The new (actually old) restriction on travel abroad: concealment and departmental error

Insiders in the Department of Workforce Development tell me that in December 2015 the Department began tracking people who file on-line by their IP address. Because IP addresses identity the country from where a person connects to the Internet, the Department can now tell if a claimant is filing from outside the United States.

This new ability certainly helps in preventing identity theft against claimants or fake claim filing through fictitious companies and claimants — think Nigerian prince scandals with an entourage of suddenly laid-off staffers. But, this new ability also helps the Department enforce a 2012 law. Section 1 of 2011 Wis. Act 236 created a new Wis. Stat. § 108.04(2)(ae) that reads:

A claimant is not available for work under par. (a) 1. in any week in which he or she is located in a country other than the United States, as defined in s. 108.02 (15) (do) 2., or Canada for more than 48 hours unless the claimant has authorization to work in that other country and there is a reciprocal agreement concerning the payment of unemployment insurance benefits between that other country and the United States.

NOTE: Prior to this legal change, a claimant could still be eligible for benefits if his or her job market moved with her to the other country. See Honea v. Bou-Matic LLC, UI Hearing No. 11005590MW (13 June 2012).

Unfortunately, the Department has done nothing to tell claimants about this restriction. Indeed, the only information available about this categorical restriction on unemployment benefits is from p.27 of the Department of Workforce Development’s January 2013 Financial Outlook report to the legislature:

Act 236
Tighten Benefit Eligibility Requirements for Work Availability

Act 236 also changed various portions of UI law and operations. One change in the law brought about by Act 236 is to clarify the able and available provision of UI law. If a person is outside of the United States or Canada and is not there for a reason related to current employment they are not considered able and available for work and hence not eligible for UI benefits. This codifies what was existing UI procedure. As such this is not expected to have any effect on benefits paid or the UI Trust Fund. This went into effect on April 22, 2012.

Because the Department is now tracking IP addresses, it has begun enforcing this living abroad restriction against claimants. Not surprisingly, besides being declared ineligible for any unemployment benefits for the weeks living outside the US, claimants are also being charged with concealment for intentionally hiding their living aboard status (even though there is nothing from the Department indicating that this issue exists unless you happen to read unemployment statutes).

One of those recently charged with concealment was a claimant who traveled to Germany during the winter months of early 2015 to be with his girlfriend. He was there for love, not for a vacation. Furthermore, his job search was waived for these months, but he kept in contact with his employer on a weekly basis for when he should return to work. Regardless, the Department charged him with concealment for 22 weeks, demanding him to repay $8,140 in unemployment benefits, pay a 40% concealment penalty of $3,256, and forfeit $17,020 in future unemployment benefits because of that alleged concealment. In a lengthy and generally well-reasoned decision, the appeal tribunal tossed the concealment allegations. After observing that there “is no evidence that he was aware that there were geographic restrictions with respect to the availability question for unemployment purposes,” she found:

the mere fact that as a matter of law the claimant in this case is necessarily treated as having been “unavailable” for work while staying outside the United States does not obviate the literal truth that he was at all times ready, willing and able to accept fulltime suitable work during weeks 1 through 22 of 2015.

Because the Department has done nothing to notify claimants of this restriction, the issue of departmental error was also raised. The administrative law judge declined to find departmental error, explaining:

The claimant argues that the overpayment should be waived pursuant to federal law that requires state law to include provisions that reasonably affords those entitled to unemployment compensation benefits an opportunity to know, establish, and protect their rights under its unemployment compensation law. As such the department’s failure to include the geographical restriction in the Claimant Handbook or any other notice delivered to the claimant supports a waiver of the overpayment. However, the state law is in compliance with federal law because the unemployment insurance law is accessible publicly. The entirety of the unemployment insurance law simply cannot be reduced to the Claimant Handbook. Moreover, the department has provided its contact information in the Claimant Handbook with instructions to contact the department if there is a question concerning one’s eligibility for benefits. Accordingly, it was the claimant’s responsibility to report to the department that he would be traveling abroad and to ask whether his travel had any impact on his eligibility.

In other words, the appeal tribunal held that the Department satisfied its burden to explain unemployment law to claimants because the unemployment statutes can be read by the public and the claimant still had a duty to contact the Department about an issue he did not know was actually an issue and ask whether the problem he knew nothing about was actually a problem. To me, this conclusion means that claimants need to be both attorneys and fortune tellers.

