When the Unemployment Insurance Advisory Council last met on 21 October 2021, not much was decided or even reckoned with.
Other than the trust fund balance being $963 million and approval of a draft UI bill, LRB 4438 (unchanged from what was introduced in the September 2021 meeting), nothing much was discussed or decided. Council members even decided to cancel their remaining meetings for November and December.
The big news was that Mark Reihl, UI division head from before the pandemic started, announced his retirement, as of early November 2021.
The pattern continues into 2022, when the council met on January 20th.
Covid-19 is perhaps worse now than when the pandemic started. But, if job search requirements and claim-filing are to continue pretending that the pandemic does not really exist anymore, then the least the Department can do is open its job centers so that claimants can get the help they actually need. I know that people are leaving jobs because some (maybe more than some) employers are ignoring safety standards and pretending the pandemic no longer exists. The Department is making things worse for claimants struggling in this atmosphere by pushing claimants to on-line only claim-filing, and ill-equipped librarians who do not understand all the complexities and confusions of the on-line claim-filing process is simply asking too much of people who are not directly involved.
For instance, the Department’s job search requirements are quite specific, and many actions people think as qualifying as a job search do not actually qualify. Unless the Department is going to demonstrate how it is training librarians about how to assist confused claimants with understanding the Department’s very specific job search requirements (let alone all of the other “issues” that can catch claimants into making mistakes), then saying talk to a librarian is little more than Calvinball.
The unemployment trust fund is back over a billion (indeed, $1.1 billion). Left unremarked on was that in 2021 payment of regular unemployment benefits plummeted to nearly one-third of what was seen in 2020: $583.1 million versus $1,464.7 million. Given that the pandemic still exists and that employees — even in Wisconsin — are leaving jobs at record numbers in 2021, this startlingly drop in payment of regular unemployment benefits indicates that many of the old practices at the Department are re-asserting themselves.
Job searches, as noted above, are extremely difficult to complete to the Department’s satisfaction. Furthermore, all claimants will have their job searches eventually audited (claimants must keep their job searches for one year, and Department staffers tell me that they are under pressure to make sure every claimant gets some of his or her job searches audited within that one-year time frame).
Jim Chiolino, a mainstay in all kinds of Department operations for the last several decades, is now head of the UI division. Tom McHugh, treasurer of the unemployment trust fund, retired as of January 10th. He will be missed.
Also, Kathy Thornton-Bias joined the council as a management representative for non-profits, replacing Theresa Hillis from the Eau Claire YMCA.
EmR2125 for waiving benefit charges related to pandemic job losses and for compensating reimbursable employers for their pandemic-related job losses (reimbursable employers like non-profits and government entities pay dollar-for-dollar for unemployment benefits paid to their former employees) continues to be in effect until March 2nd/April 24th of this year.
The Department presented Council members with a highly technical rule change for switching Wisconsin’s regulations from the Standard Industrial Classification (SIC) industry classification codes to North American Industry Classifications System (NAICS) industry classification codes — the stuff that labor economists dream about — as well as several other technical changes and corrections.
After caucusing, Council members approved of this new rule.
The Labor and Industry Review Commission also presented to Council members the Commission’s proposed new rules. These proposed rules mostly update Commission procedure in light of all the procedural changes to unemployment law the past few years as well as some less extensive changes to workers’ compensation law during these past years. The only change of note in the unemployment context is that answers to petitions for review in unemployment cases now need to be filed in 14 days rather than 21 days. As answers are rarely filed and usually unnecessary, this change does not raise major concerns (unless increasing delays in mail service make the 14 day window unworkable).
There was a short presentation on AB691, a bill that would declare that the required use of any safety equipment could not serve as evidence that an operator of a motor vehicle (yes — any motor vehicle, not just truck drivers) could be classified as an employee for purposes of workers’ compensation law, unemployment law, minimum wage law, and wage law. Yikes.
Finally, after caucusing, Council members provided their stamp of approval on two other LRB drafts of the agreed upon bill, LRB-5584 and LRB-5585.For what these bills do, seeAdvisory Council meeting in August 2021. After caucusing, Council members approved of these draft bills.
At the September 16th Advisory Council meeting, a new employer representative appeared, as David Bohl, general counsel to J. H. Findorff & Sons, replaced John Mielke of ABC-Wisconsin.
Note: As of October 18th, however, John Mielke is still listed as a council member.
At this meeting, the Department provided the following information to council members:
A letter from Secretary-designee Pechacek asking the Advisory Council to approve another program integrity assessment (estimated to be $3.3 million). Left out of this letter is that the program integrity fund, as of August 2021 (see line 228), already has $19,444,000. Regardless, the council approved of this additional assessment.
Presented SB545, a proposed bill to legalize marijuana. Under this bill, employees who test positive for marijuana use and who are then discharged would not be disqualified from receiving unemployment benefits.
Presented SB547, a proposed bill to allow people who refuse vaccinations to qualify for unemployment benefits (discussed here).
Introduced a future emergency regulation (now available as EmR2125) that extends the time for recharging of unemployment benefits to employers’ accounts or the balancing account until 30 June 2022 and continues to waive any interest charges for reimbursable employers. After caucus, Council members voiced their support for this new emergency regulation. In general, charging relief for pandemic-related job losses needs to be requested because only a few kinds of job losses are presumed to be pandemic-related. But, the deadline for those requests expired as of 14 May 2021. Only for new, back-dated pandemic-related claims are charging relief requests still viable,
The Financial Report for this month indicates that benefit payments are now around half of what they were a year ago, that the unemployment taxes employers pay continue to decline because of fewer claims being paid, and that the unemployment trust fund balance was nearly $950 million.
The support for D21-01 through D21-08 is disappointing, as basic questions remain unanswered about why these proposed changes are needed, including:
Why are penalties against employers increasing so much in the last four years that the separate fund proposed in D21-01 is now needed?
Why is the Department in D21-06 re-writing unemployment law to its benefit when it loses key court cases?
Why the Department in D21-06 is allowing administrative law judges to ignore Commission precedent and unemployment law and regulations without any consequences?
How will an option to be a fiscal agent in D21-08 actually fix the confusing mess of excluded employment and unemployment taxes that currently exists when a family member cares for another?
In financial news, the unemployment trust fund has $977.5 million as of August 7th.
The Department introduced to council members SB485/AB487, a bill that would exclude uber and lyft drivers from regular unemployment benefits. Strangely, the Department has yet to introduce AB394, a bill that would revamp the over-payment waiver standard to add an equity and good conscience standard to whether an over-payment is affordable or not.
Indeed, there is some interesting data and issues with this latter bill. The Department’s fiscal estimate for AB394 indicates that in the 2018 and 2019 calendar years combined there were only around 350 no-fault over-payments (lack of fault is a precondition for an equity and good conscience waiver). Given that there were 41,197 non-fraud over-payment decisions in 2019 and 44,634 non-fraud over-payment decisions in 2018 (for a combined total of 85,831 non-fraud over-payment decisions, seethe 2020 Fraud Report at 9), this number of around 350 is just unbelievable. Less than 0.5% (1 out of every 200 who allegedly made a non-fraudulent mistake) of these cases are without claimant fault?
This conclusion makes even less sense when comparing the number of non-fraud decisions in these years relative to the number of initial claims filed and the number of claimants actually paid unemployment benefits in these years.
That is, in 2018 and 2019 non-fraud mistakes are around one out of every seven initial claims and one out of every three paid claims. If non-fraudulent mistakes are truly this high (and in years when claim-filing was at an all-time low), then the Department’s guidance to claimants and the claim-filing process are themselves completely broken and inadequate. Claimants are making claim-filing mistakes because the Department is completely inadequate in assisting claimants when they are filing unemployment claims.
But, since the pandemic started there have been no questions or discussion over the claim-filing process at an Advisory Council meeting.
