Unemployment is going away

The March 2nd edition of the Isthmus has an excellent cover story about unemployment changes the past few years. Make sure to read it.

The Department’s press release that same day provides some additional insight into what is going on with unemployment in this state.

Two issues arising from these news items deserve additional comment.

First, the response from the Department in the Isthmus story indicates that this expansion of concealment to include mistakes is intended.

Now, honest mistakes can lead to fines and criminal charges, Forberger says.

Tyler Tichenor, a DWD spokesperson, counters that the change was made “to make the definition clearer for claimants so they could better understand what they need to do to file a claim accurately.”

John Dipko, another department spokesperson, says the state is making a concerted effort to crack down on fraud and that referrals for prosecution began increasing even before the definition change.

“The number of referrals have gone up,” Dipko says. “We’ve been much more aggressive in referring the most egregious cases of fraud for consideration for possible prosecution.”

The change Mr. Tichenor is referring to is the 2015 change in the statutory definition of concealment. He is NOT referring to providing simpler explanations of unemployment issues for claimants or making the filing process easier to follow. No claimant (or employer for that matter) should be expected to review a legal statute simply to make sure he or she is doing what the Department wants him or her to do. Such a policy is akin to the IRS making everyone read the Internal Revenue Code when filing their taxes. Yes, the statutes govern. But, the agency responsible for carrying out those statutes has a duty to explain those statutory requirements as simply as possible and in a way that is not intended to confuse and trip folks up.

But, confusion and mistakes are the whole point of unemployment concealment now. For instance, the on-line filing process is now more complex, not less, with numerous requirements for which any single mistake can now lead to a charge of unemployment concealment.

And, this concealment push cannot be under-stated. When filing on-line, the first thing a claimant sees, even before he or she creates a user-id and a password, is this screen:

UI claim initial screen

Notice the specific language being used here — “If you make a mistake or forget to report a material fact related to your claim . . . ” The Department is officially declaring here that a simple mistake or even forgetfulness can be the basis for a concealment charge.

Second, the Department’s press release about record-low unemployment claims and a sudden rise in employees’ wages indicate how significant the Department’s changes in unemployment have been.

Four issues in the Department press release on March 2nd highlight the changes being wrought by the Department. First, the Department reveals that September 2015 to September 2016 job growth in Wisconsin was 29,486 total jobs and 25,608 private-sector jobs. When compared to prior job growth numbers, this trend indicates that job growth is actually slowing in Wisconsin — 37,432 jobs from March 2015 to March 2016 and 39,652 jobs from March 2015 to March 2015.

In light of the Department’s push for charging claimants with concealment for their honest mistakes and the loss of work search waivers during the winter months for seasonal employees, three other points from the press release suggest what is actually going on.

  • Quarterly wages by covered private-sector employers grew by 7 percent year over year. Total wages grew by 7.5 percent over the year.

  • Initial UI claims ended 2016 at their lowest level since 1988. Continuing unemployment claims ended 2016 at their lowest level since 1973.
  • More people were employed last year in Wisconsin (November 2016) than at any point in our state’s history.

As indicated here, the number of people working in Wisconsin is at a record high level. (NOTE: this statistic could also be — and likely is as noted below — because the number of people in the state remains relatively flat.) This increase in working folk should indicate that Wisconsin has a “hot” job market. Employees would then have increased bargaining power and be willing to switch jobs when employers are less than fair or better opportunities appear to be available with other employers. Such a “hot” job market would suggest that unemployment claims would rise somewhat because of individuals trying out new jobs that do not work out or which prove to be less than hospitable. But, initial unemployment claims are at record lows. So, folks either are NOT leaving jobs at all or are NOT filing claims for unemployment benefits when job separations do happen (because of the Department’s concealment push). Finally, the fact that wages have jumped over 7% in one year without a “hot” labor market indicates that employers are voluntarily raising wages for the employees they already have even though labor turnover (signified by the record low number of claims being filed) is markedly down.

As indicated in the Isthmus cover story, employers this past winter were faced with employees who no longer had seasonal job search waivers when claiming unemployment benefits and so had to do four job searches a week along with all the other job search requirements the Department has enacted the past two years. Those employees are essentially making themselves available to be poached by other employers, and so the Department has created a competition for employees among employers where none existed before.

If employees were little more than replaceable cogs, this increased competition would still not lead to higher wages. But, for skilled work where employees are not interchangeable, employers need to keep their skilled labor because of the high replacement costs that arise when those skilled employees leave.

To avoid this whole government-created poaching regime, employers’ only real option is to keep their employees off of unemployment by “hiring” and paying them during winter months despite the lack of actual work available for these employees. In other words, some employers have found themselves handing out winter make-do work to keep their employees off of unemployment. With full wages (or even partial wages), these employees are doing financially much better than when they just received unemployment benefits that max out at $370 a week.

NOTE: as this COWS report indicates, the wage growth at issue here is a very recent development. In January 2017, the story in Wisconsin was the flat wage growth in this state.