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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.

LIRC funding fix

Recall that in the latest Wisconsin budget, not only was LIRC’s budget cut and its general counsel made a political appointee of the Governor, but the Labor and Industry Review Commission was also transferred from DWD to the Department of Administration for budgetary purposes.

The problem with this change is that administration of unemployment law is funded through a federal tax that employers pay. The funds are then channeled from the feds to the state agency responsible for unemployment law in the state, namely DWD in the case of Wisconsin. Since LIRC is now no longer part of DWD for budgetary purposes, LIRC faces the prospect of losing all of its federal unemployment funding (as well as some equal rights funding that also comes from the feds).

So, AB685 and SB560 create a mechanism for transferring federal funds from DWD to LIRC for its federally funded work.

As the LRB explains:

Under prior law, the Labor and Industry Review Commission (LIRC) was attached to the Department of Workforce Development (DWD) and moneys were appropriated to DWD for the activities of LIRC. 2015 Wisconsin Act 55 (the 2015-17 biennial budget act) attached LIRC to the Department of Administration and appropriated moneys directly to LIRC.

This bill provides for the transfer of federal moneys received by DWD to LIRC for unemployment administration and equal rights functions performed by LIRC and of other moneys transferred to LIRC for other purposes.

The mechanism for accomplishing this transfer of unemployment funds?

to transfer to the appropriation account under s. 20.427 (1) (k) an amount determined by the treasurer of the unemployment reserve fund. [emphasis supplied]

In other words, the treasurer of the unemployment reserve will now have the statutory authority to determine independently what LIRC’s funding from federal monies will be.

US DOL: 80 years of unemployment help

From an August 2015 post by Gay Gilbert on the 80th anniversary of the unemployment system:

Anniversaries are a chance to reflect on the work we’ve done and what we hope for in the future.  Reflecting on 80 years of the Unemployment Insurance program is especially poignant for me as the last five years (and more) have been marked by immense struggles and profound accomplishments. Our economy is recovering after the most difficult economic period in our lifetime. Millions of lives were turned upside down by rampant layoffs.

And through it all, the Unemployment Insurance system was there to lend a hand, offering support for individuals and families while they looked for a job. At a time when they needed it most, UI benefits helped put food on the table and a roof over the heads of millions of American families. 

The UI program is also credited by most economists as playing a vital role in stabilizing the economy.  The program provides money to the people who need it most and who in turn inject that money right back into the economy at a critical time. These dollars are spent on food, school supplies, rent and other vital products and services that help local employers remain in business – preventing further job losses.

And the backbone of the program are the men and women at the federal, state and local level who kept the program running smoothly – even in the face of unprecedented budget constraints and capacity challenges. They continue to be key partners as we enact reforms to develop a program that meets the needs of workers and employers in the 21st century.

And as we look to the future, we have more tools for laid-off workers that we didn’t have during the Great Recession. Recent legislation is helping to ensure that laid-off workers not only get the financial support they need, but are also connected to federal employment services to help them get back on their feet quickly. Employers also have tools like Short Time Compensation to help be avoid layoffs during temporary weak business cycles.

UI has a proud legacy and will continue to serve generations to come.

Gay Gilbert is the Director of Office of the Unemployment Insurance at the U.S. Department of Labor. 

UI helping hand

2014 State UI Tax Info Available

From Rick McHugh of NELP:

A useful report from U.S. Department of Labor is the Significant Measures of State UI Tax Systems. The 2014 edition has been released.

One of the useful features of this report is that USDOL calculates an “Adequate Financing Rate.” The bad news in the report is that most states are under-financing their UI programs using this benchmark: meaning they will not be prepared with trust fund reserves sufficient to ride out increased benefit costs during the next recession. Forty-four states had an average UI payroll tax below their minimum adequate financing rate in 2014. Yikes!

Business climate debates dominate UI discussions in the states. (Yes, I know these are not real world discussions. Ironically, business climate is viewed as real by the same folks who do not think climate change is real.) The Significant Measures report gives advocates key information about individual states as well as comparative information presented in tables. In addition, by selecting the United States as an “individual state” you will have a ready-reference to how your individual state compares to U.S. averages.

In terms of business climate claims, many employer groups will focus on average tax rates on taxable wages. The average taxable employer paid $398 per employee in 2014. This translates to 0.8% of total wages, or 80 cents of every $100 dollars of wages. Nonetheless, using average UI taxes on taxable wages exaggerates tax levels.