Labor’s proposed increase in the weekly benefit rate attracted a great deal of attention from the management side. The Department presented three different scenarios of what the proposed increase would mean, depending on low, medium, and high unemployment — based on the number of weeks of unemployment paid per a typical claim. The management reps, however, want to know an additional variable — what changes in the unemployment rate itself would mean under this proposed weekly benefit rate. The staffer for the Department tried to explain that the three scenarios necessarily implicated a change in unemployment rates (more unemployment claims is correlated with longer periods of unemployment), but the management reps were insistent on seeing numbers directly rated to unemployment rates.
The problem with management representatives’ demand for unemployment rates is that those rates are no longer correlated with the number of unemployment claims filed or paid in Wisconsin. In 2007, the unemployment rate in Wisconsin was 4.8%, but 638,548 initial claims were filed that year and 332,982 of those initial claims (52.15%) were paid.
In 2019, the unemployment rate in Wisconsin was down to 3.3%, roughly 68% of the unemployment rate from 2007. Yet, initial claims in 2019 were down even further to 287,043, and paid claimants were down still more to 129,888. Those 2019 numbers are 45% and 39% of comparable 2007 numbers. In other words, claim-filing has declined to such an extent that it no longer has an historical connection to unemployment rates.
One tidbit in the Department’s research response that went without comment was the disclosure that 2,167 claimants in a typical year win approval of benefits under the 30-day quit to try a new job provision. Since 130,710 claimants were paid unemployment benefits in 2018, this 2,167 figure means that roughly 1 out of every 100 claimants received their unemployment benefits because of this quit exception.
Note: In its research response, the Department reports that 3,425 claimants received unemployment benefits in 2019 under the 30-day quit provision, but that this number was higher than expected because the number of claims being filed increased that year. The number of initial claims in 2019 was up slightly to 287,043 from 279,912 in 2018, hardly a major increase. Moreover, the claimants who were paid benefits in 2019 was actually down in 2019, at 129,888, from 130,710 in 2018. So, it appears that the 30-day quit exception is actually more significant in allowing claimants to receive unemployment benefits that what the Department is reporting.
The other research response that drew ire from management representatives was that the Department indicated that the ability of temp companies to immediately challenge claimant eligibility about missed interviews, declined job offers, and job search contacts was problematic during the initial modernization process. The Department indicated that these management proposals could eventually be implemented and indeed voiced support for them, but that the initial modernization effort could not include them because the modernization request for proposals had already been written and because claimant confidentiality issues would need to be addressed to allow employers to respond in the desired ways. Management reps, however, were unhappy with even this kind of delay. They want to object to claimant eligibility immediately.
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.
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.
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.
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.
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.
At the 18 March 2021 meeting of the Advisory Council, the Department presented its first eight proposals. These first eight proposals included the proposals that the Advisory Council originally approved of in 2019 (but which were not enacted because of the pandemic).
At the 15 April and the 20 May 2021 meetings of the Advisory Council, the Department presented another 18 proposals — D21-09 thru D21-26. Yikes. Here are those proposals, with links to the actual proposals that appeared at the May 2021 Advisory Council meeting.
D21-09, Employee Status solely determined by unemployment law
The Department seeks to amend the definition of employee and self-employment.
The Department proposes to amend sections 108.09(2)(bm) and 108.09(4s) to provide that all issues of unemployment insurance employee status may only be determined under Wisconsin unemployment statutes and rules. This proposal will provide consistency in determining individuals’ eligibility for unemployment benefits and employers’ unemployment insurance tax liability by limiting the employee status inquiry to the provisions of the unemployment insurance law.
D21-09 at 2. The actual proposed changes seem to do little more than re-arrange statutory wording, however. At present, current unemployment law prohibits consideration of licensing requirements or other state or federal law in determining employee status. So, there is a change in wording being proposed, but I cannot determine what substantively is being changed. The Department’s rationale seems to be that administrative law judges are over-turning initial determinations that held claimants to be employees (and so, concluding that the claimants truly were independent contractors) because those administrative law judges were looking to laws outside of unemployment law.
the appeal tribunal shall not take administrative notice of or admit into evidence documents granting operating authority or licenses, or any state or federal laws or federal regulations granting such authority or licenses.
So, the actual goal of this proposed change is unclear at the moment.
This proposals adds a provision — required by federal law — to prevent employers from re-organizing themselves and thereby reducing their tax rate significantly and restoring a positive account balance as a “new” employer — a practice called SUTA dumping.
SUTA dumping is a major problem that can easily “cost” thousands of dollars (and maybe even tens of thousands) per employer, especially when extended beyond one year. The proposed penalties are a $5,000 forfeiture, a possible $10,000 civil penalty, and possible criminal charges as a class A misdemeanor (up to 9 months in jail and up to a $10,000 fine).
So, these penalties are chump change and unlikely to discourage any employer but the smallest from SUTA dumping. A large employer who might save $70,000 or more in three years will not bat an eye at these proposed penalties.
Moreover, the penalties for claimant concealment are much more severe. Alongside the financial penalties that claimants incur for the claim-filing mistakes, per 2017 Wis. Act 147 the criminal penalties for claimant concealment are:
For benefits up to $2,500: An unclassified misdemeanor with a fine up to $10,000, imprisonment up to nine months, or both.
For benefits up to $5,000: A Class I felony, for which the penalty is a fine upto $10,000, imprisonment up to three years and six months, or both.
For benefits up to $10,000: A Class H felony, for which the penalty is a fine up to $10,000, imprisonment up to six years, or both.
For benefits over $10,000: A Class G felony, for which the penalty is a fine up to $25,000, imprisonment up to 10 years, or both
And, unlike claimant concealment, actual and specific intent to commit SUTA dumping needs to be proven. Proposed Wis. Stat. § 108.16(8)(mm)3 will read:
For the purposes of this paragraph and par. (m), “knowingly” means having actual knowledge of or acting with deliberate ignorance of or reckless disregard for the statute violated.
D21-10 at 3. Claimant “intent” for the purpose of unemployment concealment is shown for any claim-filing mistakes by the following factors:
a. Whether the claimant failed to read or follow instructions or other communications of the department related to a claim for benefits. b. Whether the claimant relied on the statements or representations of persons other than an employee of the department who is authorized to provide advice regarding the claimant’s claim for benefits. c. Whether the claimant has a limitation or disability and, if so, whether the claimant provided evidence to the department of that limitation or disability. d. The claimant’s unemployment insurance claims filing experience. e. Any instructions or previous determinations of concealment issued or provided to the claimant. f. Any other factor that may provide evidence of the claimant’s intent.
Wis. Stat. § 108.04(11)(g)2 (setting forth a claimant’s duty of care to provide accurate and complete responses to Department inquires).
These standards are hardly comparable. They should be. They need to be.
Work-share has been one of the few unemployment success stories in Wisconsin during this pandemic. In light of federal changes to work-share programs during the pandemic, this proposal seeks to expand work-share options and flexibility in light of those federal changes so that more employers and employees can take advantage of these benefits.
This proposal is a no-brainer and should have been adopted months ago.
The Department wants to hear about other changes needed to work-share efforts in Wisconsin. Other than a reduction in the complicated paperwork (a universal complaint for work-share), contact me with your suggestions. I will pass them on to the Advisory Council.
D21-12, Secretary waiver of provisions for the sake of funding flexibility
This proposal expands the general savings clause (the Department’s secretary can waive compliance with any specific state requirement should that state requirement be found to conflict with federal law) to also allow the Department secretary to waive requirements that prevent the state from taking full advantage of federal funding opportunities (like immediately waiving the waiting week when the pandemic struck, as the legislative delay costs Wisconsin employers’ millions of dollars).
D21-13, Initial tax rates for construction employers
Unemployment taxes have been declining so rapidly in Wisconsin that the initial tax rates for construction employers — one of the few booming industries from before and during the pandemic — are now lower than the initial rates of non-construction new employers.
D21-13 at 1. Because construction work is generally seasonal work, initial tax rates in construction should in theory be higher than for general, non-construction employers. The Department’s solution is to amend “the initial tax rate for construction employers to be the greater of the initial rate for non-construction employers or the average rate for construction industry employers as determined by the department on each computation date, rounded up to the next highest rate.” D21-13 at 2.