Finally, this lack of unemployment benefits is affecting everyone — employers and employees — when the record low in continuing claims is considered. This statistic indicates that even when employees file a claim for unemployment benefits, that claim is stopped shortly thereafter because they are either denied benefits because of substantial fault or misconduct or because they fail to meet some new job registration requirement that Department has enacted. With no unemployment benefits available, the unemployed are out searching for jobs or they are leaving this state for greener pastures where jobs and unemployment benefits are available. The state’s relatively flat population growth the last few years — a 0.6% growth rate in 2010 is 0.2% in 2016 — bears this point out. Because of the Department’s drastic changes to unemployment, the state is certainly not becoming business friendly for most employers.

AB819 signed into law

The Advisory Council Bill, AB819, was signed into law by Governor Walker and published on March 31st as 2015 Wis. Act 334. Details of this new law were described in this previous post about the bill.

The concealment changes will probably have the biggest impact on unemployment law. As noted previously, these changes mean that the Department will no longer need to show an intent to conceal when alleging concealment against claimants. Claimants will essentially be strictly liable for their mistakes and subject to steep and unforgiving concealment penalties.

Given the risk of making a mistake when filing an unemployment claim (especially as the claim filing process becomes increasingly complex), NO ONE SHOULD EVER FILE FOR UNEMPLOYMENT CLAIMS ANY LONGER. Since any mistake can now lead to a charge for concealment, claimants will be at the mercy of Department whims about when to consider a mistake as concealment or not.

If a person has no other choice but to file an unemployment claim, the only way to escape a concealment charge is to demonstrate that the mistake occurred because of advice from a Department representative. So, claimants should call up a Department representative and have that person walk him or her through the entire claim-filing process for EVERY weekly certification. Make sure to ask questions about everything that could possibly be an issue in your claim and to document the advice you receive from the representative about those issues. Note that is common for one representative to contradict the advice of a prior representative, so your notes about the advice you receive will be crucial to surviving a concealment charge.

Keep in mind that the Department has numerous notices during the claims-filing process about how folks should contact the Department with any questions they might have. So, take the Department up on this offer and actually ask for the kind of detailed advice you need to complete a successful unemployment claim.

Update on UI legislation

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

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

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

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

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

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

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

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

The labor proposals that the council agreed to include:

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

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

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

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

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

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

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

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

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

Large state UI programs unprepared for next recession

Rick McHugh of NELP offers the following observations about unemployment legislation in other states:

Ben Casselman of the 538 blog has a new posting on the current state of UI programs. . The main focus of the blog is on the fact that several large states’ trust funds have not recovered from the Great Recession and they are unprepared for the next recession.

Rather than raising taxable wage bases and taking other responsible financing steps, the result of trust fund insolvency has been restrictive state legislation in some states mainly during the 2010-2013 time period. Eight states (AR,FL,GA,KS,MI,MO,NC,SC) have cut the maximum number of available weeks of UI to less than the traditional 26 weeks—and Ohio is considering joining this club. An Ohio bill cutting maximum durations to a sliding scale ranging from 12 to 20 weeks, depending upon the state’s unemployment rate, is advancing in the Ohio House of Representatives. The bill contains many other restrictive eligibility measures, and is modeled upon 2013 North Carolina legislation. It is estimated by the Ohio Legislative Service Commission to reduce benefits by $475 million a year.

One change from the North Carolina pattern is that Ohio employers would see UI payroll taxes fall under the Ohio bill, something that places the entire burden for improving Ohio’s trust fund on its jobless workers. Even North Carolina was not this one-sided in its approach to UI retrenchment. Policy Matters Ohio’s concerns about HB 394 are expressed in testimony by Zach Schiller and Hannah Halbert here and here. Many newspapers in Ohio have expressed concerns about the Ohio bill’s approach, and while momentum has slowed since the bill’s introduction in November 2015, the outcome remains uncertain.

States cutting the available weeks of benefits attempt to justify these changes by claiming that paying fewer weeks of benefit will induce a more rapid return to work by jobseekers. According to a recent Economic Policy Institute Snapshot by Will Kimball, three states cutting UI benefits the most (FL,GA,NC) by adopting a sliding scale approach similar to the Ohio proposal, have not seen their prime age (25 to 54 years of age) employment to population ratios increase. If the rationale for cutting weeks was true, jobless workers would return in greater numbers to employment. What appears to be happening to a more significant extent is that, without support from UI benefits, more jobless workers are dropping out of the labor force in those states.

These initial findings by EPI are consistent with many studies reviewed in NELP’s latest edition of our UI Toolkit. Specifically, one section of the toolkit presents recent studies that show that some economists’ preoccupation with disincentive effects of UI benefits has not been reflected in the behavior of jobless workers during the recession. In addition, the toolkit discusses other reports that show that UI claimants in fact do, in fact, look for work while on UI and that UI benefits keep individuals in the labor market and support better job matching. While sometimes facts don’t matter in contemporary policy debates, the tide of recent perspectives is now running against traditional economists’ strong moral hazard concerns about UI claimants.

Note that Wisconsin has through substantial fault and concealment, already seen a remarkable decline in its benefit levels.

DWD/Advisory Council bill going forward

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

Department Proposals

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

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

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

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

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

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

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

The labor proposals that the council agreed to include:

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

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

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

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

White House announces new UI reforms

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

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

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

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

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