The Significant Measures report gives us some basic information on the distribution of taxes that usefully shows that most employers do not pay average UI taxes. Instead a few employers (6 percent in 2014) pay taxes at the highest rate and the rest pay lower taxes, many pay close to no UI taxes. Indeed, last year 37 percent of all employers paid the lowest state tax rate available (in five states this rate was zero) and 47 percent paid a tax rate of less than 0.5 percent of total wages (or less than 50 cents for every $100 dollars of wages). In some states, I have observed that up to 70 percent of employers paid minimum tax rates in some years. This tax distribution info is not routinely shared by state agencies in my experience, making this source of information the best we have in many states.

Yes, there are states where UI taxes are higher and perhaps a half-way credible business climate case can be made there. However, overall it is difficult to make out a case that UI payroll taxes make up a significant element of business climate. In the few states with higher UI taxes, I suggest comparing UI taxes to total wages and benefit costs (according to the 2015 National Compensation survey from BLS, UI taxes were $ 0.23 of the average hourly cost of labor ($33.49) in the private sector in 2014. Or, profits. Or, health care. Or, pensions.

Income tax intercepts coming to employers

Tax intercepts against claimants for recovering over-payments have been occurring for numerous years now. That is, a claimant who owes money to the Department of Workforce Development because of an over-payment has seen the Department intercept federal and state tax refunds due the claimant in order to recover that over-payment. The official name for these tax intercepts is the Treasury Offset Program, or TOP.

The 2013 budget act at the federal level required states to implement treasury offsets for ALL unemployment debts. Wisconsin has previously only applied treasury offsets for collecting claimants’ debts. To continue to receive federal grants for administering unemployment law, Wisconsin needs to make treasury offsets applicable to employers’ debts as well.

To that end, at the February 19th Advisory Council meeting the Department prepared a proposal, D15-03, for implementing a treasury offset against employers. Besides setting forth new and changed statutory language, this proposal explained:

Impact: This proposal is expected to save the Trust Fund approximately $4.3M annually via additional employer state Ul tax collections.

Summary of the Proposal: The Treasury Offset Program (TOP) is a Federal tax intercept collection tool used to collect unpaid debts owed to various government agencies. DWD UI previously implemented TOP to recover fraud and wage non-fraud overpayment debts from claimants. This proposal expands the use of the TOP program to unpaid employer contributions when personal and corporate liability can be assigned. However, the Federal government does not have the functionality to collect from corporate tax accounts at this time. The proposal is written to include corporate accounts for future enhanced Federal capabilities. Expansion of TOP is mandated by the Federal government. Fees are charged by the TOP program directly to the participant and would not affect the UI Trust Fund.

Methodology: Employer tax debt that would be certifiable for TOP is mainly debt from preliminarily closed and closed employer accounts. From 2010-2014 the average yearly amount of delinquent debt due to preliminarily closed/closed accounts is approximately $43M of which approximately 38% is recovered by Ul collections.

In 2012, TOP for claimant benefit overpayments was expanded to include fraud and non-fraud wage overpayments. From 2012—2014 the average annual amount of benefit overpayment debt certifiable for TOP was $25.2M of which approximately $12M was recovered by UI collections, or 48%.

At a 48% recovery rate, approximately $20.6M of employer debt certifiable for TOP would be collected annually. Much of the debt UI already recovered would now be collected with TOP; however, it would be collected more efficiently. Since UI can already collect approximately 38% of TOP certified debt using other collection tools, adding TOP as an additional tool would increase employer debt tax collections by approximately 10% of the certified debt annually. Ten percent of the average $43M employer debt certified for TOP would result in Trust Fund savings of approximately $4.3M annually via additional employer tax debt collections.

Note that while a federal process for applying treasury offsets against corporations is not yet in place, these treasury offsets will certainly take effect against employers whose businesses are included in their personal tax returns, such as limited liability corporations. Accordingly, the Department acknowledges that these offsets will have an immediate effect of $4.3 million in additional collections for employer debts.

At its March 19th meeting, the Advisory Council approved this proposal. As a result, it will be included in the Department’s UI bill along with other changes approved by the council. That bill should be presented to the legislature this fall or winter. So, for the 2016 tax year and perhaps for the 2015 tax year (if the bill is enacted in 2015), employers will have to face the loss of their state and federal refunds if they have unpaid unemployment taxes.