Until construction work no longer has seasonal layoffs because of winter, this proposal makes sense.
Current regulations, however, still prioritize in-person hearings over hearings by phone. In this proposal, the Department wants:
to amend chapter DWD 140 to provide that, while parties may continue to request in-person hearings, it is the hearing office’s discretion whether to grant that request. The Department also proposes to clarify language in DWD chapter 140 regarding hearing records, Department assistance for people with disabilities at hearings, and to correct minor and technical language in DWD chapter 140.
D21-14 at 2. As currently worded, the proposal simply justifies what the Department wants to do and provides no actual reasons or justification for these changes. For instance, the Department lacks space for in-person hearings because the Department previously closed three out of four hearing offices.
Even more troubling, the substances of the proposed changes is lacking. Wis. Admin. Code § DWD 140 is THE set of regulations for how hearings are conducted. Any changes to this chapter could have long-term repercussions to claimants and employers about what happens at unemployment hearings and their access to the hearing files connected to these cases.
When presenting this proposal, the Department indicated that the changes to DWD 140 are needed as well as to DWD 149 to reflect the Department’s current practices in responding to open records requests. So, it begs the question of what exactly is in conflict between these regulations and the Department’s current hearing practices. Wis. Admin. Code DWD 149.03 provides:
(1) Claimants and employing units. Except as otherwise provided under s. DWD 140.09, the department shall make the following records available to the following persons upon request:
(a) An unemployment insurance record concerning an individual is available to that individual.
(b) An unemployment insurance record concerning an individual’s work for an employing unit is available to that employing unit.
(c) An unemployment insurance record concerning a determination to which an employing unit is identified as a party of interest under s. 108.09, Stats., is available to that employing unit.
(d) An unemployment insurance record concerning an employing unit’s status or liability under ch. 108, Stats., is available to that employing unit.
In legal circles it is generally understood that phone hearings favor employers, as employer witnesses can gather in one room and share a set of notes during their testimony without an administrative law judge witnessing those notes being passed.
Finally, for comparison, here is a 1998 Department notice (from a 2000 training about unemployment hearings) about opting for a phone hearing. If the Department is going to go forward with this change, it should address these points it put forward in 1998 for why phone hearings are problematic.
Currently, summer camp counselors are generally ineligible to receive unemployment benefits because they are usually full-time students. But, summer camps must still pay unemployment taxes for the wages paid to summer camp counselor.
This proposal applies the federal definition of excluded employment for camp counselors to state law.
The result of this change is that summer camps will no longer pay unemployment taxes for the wages paid to their summer camp counselors. And, some summer camp counselors who are not students may lose the ability to include their summer camp wages in establishing a benefit year.
This proposal repeals the drug testing provisions the Walker administration kept trying to institute. Recall that the drug testing efforts came in three parts: (1) voluntary employer testing and reporting, (2) mandatory testing of claimants based on to-be-determined federally designated occupations for testing, and (3) mandatory testing of claimants based on a future, state-based list of designated occupations. Only the voluntary employer testing and reporting was ever implemented.
The big news here is that as of 31 March 2021, the Department has received 171 drug test reports (either a failed test or failing to take a test) from potential employers. Previously, the Department had reported none or just a couple of voluntary testing reports from employers. In any case, the impact of these 171 voluntary employer reports remains nil. “No claimants have been determined to be ineligible for UI benefits under the pre-employment drug testing statutes and rules and denied benefits because of the employers’ reports of a failed or refused drug test as a condition of an offer of employment.” D21-16 at 1. So, there has been no opportunity for claimants to maintain their eligibility by enrolling a drug treatment program at the state’s expense.
Because employers have no idea of whether a job applicant is receiving or not receiving unemployment benefits OR because employers are failing to provide the necessary drug-testing paperwork and follow the necessary protocols for reporting a drug test OR a combination of these two factors, the voluntary drug testing has been a complete bust. In more than five years, this effort has not led to a single disqualification or enrollment in a drug treatment program. Ending a program that is doing nothing should make sense.
D21-17, Repeal of the substantial fault disqualification
This proposal seeks to repeal the substantial fault disqualification. There are two issues with this proposal, however.
Second, court decisions in Operton v. LIRC, 2017 WI 46, and Easterling v. LIRC, 2017 WI App 18, have limited the scope of substantial fault in important ways from how the Department applies this disqualification. But, the Department continues to ignore those court precedents. Indeed, as of May 2021, I have come across two cases of employees disqualified for substantial fault because of unintentional mistakes where the mistakes in question are nearly identical to the mistakes in Operton (inadvertent job mistakes) and Easterling (unintentional mistakes while attempting to satisfy employer demands).
D21-18, Expansion of the relocating spouse quit exception
This proposal restores this quit exception to allow any claimant who has to quit a job because his or her spouse has to relocate. Prior to 2013, Wisconsin allowed claimants to receive unemployment benefits when they had to relocate because of a spouse transferring to another job for any reason. In proposal D12-19, the Department limited this quit exception to the spouses of military personnel who had to relocate.
So, this proposal restores the expansive nature of this quit exception.
The problem here, like with substantial fault, is that the Advisory Council previously rejected this Department proposal to limit this quit exception to the spouses of military personnel. Here is what the Advisory Council actually agreed to back in 2013. So, this proposed change should be included as a matter of course in the council’s agreed-upon bill.
The waiting week was enacted as part of the 2011 budget act, 2011 Wis. Act 32 and without any input from the Advisory Council.
The concept of a waiting week exists because state unemployment agencies originally could not act quickly on a claim for benefits, and so a waiting week was needed to give the state agency time to process the necessary paperwork. With the advent of claim-filing by phone, however, that additional time was no longer needed. The waiting week effectively became a vehicle for reducing the total amount of benefits paid out to a claimant, since claimants did not receive any unemployment benefits for the first week of their claim.
The Department estimates that the waiting week costs claimants $26.1 million each year. D21-19 at 3. Given the purpose of unemployment benefits to provide immediate economic stimulus to workers in time of need after losing their jobs, a waiting week makes no sense.
D21-20, Repeal of the lame duck work search and work registration changes
In light of Wisconsin’s partial wage formula, a claimant with a weekly benefit rate of $370 could in theory have as much as $574 in wages and still qualify for at least $5 in unemployment benefits. D21-21 at 1. In other words, the partial wage formula indicates that anyone with $575 or more in wages would NOT receive any unemployment benefits.
As a consequence, the $500 cutoff actually discourages some work, as any employee who receives $500 or more in wages loses all unemployment benefits. For instance, a person with a WBR of $370 who earns $550 in wages would receive $22 in unemployment benefits that week, if the $500 wage cap was eliminated.
In other states, the gap between earnings and unemployment eligibility is called an “earnings disregard.” In some of these states, a worker who earns just $200 in a week loses unemployment eligibility dollar for dollar, so the earnings disregard in those states is sizable. See Massachusetts, for example, in this table. Because of Wisconsin’s partial wage formula, the earnings disregard in Wisconsin is limited to this $500 wage cap and only applies for claimants receiving the highest weekly benefit rate.
So, at present this $500 wage cap has a very limited effect. But, should the weekly benefit even be increased, it will become a major problem. And, as indicated in the next proposal, Wisconsin now has the second-lowest weekly benefit rate in the mid-west. So, this artificial cap needs to go if Wisconsin is going to raise its weekly benefit rate.
Finally, as noted by the Department, D21-21 at 3, the eligibility ban when working 32 or more hours in a week remains in place.
Currently, Wisconsin has the second-lowest maximum weekly benefit rate in the mid-west.
State Max. WBR Max. w/ dependents
IL $484 $667
IN $390 $390
IA $481 $591
MI $362 $362
MN $740 $740
OH $480 $647
WI $370 $370
A listing of the weekly benefit for all the states is available here.
Note: this data is different from what the Department reports in its proposal, and these numbers are current as of October 2020. These numbers have changed since then. Ohio, for instance, currently has a maximum WBR of $498 and $672 with dependents.
