any one point in time.

Now, consider that in the last two years only about 30% of all initial determinations concern separation issues and that only 1 out of 4 initial determinations is allowing unemployment benefits at all. In this light, it appears that the only initial determinations right now allowing benefits are the discharge and quit separation determinations that are NOT denying benefits. Everything else the Department is doing is to deny unemployment benefits to claimants.

What these numbers reveal is that most folks applying for unemployment benefits are being denied those benefits, that essentially the only folks qualifying for unemployment benefits are those laid off from their jobs by their employers, and that numerous denials of unemployment benefits have nothing to do with separation issues. These non-separation initial determinations most likely are part of the Department’s program integrity efforts and most likely lead to charges of unemployment concealment, especially under the Department’s new strict liability standard for concealment.

So, unemployment claims and benefits are at record lows in the state because the state is making it difficult to impossible for claimants to receive benefits and charging the few that collect unemployment benefits with unemployment concealment. Essentially, employers are paying unemployment taxes for a benefit almost no one is using. Pretty soon, folks will start calling for eliminating the unemployment system entirely, as who wants to pay a tax that does nothing.

UPDATE (14 Sept. 2016): Fixed links so that a click on a chart brings up a full-sized version.

Substantial fault and misconduct principles from unemployment law to come to workers’ compensation

A Department-sponsored bill from the Workers’ Compensation Advisory Council, SB536, will make the following changes to workers’ compensation law:

Employees suspended or terminated for misconduct or substantial fault This bill provides that an employer is not liable for temporary disability benefits during an employee’s healing period if the employee is suspended or terminated from employment due to misconduct, as defined in the unemployment insurance law, or substantial fault, as defined in the unemployment insurance law, by the employee connected with the employee’s work.

The unemployment insurance law defines “misconduct” as action or conduct evincing such willful or wanton disregard of an employer’s interests as is found in 1) deliberate violation or disregard of standards of behavior that an employer has a right to expect of his or her employees; or 2) carelessness or negligence of such degree or recurrence as to manifest culpability, wrongful intent, or evil design in disregard of the employer’s interests or to show an intentional and substantial disregard of an employer’s interests or of an employee’s duties and obligations to his or her employer.

The unemployment insurance law defines “substantial fault” as acts or omissions of an employee over which the employee exercised reasonable control that violate reasonable requirements of the employee’s employer, but not including minor infractions, inadvertent errors, or failure to perform work due to insufficient skill, ability, or equipment.

In other words, temporarily disabled employees lose their workers’ compensation benefits when they lose jobs because of misconduct or substantial fault (which by the way also cancels out their unemployment benefits). Given this two-fer, employers will have an extra incentive for discharging employees who suffer a temporary workplace injury. Not only are the employees disqualified from receiving unemployment benefits, but they also lose their workers’ compensation benefits. Given how easy it is to find substantial fault (the Commission has found mere negligence to qualify as substantial fault), workers’ compensation benefits for temporary injuries are likely to become exceptionally rare under this new provision. YIKES!

NOTE: As seen in the 21 October 2015 minutes of the advisory council meeting in which this change — Management Proposal 11 — was discussed, these concerns about the impact of this disqualification were not new. In these minutes, however, these concerns were made in regards to misconduct only. Substantial fault was not discussed.