The highest WBR available is in Massachusetts, at $823 ($1,234 with dependents). The second highest is in Washington state at $790.
This proposal sets forth a series of increases in the weekly benefit rate.
For benefits paid for weeks of unemployment beginning on or after January 2, 2022, but before January 1, 2023, the maximum weekly benefit is capped at $409.
For benefits paid for weeks of unemployment beginning on or after January 1, 2023, but before December 31, 2023, the maximum weekly benefit is capped at 50% of the state’s annual average weekly wages.
For benefits paid for weeks of unemployment beginning on or after December 31, 2023, the maximum weekly benefit is capped at 75% of the state’s annual average weekly wages, or the maximum weekly benefit amount from the previous year, whichever is greater.
Wisconsin’s weekly benefit rate relative to the wages being paid in this state has never been all that good and has become essentially a token reimbursement in the last few decades.
Using the average weekly Wisconsin wage of $951 in 2019, the maximum WBR in 2023 would be $475, and in 2024 the maximum WBR would be $713. So, this proposal would basically make the maximum weekly benefit rate actually useful and relevant again in Wisconsin.
D21-23, Expanded flexibility in searching for suitable work
Here, the Department proposes two changes. First, the Department wants to expand the canvassing period from six weeks to eleven weeks.
The canvassing period is the time when you can reject a job offer which is a lower grade of skill or at a significantly lower rate of pay (less than 75%) than you had on one or more recent jobs without losing your eligibility for benefits. SeeTips for filing for unemployment benefits in Wisconsin for more information about your canvassing period.
Second, the Department proposes expanding the trial time period for quitting a job without being disqualified from receiving unemployment benefits from 30 days to ten weeks (the original time period). The Advisory Council originally approved of the change from ten weeks to 30 days.
This trial time period provides various ways for an employee to still qualify for unemployment benefits when quitting a job regardless of the employee’s actual reason. The main reason found in this category usually is that the job fails to meet established labor market standards (e.g., wages are 25% or less than what is normally paid in that specific labor market for that occupation). But, any reason that would have allowed the employees to refuse the job offer in the first place as well as any reason for quitting the job with good cause applies here. Only the last reason — having good cause for quitting the job — is still available to employees after the trial period has expired.
D21-24, changing the SSDI eligibility ban to an offset
This proposal was previously discussed here, along with the entire history of the Department’s SSDI eligibility ban qua offset. Whether as an eligibility ban or an offset, it still makes no sense. There should be no SSDI offset, just like there should be no SSDI eligibility ban.
Here is hoping the Advisory Council can fix this crazy proposal and end this discrimination against the disabled.
At present, large employers (those with annual unemployment taxes of $10,000 or more) must e-file their reports and e-pay their unemployment taxes.
This proposal would mandate e-filing and e-pay for ALL employers.
The problem is that many one or two person LLCs and other self-employed individuals have no conception of unemployment taxes and the reports that need to be filed. Given the lack of broadband access in the state, this mandate for these small employers is likely difficult to impossible to implement.
Without a broad-based, educational media campaign, this mandatory e-filing will accomplish little more than allowing the Department to levy administrative penalties against small employers who have no idea what is going on and fail to provide their forms and payments via e-file and e-pay. The fact that implementation will be delayed until the Department actually has the technology in place to support this proposal offers little assurance. In short, this proposal should be rejected out-of-hand. After all, those who push for ease-of-use indicate that multiple kinds of access need to be maintained and fully supported. So, mandatory e-filing and e-pay actually runs counter to making unemploymeny more modern and easier-to-use.
This proposal seeks to replace the token employer penalties for mis-classifying construction workers (1) with penalties that at least some have some dentures to them and (2) to expand this issue to all industries rather than limiting it to just construction.
The Advisory Council at the urging of Mark Reihl, then the head of the carpenters’ union in Wisconsin (and now division director for unemployment) originally approved the original penalties proposed by the labor caucus.
$500 civil penalty for each employee who is misclassified, but not to exceed $7,500 per incident.
$1,000 criminal fine for each employee who is misclassified, subject to a maximum fine of $25,000 for each violation, but only if the employer has previously been assessed a civil penalty for misclassified workers.
$1,000 civil penalty for each individual coerced to adopt independent contractor status, up to $10,000 per calendar year.
D21-36 at 1.
With this proposal, the Department explains:
The proposal removes the $7,500 and $10,000 limitations on these penalties and provides that the penalties double for each act occurring after the date of the first determination of a violation. The proposal also removes the limitations on the types of employers to which the penalties apply, allowing them to be assessed against any type of employer that violates the above prohibitions.
(b) The department shall consider the following nonexclusive factors in determining whether an employer described under par. (a) knowingly and intentionally provided false information to the department for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee:
1. Whether the employer was previously found to have misclassified an employee in the same or a substantially similar position. 2. Whether the employer was the subject of litigation or a governmental investigation relating to worker misclassification and the employer, as a result of that litigation or investigation, received an opinion or decision from a federal or state court or agency that the subject position or a substantially similar position should be classified as an employee.
Under this standard, it is well nigh impossible to charge an employer with mis-classification for a first-time violation. On the other hand, claimants are given no such leeway for their claim-filing mistakes. As noted above with proposal D21-10 (SUTA dumping), claimants who have filed for unemployment insurance previously and been given notice to read the claimants’ handbook are presumed to know everything about how to file an unemployment claim and to not make any claim-filing mistakes. But, here, employers are not liable for mis-classification (a far more serious problem economically) until after their first instance of mis-classification. In other words, these mis-classification penalties can only apply to employers when prosecuted a second time for the same mis-classification. Having two bites of the apple sure is nice.
Either employers should be held to the same claim-filing standards as employees, or the intent requirements used against employees for their claim-filing mistakes needs to be seriously redone.
At the 18 March 2021 meeting of the Advisory Council, the Department began introducing its own proposals for changing unemployment law. More proposals are expected. These first proposals are appearing first because they were originally put forward during the last legislative session. The pandemic, however, meant that these proposals were never acted on.
Some of these proposals are innocuous. Others combine difficult and complex issues with a less than forthright explanation. What follows are these first proposals, their 2019 versions, and an assessment of what is going on.
Here, as in D19-09, the Department seeks to create a permanent administrative fund for its own use.
As explained in the 2021 and 2019 proposals on this issue, there already exists an administrative account under Wis. Stat. § 108.20 that contains the interest and penalties paid by employers who fail to submit timely tax reports and payments.
This account, however, “lapses” at the end of a legislative session, and so any funds in this account gets transferred to general state funds rather than remaining a specific unemployment income/expense item.
The proposal here is to change the administrative account into an administrative fund that cannot “lapse,” so that these funds remain available to the Department. As explained in the fiscal impact:
The most recent lapse expenditures of employer interest and penalties monies occurred in SFY16 and SFY17 of approximately $2.67 million and $2.23 million respectively. This proposal would result in an additional $2 – $3 million in funds remaining within the UI program during years where lapse is in effect.
In past years, the interest and penalties employers paid were apparently so small that a lapse into the general fund was inconsequential. Now, with these interest and penalties numbers over $2 million, the amount is sizable and worth hanging on to.
Left unexplained by the Department here is why the interest and penalties paid by employers have of late increased so much. The Department’s targeting of small employers for unpaid tax liabilities has noticeably increased the last few years. But, members of the Advisory Council are left to guess why the Department now has $2+ million in this administrative account.
From an initial set aside of $2 million for this identity theft fund, there is today around $1.9 million still available.
The Department now proposes here and in D19-01 to use some of these funds to reduce the taxes reimbursable employers pay for covering situations when other reimbursable employers lack the available funds for covering the unemployment benefits owed to claimants.
Note: These shortages from reimbursable employers most often arise when the reimbursable employer closes unexpectedly, leading to its former employees filing claims for unemployment benefits but no employer available for reimbursing the Department for the benefits paid out.
When such shortages arise, the remaining reimbursable employers are charged an additional fee called the reimbursable employer debt assessment or “REDA” to cover this shortage.
The Department proposes that a limited amount of the reimbursable employer identity theft fraud funds set aside in the balancing account be made available to recover uncollectible reimbursements instead of assessing the REDA (or to reduce the amount of the REDA). This would greatly reduce administrative costs to the Department and non-profit reimbursable employers and relieve those employers of having to pay the REDA. The Department proposes that the identity theft fraud funds be used to pay the REDA only if the use of those funds would not reduce the balance of the funds below $1.75 million. This would ensure that the bulk of the identity theft fraud funds are available for restoring identity theft charges.
The Department also proposes to increase the minimum amount of the REDA from $10 to $20, which would reduce the administrative costs of assessing the REDA.
What is left unsaid in this proposal is whether the Department will stop its collection efforts against reimbursable employers who have defaulted and created the uncollectible debt in the first place.
This proposal and its predecessor, D19-19, are less complicated than they seem.
The Department is responsible for releasing three reports and conducting one event — the public hearing. Here is the current schedule:
public hearing every two years (usually in November) of even numbered years
fraud report released annually in March of each year
financial outlook report released in April on odd years every two years
Advisory Council report released in May on even years every two years
Essentially, the Department wants to shift the financial outlook report to being released in May every two years on even numbered years. Because the financial report is shifted to even-numbered years, the Department wants to move up the Advisory Council report to January. The new schedule would be:
public hearing every two years (usually in November) of even numbered years
Advisory Council report released in January on even years every two years
fraud report released annually in March of each year
financial outlook report released in May on even years every two years
The impetus for this change is so that most of the reports and information become available when unemployment legislative proposals are brought before the legislature. Right now, an odd-numbered year, is when those proposals first appear and are developed. Next year — an even-numbered year — is when those proposals are likely to be brought before the legislature. Apparently, the Department wants to use the Advisory Council report and the financial outlook report to support whatever proposed legislative changes are being pushed for at the time.
As a consequence, the focus of the Department’s efforts with this change is being pointed to a specific legislative session, rather than any general, long-term view of the unemployment system as a whole.
As many claimants can already attest, the Department is incredibly effective at debt collection.
In this proposal and its 2019 version, D19-22, the Department proposes to exempt itself from Wis. Stat. § 71.93(8)(b), which requires state agencies to enter into an agreement with the Department of Revenue for collecting long-term debts.
Given how effective the Department has been at collecting unemployment debts and the tools available to it — offsets against unemployment benefits, interception of tax refunds, liens against real estate and cars, wage garnishments, levies of bank accounts, and re-payment plans — debt collection by the Department of Revenue adds unnecessary layers and additional fees. So, this proposal makes sense.
D21-06, Excluding appeal tribunals from the definition of departmental error
Revamping departmental error has been a constant item on the Department’s agenda. Over the past decade, the Department has changed unemployment law to excuse its mistakes rather than actually correcting its actions and policies. Here is what the Department has done so far:
This new proposal dates back to when the SSDI eligibility ban was enacted and was originally set forth in D19-07.
Recall that the original SSDI eligibility ban was poorly drafted, seeD12-05, and the Commission held in Gary Kluczynski, UI Hearing No. 14400214AP (30 May 2014) that this original ban on receiving unemployment benefits only applied to the week in which SSDI benefits were received. In D15-01, the Department proposed the eligibility ban that we have today.
Between D12-05 and D15-01, the Department challenged the Commission over Kluczynski and other SSDI recipients it and appeal tribunals had originally found eligible for unemployment benefits under D12-05. The Department won many of those cases in circuit court, and the Commission then changed its mind and agreed with the Department that SSDI recipients were not eligible for unemployment benefits.
But, when the Department began seeking to recoup unemployment benefits against SSDI recipients, the Commission held that it and appeal tribunals had gotten the law wrong and so these SSDI claimants did not need to repay the unemployment benefits they had received. The Department then took this repayment issue to the appeals court and lost decisively in DWD v. LIRC (Morse), 2017 WI App 68:
DWD’s argument is that it should be permitted to recover the overpayments if there was a reasonable basis for DWD’s mistake. In essence, DWD contends that a departmental error stemming from a misinterpretation of law should not preclude overpayment recovery if the misinterpretation was reasonable.
As stated, Wis. Stat. § 108.02(10e)(am)1. defines “[d]epartmental error,” in part, as follows: “A mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, whether by commission or omission.” Nowhere in the statute do the words “reasonable” or “unreasonable” appear. We may not add words to the statute’s text. Words excluded from a statutory text must be presumed to have been excluded for a purpose. Heritage Farms, Inc. v. Markel Ins. Co, 2009 WI 27, ¶14 & n.9, 316 Wis.2d 47, 762 N.W.2d 652. “One of the maxims of statutory construction is that courts should not add words to a statute to give it a certain meaning.” Fond Du Lac Cty. v. Town of Rosendale, 149 Wis.2d 326, 334, 440 N.W.2d 818 (Ct. App. 1989). We deduce the legislature’s intent from the words it has chosen. See id. at 332. We reject DWD’s invitation to add additional requirements to these existing statutes. The legislature did not choose to insert adjectives such as “reasonable” or “unreasonable” or “longstanding” to limit the statutory terms “misapplication or misinterpretation of the law.” We have no power to insert what the legislature chose to omit.
Even if we did have such power, we would not exercise it here. First, we see no benefit to the claimants, DWD, LIRC, or the courts, in imposing DWD’s proposed “reasonable misinterpretation” exception to the waiver statute. Such an addition would result in additional litigation about whether an interpretation, though pronounced an error of law by a court, was still “reasonable.” Such a debate would inevitably cause unnecessary and unproductive expenditure of agency and judicial resources. It is a court’s job to interpret statutes. SeeOtt v. Peppertree Resort Villas, Inc., 2006 WI App 77, ¶11, 292 Wis.2d 173, 716 N.W.2d 127 (describing what a court must do when interpreting statutes). Courts should not be drawn into collateral litigation about whether a wrong interpretation was nonetheless “reasonable.” One person’s “reasonable” (e.g., an agency that wants its money back to pay other benefits) can be another person’s “absurd” (e.g., an unemployed claimant who really needed the money, did not misrepresent anything, was entitled to the benefits under the prevailing statute interpretation, and spent it before the court decision). DWD’s approach, if adopted, would produce the opposite of the certainty and predictability that the administrative system of unemployment benefits was designed to produce. We cannot conclude that DWD offers a more reasonable interpretation of Wis. Stat. § 108.02(10e)(am)1. than LIRC. SeeDWD, 375 Wis.2d 183, ¶11.
Morse at ¶¶22-4.
So, in D19-07 and now D21-06, the Department wants to overturn Morse without mentioning this court decision at all (and instead indicating that this issue is only a minor and technical dispute between it and the Commission) in order to make sure that any unemployment benefits that ever go to SSDI recipients in the future will always have to paid back. The Department’s explanation for the fiscal effect of this change reveals that this change in the law is very much about SSDI benefits:
To determine the impact of the proposed change, 2015-2017 data was reviewed for LIRC determinations that found departmental error based on appeal tribunal determinations. There were no LIRC decisions that found departmental error in 2016 or 2017 and in 2015, there were approximately 10 determinations. The total overpayment for all affected determinations was approximately $6,560, which claimants would now be required to pay back if departmental error could not be found on appeal tribunal determinations. At an 80% collection rate, this results in an average savings to the Trust Fund of $5,200 annually. Since there were no LIRC decisions that found departmental error [by an administrative law judge] in 2016 or 2017, the Trust Fund savings may be less going forward.
As this explanation indicates, the only cases at issue here are the 2015 and earlier SSDI cases for which the Department wanted to recoup unemployment benefits.
The other problem with this proposed legal change that is not mentioned at all is that the current understanding of departmental error has been in existence for decades and serves as an important check against appeal tribunals for getting basic unemployment law wrong. See, e.g., Parker v. Cady Cheese Factor Inc., UI Hearing No. 05200982EC (12 Aug. 2005) (an interpretation of a statutory provision which disregards a contrary long-standing interpretation by the commission constitutes departmental error).
Essentially, the Department’s proposed change to departmental error would mean that administrative law judges could ignore longstanding Commission precedent, and the consequences of that ignorance would fall exclusively on claimants. Under the Department’s proposed change in the definition of departmental error, waiver of any over-payments for the actions of administrative law judge’s would no longer be available to claimants who rely on administrative law judge’s getting unemployment law right in the first place.
I cannot think of anything more detrimental to the cause of justice and the purpose of unemployment benefits as vital economic assistance than this proposed change.
D21-07, Clarifying the effect of criminal convictions when charging concealment
In this proposal, the Department seeks to address the situation of a claimant who is charged criminally for unemployment fraud before the Department has alleged unemployment concealment.
In some circumstances, however, criminal prosecution may result in a court-ordered restitution order or judgment when the Department has not issued an administrative determination that a debt is owed. Examples could include submitting forged documents to the Department with the expectation that the forger would receive a benefit; submitting false unemployment benefit claims by using a fictitious employer scheme; or filing benefit claims using stolen identities.
D21-07 at 1. This concern is at present completely hypothetical, but the Department’s ever zealous push for pursuing unemployment concealment against claimants means that it is always thinking through the angles and procedures for these kinds of cases.
So, the Department wants to make sure that its concealment cases are NOT affected by any criminal cases and that claimants criminally guilty of concealment can not later contest that guilt to the Department. To accomplish this goal, the Department wants a change in law so that any criminal proceeding will serve as issue preclusion for the Department’s own concealment case against the claimant.
Section 108.101(5) of the statutes is created to read:
Notwithstanding sub. (4) [no other legal matter is binding for purposes of unemployment law], a final order or judgment of conviction for a crime entered by a court is binding on the convicted person in an action or proceeding under this chapter that relates to the criminal conviction. A person convicted of a crime is precluded from denying the essential allegations of the criminal offense that is the basis for the conviction in an action or proceeding under this chapter.
D21-07 at 1. In making this proposal, the Department does not intend “this proposal to change the Department’s practice with respect to nearly all cases referred for criminal prosecution. The Department intends to continue to refer most cases for prosecution after its administrative determination is final.” D19-20 at 2 (emphasis supplied).
Given that a person found guilty of criminal unemployment fraud will likely face prison as well as steep financial penalties, the goal here of later going after the claimant administratively for unemployment concealment seems to either be overkill or an admission that the Department cannot coordinate a criminal prosecution with prosecuting attorneys to make sure that the criminal case includes all relevant administrative issues from the Department’s perspective.
Like the departmental error proposal, this proposal hides a great deal of complexity and numerous other issues.
The aging of boomers and the push in Wisconsin for family members to provide care for their aging parents through numerous state support programs has led many, many folks to obtain “work” as family caregivers or to hire in-home caregivers to supplement what the children are doing.
A quirk in state law, however, allows the companies that facilitate this family care to avoid being identified as employers. Instead, the parents who are receiving this care are identified as the employers of their children and other caregivers for the purpose of unemployment law.
Note: This quirk in state law also applies to parents providing care of their adult children, though the specific statutes at issue are different.
Most parents and their children never know about the parent being the employer of record because the “notice” of this issue is provided in small print on one of many forms they complete when starting out with this family care. Because the parents are the employer of record, however, they are supposed to pay unemployment taxes for the wages paid their caregivers. Needless to say, most of these “employers” never pay the unemployment taxes that are owed.
For the most part, no one discovers this problem until after the parent has passed away. Then the children and hired caregivers file unemployment claims because they are now out of a job and looking for new work.
The family members who provide care to their parents are excluded from receiving any unemployment benefits pursuant to Wis. Stat. § 108.02(15)(km), which defines excluded employment as a family member providing personal care or companionship to another family member.
Many, many family members are only finding out about this exclusion when they file for unemployment benefits. And, given the arcane nature of this exclusion, many are paid unemployment benefits by mistake, only to have the Department recoup those unemployment benefits at a later date.
Understandably, non-family members are still eligible for unemployment benefits. But, the parent-as-employer has passed away without paying the unemployment taxes that were due, and any claim against the “estate” for unpaid unemployment taxes is unlikely to get anywhere given that these estates are usually meager to begin with and already claimed by other debts.
In D17-02, the Department addressed this lack of liability for the unpaid unemployment taxes by making the fiscal agents joint and severally liable for the unemployment taxes that are still owed. See also the discussion of D17-02 in Department unemployment proposals in 2017 (24 May 2017). As the Department explained for why joint and several liability for fiscal agents was needed:
Individuals who receive long-term support services in their home through government-funded care programs are domestic employers under Wisconsin’s unemployment insurance law. [Wis. Stat. § 108.02(15)(km)] These employers receive financial services from fiscal agents, who directly receive and disperse government program funds. The fiscal agent is responsible for reporting employees who provide services for the domestic employers to the Department, and for paying unemployment tax liability on behalf of the employer. [Wis. Stat. § 46.27(5)(i)] Currently, approximately 16,000 of the 19,000 domestic employers in Wisconsin receive government-funded care and use a fiscal agent. These employers incur tax liability when fiscal agents fail to file quarterly reports or fail to make tax liability payments. [As of July 2016, the receivables for domestic employers is $44,709.02] It is difficult to collect delinquent tax from domestic employers who use fiscal agents because these employers are typically collection-proof.
D17-02 at 1 (footnotes inserted into text). These numbers — 16,000 out of 19,000 domestic employers — indicate just how significant this issue is.
In D19-03 and now D21-08, the Department is proposing to change the law so that fiscal agents could optionally elect to be the employer-of-record for family members caring for others in their family. That is, family members would no longer be prevented from receiving unemployment pursuant to Wis. Stat. § 108.02(15)(km).
The fiscal impact of this proposed change based on the claim-filing problems that occurred when claims were at a near-record low is sizable.
In 2018, there were approximately 93 determinations excluding wages from benefit claims under 108.02(15)(km). Assuming the individual had no other base period wages this would result in approximately $354,330 in additional benefits paid annually (assuming an average weekly benefit amount of $300 and average weeks paid of 12.7). Adjusting for taxes, this would result in an approximately $233,857 cost to the Trust Fund. However, this does not take into account the additional tax revenue on employee whose wages would no longer be excluded from UI coverage.
In summary, this proposal could result in:
• More tax revenue received and more benefits paid based on previously excluded wages under 108.02(15)(km); however, this amount cannot be established.
• Fewer benefit overpayments based on the 108.02(15)(km) exclusion estimated at $100,000 annually. This is because under this proposal these benefits would now be payable. However, most overpayments are collected (at least 80%) thus this would not have a significant impact on the Trust Fund.
The problem with this proposal is that the change in who is the employer in these cases is an optional change done at the discretion of the fiscal agent. Given how confusing, unknown, and ambiguous this issue is already for parents and their family care-givers as well as what the Department is encouraging here (that fiscal agents voluntarily take on an additional expense at their discretion), this proposed change seems highly unlikely to lead to any practical change at all in regards to family members currently being placed in excluded employment.
Right now, almost all family members think that these fiscal agents are their employers. Family members as caregivers report their hours of work to these fiscal agents, and these fiscal agents are the entities that pay family members for their hours of care for their elderly parents and relatives. Almost none of them understand at all that the parents receiving care are legally an employer responsible for paying unemployment taxes.
So, if this proposal is going to have any actual impact on a very confusing and difficult situation, the switch from parent-as-employer to fiscal agent-as-employer needs to be a mandatory change, not optional.
So, a public hearing in the midst of this pandemic is nothing to be excited about. In light of the pandemic, this hearing is split across two days and takes place via webex, a difficult on-line conferencing tool that is great in corporate environments but a pain to use across numerous platforms and technologies, especially where broadband access is limited. Here, for example, is the help Department offers for the toll-free number.
Today’s session was less than remarkable. Besides myself, there were about 25 observers and 12 witnesses (a 13th never managed to get her computer audio working, a common issue with webex). In lieu of providing basic information about the claim-filing process or even some sympathy to those describing their frustration, the Department’s representatives maintained that they could provide no information in response to such queries, even general queries, and was solely there to listen to public testimony.
And, if participants did not connect on right at 2pm (the scheduled start of today’s hearing, which was supposed to last until 4pm), they may have found no connection whatsoever. The Department abruptly ending the public hearing at 2:49pm when there no more speakers who had not yet testified.
Note: There does NOT appear to be any legal basis for ending a public hearing simply because no one from the public is currently in attendance. In-person public hearings continue for the entire scheduled time, as participants may well have planned to arrive at a certain time rather than appear immediately at the beginning. By ending this hearing prematurely before the scheduled ending time of 4pm, the Department violated its own notice for this meeting.
You can still register for the session tomorrow, Nov. 10th, from 4:30-6:30pm.
One of the requirements of the Families First Coronavirus Response Act, Pub. L. 116-127, was that states require employers to provide individualized notification of the availability of unemployment benefits to employees at the time of their separation from employment. This requirement was essential for some of the administrative funding available from the Families First Act.
States that did not yet have this requirement, like Wisconsin, were to implement this requirement by emergency rule within 60 days of the passage of the Families First Act. SeeUIPL 13-20 (22 March 2020) at 3-4.
The Families First Act was signed into law on 18 March 2020. So, Wisconsin needed to have an emergency rule implementing this requirement no later than 17 May 2020.
There is so far no emergency rule (Wisconsin did issue a scope statement, 018-20, on 30 March 2020 for such a rule). At the last two meetings of the Unemployment Insurance Advisory Council, there has been vigorous debate about creating the needed emergency rule.
The big questions: Why this delay and such debate?
What currently exists
It helps to know what is currently required for notice of unemployment benefits, a poster:
Notice-posters as to claiming unemployment benefits. Each covered employer shall keep employees informed about unemployment insurance under ch.108, Stats., by posting appropriate notice-posters supplied by the unemployment insurance division. The notices shall be permanently posted by each such employer at suitable points in each of the employer’s work-places and establishments in Wisconsin. Suitable points for posting the notices include: on bulletin boards, near time clocks, and other places where all employees will readily see them
Failing to provide this poster allows an employee to backdate a claim for unemployment benefits.
The administrative rules provide for a waiver of the notification requirement if exceptional circumstances exist. An exceptional circumstance exists if the employe was not aware of the duty to notify the department of her intent to initiate a claim and her most recent employer failed to post or maintain a notice as to claiming benefits. Wis. Admin. Code § DWD 129.01(4)(c). It is the employer’s obligation to post UI posters at suitable points where all employes will readily see them. See Wis. Admin. Code § DWD 120.01.
So, it would seem that all the Department needs to do is create an additional requirement for employers to provide individualized notice about unemployment benefits to employees at the time of their separation.
For some reason, however, the Department did not get around to even presenting a proposed emergency rule until the July 16th meeting of the Advisory Council, well after the May 17th deadline.
Note: Other emergency rules, like job search changes, EmR2006, not charging employers interest for delayed tax contributions, EmR2011, and waiving experience rating changes for employers for their pandemic-related layoffs, EmR2018, were all done without waiting for the Advisory Council.
This proposal creates a new DWD 120.02. The Department explains that:
(14) Summary of Rule’s Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State’s Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred) The proposed rule is expected to have an economic impact on employees, who may be more likely to file timely claims for unemployment insurance. The proposed rule is expected to have an economic impact on employers because employers will need to provide notice of the availability of unemployment insurance at the time of separation of employment. However, employers may provide notice to employees electronically, so employers may be able to limit the fiscal impact of this rule to minimal staff time to send an e-mail or text message to the separating employee.
(15) Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule The benefits of implementing this rule are that claimants who are separated from employment will have timely notice of the availability of unemployment insurance, so that they will be less likely to attempt to backdate their claim. The department may save staff time under this rule if more unemployment insurance claims are timely filed and fewer claimants seek to backdate claims.
(16) Long Range Implications of Implementing the Rule The long range implications of this rule are that more employees will have timely notice of the availability of unemployment insurance benefits so they will be more likely to file their claims timely and less likely to seek to backdate their claims.
At the July 16th meeting of the Advisory Council, only one management representative was present (and so the council lacked a quorum). This management representative, moreover, voiced heated opposition to this change, as it would potentially give employees a few more weeks of unemployment benefits when the required notice was lacking.
The proposed rule states:
DWD 120.02 Notice at Separation. (1) Each employer shall provide notification of the availability of unemployment insurance to employees at the time of separation from employment by at least one of the following methods: (a) Letter. (b) E-mail. (c) Text message. (d) Flyer. (e) Any other department-approved method designed to give immediate notice to employees of the availability of unemployment insurance at the time of separation.
(2) If the circumstances of the separation make immediate notice under this section impossible, the employer shall provide notice to the employee as soon as possible.
(4) An employer’s failure to comply with this section constitutes exceptional circumstances over which the claimant has no control under s. DWD 129.01 (4) (f) unless the employee was aware of the availability of unemployment insurance.
Note: The effective date of this proposed emergency rule is 2 Nov. 2020, in order to allow time for employers to comply with this requirement.
The August 20th meeting continued with these concerns. Management representatives questioned why this change needed to be permanent (there was no sunset provision and the Department intended the emergency rule to eventually become a permanent rule). The Department explained that federal law and guidance mandated this permanent change.
As set forth in the rule, this notice could easily be included in a final paycheck, the Department explained. If done that way, at most an employee could claim would be one, two weeks at the most (because of delays in the final paycheck).
Janell Knutson and Andy Rubsam tried to calm management representatives’ anxiety by explaining that claimants who tried to get their claims back-dated would face a high hurdle for accomplishing that task. If the person had ever filed for unemployment before or if the claimant acknowledged seeing the employer’s unemployment poster (even a poster that might exist), then the Department would find that there was no basis — no exceptional circumstance — to allow the claim to be back-dated despite the requirement for individualized notice in this proposed rule.
Note: This legal “application” of the individualized notice requirement essentially makes the whole issue moot except in very rare circumstances — i.e., the Department’s motivating goal for several years now.
Management representatives were not satisfied with this legal narrowing of the proposed notice requirement (which in any case will be applied by the Department and drew no response from labor representatives). So, into caucus to discuss this proposal the Department, management representatives, and labor representatives went.
The solution they reached was to append a sentence to the end of sub-section (4) of the proposed emergency rule:
If the employer meets the requirements of s. DWD 120.01, the employee is deemed to be aware of the availability of unemployment insurance for the purposes of this subsection.
In other words, the poster requirement will satisfy the requirement for individualized notice. Huh?
Apparently, the US Dep’t of Labor is not happy with this change to the proposal, as the Department has yet to actually introduce this proposal as an emergency rule (the Dep’t of Labor needs to approve proposed changes in law as being in compliance with federal requirements).
Note” I am speculating here, but the lack of approval is not surprising. UIPL 13-20 Change 1 (4 May 2020) at I-1 states:
Question: My state law already includes a requirement that employers post a notice at their worksite that informs workers of the availability of UC. Is this sufficient?
Answer: No. Under Section 903(h)(2)(A), notice to workers must be provided individually and at the time of separation. As discussed in UIPL No. 13-20, the state does have significant flexibility in the method of communicating this requirement to employers, as well as the form in which employers provide the notice to employees (such as letters, emails, text messages, or flyers given or sent to the individual receiving the information).
In situations where the existing state law does not already satisfy this requirement, the state may have to amend its statute or issue regulations. The Department recommends that the state consider issuing emergency regulations to satisfy this requirement for Allotment I funds in light of the statutory requirement that these grant payments be made within 60 days of the enactment of EUISAA.
So, nothing is happening just yet on something so minor as providing employees notice of unemployment benefits when there is an employment separation. This episode says much about the actual agenda of the Department during this economic crisis, and that agenda certainly is not all that concerned with the needs of employees.
Indeed, because of its inaction, the Department may well need to repay administrative funding it has already received. Sigh, still more policy choices that ultimately hurt workers.
Update (1 Oct. 2020): The proposed emergency rule is in effect starting on Nov. 2nd. Any employer that has an unemployment poster in the workplace or a virtual unemployment poster will NOT be subject to this requirement of providing an employee individualized notice at the time of separation or reduced hours. As Department attorneys advised (see above), all that an employer needs to do is provide notice of this poster at some point during the employment relationship. Really, why have a rule when it does not matter.
Update (6 Oct. 2020): As expected, the fiscal impact of this new non-requirement is minimal. The Department explains (emphasis supplied):
“Consistent with the new federal law, this rule adds a requirement that employers must also notify employees of the availability of unemployment insurance at the time of separation. Employers who fail to provide this notice may have additional benefits charged to their unemployment insurance account in the Trust Fund if the employee is given additional time to file an initial claim due to the employer’s failure to give notice. Additional time to file an initial claim is only given to claimants who were unaware of the requirement to file for unemployment insurance benefits, so it is expected that the fiscal effect on employer unemployment insurance accounts will be minimal.
“Employers may incur an additional expense in providing notice under this rule if they elect to provide notice in paper form by, for example, mailing a letter to the employee. However, employers may provide electronic notice, such as e-mail or text message, to employees. Electronic notice is not expected to create new out-of-pocket costs for employers.”
Update (13 Oct. 2020): Here is the official page for the emergency regulation.
Update (14 Oct. 2020): Employer counsel agree that a poster in the break room satisfies this requirement.
What Are the Consequences for Not Giving Immediate Written Notice?
The DWD did not create a penalty to the employer for noncompliance with the new rule. However, failure to comply may provide “exceptional circumstances over which the claimant has no control,” allowing a separated former employee to file backdated or otherwise untimely applications for unemployment insurance benefits. However, it appears this is only true if the employer is also violating the poster requirement of DWD §120.01.
As this post also notes, there is no new poster or poster requirement alongside this new regulation. So, this new requirement does not actually mean anything.
There is a new governor, a new Attorney General, a new secretary at the Department of Workforce Development, and a new division administrator for unemployment. But, African-Americans in Milwaukee continue to be targeted for criminal prosecutions for alleged unemployment fraud. Indeed, even as the number of cases have declined, the percentage against African-Americans have increased.
Several legislators have asked for information about these cases and an explanation for why African-Americans are being targeted for these prosecutions See, for example, this letter. Numerous groups have also raised concerns. Formal, public responses to these and other queries have been ignored, however.
The new head of criminal cases for the Department of Justice did present to the Unemployment Insurance Advisory Council at the council’s April 18th meeting in 2019. At this meeting, Deputy AG Eric Wilson explained that criminal prosecutions would only be filed where the alleged fraud was sizable, where civil remedies were inadequate, and where there was a history of previous fraud. In addition, cases would no longer only be filed in Dane County (forcing residents from Milwaukee County and other parts of the state to travel to Madison for every event in their case) but would be filed in the county where the defendant resides. Seemeeting minutes at 3-5.
Starting in the summer of 2019, the Department of Workforce Development under Caleb Frostman and Mark Reihl and the Dep’t of Justice under Josh Kaul started a new round of these prosecutions being handled by Assistant AG Dan Lennington (click on the table to see details):
While the number of prosections is down from previous years (except for 2016, when there were also 11 prosecutions), the percentage of African-Americans being prosecuted is still around 73%. Anglos make up only 18% of these cases, and persons of color combined constitute 82% of all cases (9 out of 11).
Furthermore, the one defendant outside of Milwaukee County (an African-American women in Manitowac) is still being forced to travel to Dane County for her case. So, the declaration in April of 2019 about no longer requiring defendants to travel to Madison for the convenience of prosecutors only applies to the Milwaukee County cases.
And, it gets worse. One 2019 case was almost immediately dismissed by the prosecutor after being filed. In such circumstances, dismissal is usually because the defendant is not competent to stand trial or is deceased (one of the 2018 cases was dismissed soon after filing because the defendant was declared not competent to stand trial). As the Department of Workforce Development charges unemployment concealment/fraud for accidental or unintentional claim-filing mistakes, many, many folks with learning disabilities have been so charged. So, this near immediate dismissal indicates that the Department of Justice is not really applying any new or tougher criteria in deciding which cases to prosecute.
Indeed, the plea deal set for May 29th in one case (delayed by several months to allow for restitution to be complete) indicates that these cases are still largely being pursued as a means of debt collection despite the Deputy AG’s contrary statements back in April 2019 to the Advisory Council.
Finally, there is still no explanation for why African-Americans are being targeted for these cases wholly out of proportion to their presence in the population or even the unemployed. This racial bias has been going on for four+ years now without explanation.
If Lando was in Wisconsin, he would know what is going on here.
Note: of course, benefit payments continue their decline, dropping 6.7% from 2018 numbers to $330.9 million as of April 2019. Employer taxes are also down $23.9 million, to $330.9 million, for January to April 2019.
As evident here, the trust fund is at a near record high while claimants’ benefits and employers’ taxes are dropping like rocks down the proverbial well. Two charts showcase how benefits and taxes have markedly declined since 2011 (benefits) and 2012 (taxes) relative to total payroll in the state.
So, what Wisconsin has experienced the last eight to nine years is ahistorical — only around 37% of claimants applying for unemployment benefits end up receiving any benefits rather than the more typical 55% of applicants.
Note: Department personnel continue to remark about how benefit payments are at record lows without offering any explanations or theories for why these record low benefit payments are occurring. As noted in this blog, this problem of record-low benefit payments is not unique to Wisconsin. But, it does seem from this same note that changes in how states are administering their unemployment law disqualifications are responsible for much if not all of this decline. Shouldn’t the Department finally take ownership of its own culpability for what has been going on the last eight to nine years or at least explain why the legal changes and administrative practices adopted under the prior governor to make it more difficult to claim unemployment benefits are somehow NOT connected to this decline in unemployment benefits?
At a minimum, Department staffers need to read Andrew Stettner’s excellent analysis of state unemployment systems and the changes in eligibility standards and application rates describes the impact of these changes and why these changes should be re-examined and most likely reversed.
To understand how healthy the unemployment trust fund actually is, three different scenarios for the future were played out in this presentation.
In one scenario, the economy continues along its current course, benefit payments remain anemic, and the unemployment rate returns to the normal 4-5% for Wisconsin. Here, the trust fund continues to be robust in the short-term. But, growth of the fund eventually slows, and the fund begins to decline slightly in the long-term.
In the second scenario, the economy continues along its current course, but benefit payments return to the historical experience of Wisconsin. While no recession is assumed to take place, the trust fund balance starts to take a hit in 2020 and a switch to the more aggressive tax schedule C will be needed by 2026 or so.
In the third scenario, a mild recession in 2020 occurs. Even with the anemic level of benefit payments continuing — 37% — the bottom of the trust fund drops out such that less than $500 million is left in the fund by 2022. And, in the long-term, the most aggressive tax schedule — Schedule A — needs to be triggered to start pumping money back into the trust fund.
In other words, these scenarios indicate that the trust fund balance — despite being at record levels — is wholly inadequate given the current size and scope of Wisconsin’s economy. Only a Pollyanna desire for the economic equivalent of sunshine and rainbows to continue indefinitely keeps the unemployment trust fund from imploding.
The current fetish with minimizing employers’ taxes is just one culprit behind this carefree thinking. Economists have begun explaining, that there is no correlation whatsoever between employers’ tax rates and business success. What remains to be seen is what the Advisory Council will do about all these problems: keep current policies and administrative practices in place or begin the process of changing these policies and practices. As many of these simply relate to the Department’s bureaucratic preferences in how it administers unemployment law (and, in numerous places represents a sharp conflict with that law), there is much that can be done immediately to correct at least the unparalleled decline in benefit payments before we find ourselves in the middle of a recession and with no oar available to avoid the waterfall towards which we race.