Feds release two important advisories about claimant access

On Friday, October 2nd, the Department of Labor issued two advisories — officially called program letters — about maintaining claimant’s access to their unemployment benefits.

The first concerns the due process protections claimants have when charged with concealment. In particular, this advisory spells out the requirement that whenever unemployment benefits are denied:

[T]he individual must receive a written copy of that determination and must have the right to appeal the denial. States are not required to conduct a full, formal evidentiary appeal hearing before determining that an individual was overpaid, but they must offer the individual an opportunity to know and rebut the information in fact finding before issuing a decision that the individual is not eligible and was overpaid.

UIPL 01-16 (1 October 2015) at 4. Furthermore, once a claim for unemployment benefits is underway, payment of those benefits cannot be stopped until a determination about the claimant’s eligibility has been issued.

If the state agency cannot make an eligibility determination before the date of a timely payment, the state agency “presumes the claimant’s continued eligibility until it makes a determination otherwise.” Additionally, a state must inform individuals that the pending eligibility issue may affect their entitlement to [unemployment compensation] and may result in an overpayment.

Id. And, in that investigation about the claimant’s continued eligibility for unemployment benefits, the unemployment agency must independently verify any computer match information casting doubt on the claimant’s continued eligibility, notify the claimant about the doubts on his or her continued eligibility, and give the claimant time to respond to the accusation.

States may not make determinations of overpayments and/or fraud using automated systems without the input of agency staff. The individual must also be informed of the information received as a result of the match with the Federal database and given the opportunity to be heard before a determination of an overpayment may be issued.

Id. at 5. This specific statement that fraud determinations CANNOT be based on automated systems seems specifically targeted against the fraud by algorithm process currently taking place in Michigan. The advisory closes with the requirements needed for any fraud notice.

[A] fraud determination notice must be sufficient to allow the individual to know the potential penalties or other consequences of a fraud determination as well as his or her rights with respect to an appeal. The individual must be provided additional information on the appeal process including the right to have representation; to present testimony and other evidence relative to the appeal; to subpoena witnesses and records; and to be apprised of the consequences of failing to attend an appeal if one is requested. Communications must be in plain language and using methods that ensure the communication is most likely to be successful for all populations, including individuals with limited English proficiency.

Id. at 6. Given the push in Wisconsin for pursuing concealment charges against claimants for claim-filing mistakes, this advisory applies with equal force to Wisconsin.

The second advisory concerns preventing program discrimination because of age, national origin, or language proficiency and making sure that new, computerized filing and notification procedures are as user-friendly as possible. This lengthy memorandum begins by spelling out the legal requirements for open access to claims information.

[S]tate UI agencies must ensure that use of new technologies and systems for administering UI programs and providing services do not create barriers (e.g., procedural, technological, or informational) that may prevent individuals from accessing UI benefits, such as by denying them a reasonable opportunity to establish their eligibility. The U.S. Department of Labor (Department) has determined that “access” for purposes of conforming to Section 303(a)(1) of the [Social Security Act] means individuals’ ability to complete, submit, and obtain information about their initial and continued claims, appeals, reemployment services, and any other information, program functions, or services available for all claimants.

* * *

Thus, while states may offer claimants a variety of methods to receive information, the content of a written determination, whether it is a letter mailed to the claimant or provided in an electronic medium, must comply with the requirements in the Standard for Claim Determination specified [in Employment Security Manual, Part V, Section 6013.C.1.c.].

UIPL 02-16 (1 October 2015) at 3-4.

Electronic-only communication requirements may well run afoul of these non-discrimination requirements.

The nondiscrimination laws that apply to state UI agencies prohibit discrimination based on both disparate treatment — intentionally treating members of protected groups differently based on their protected status — and disparate impact — the use of policies or practices that are neutral on their face, but have a disproportionate impact on members of some protected groups. In addition, as detailed below, regulations implementing these laws prohibit states from establishing policies or procedures that, while not directly barring access to benefits or services for individuals who have disabilities and/or are [Limited English Proficient], indirectly prevent or limit access. The use of a website and web-based technology as the sole or primary way for individuals to obtain information about UI benefits or to file UI claims may have the effect of denying or limiting access to members of protected groups in violation of Federal nondiscrimination law.

* * *

States may offer individuals the option of receiving the information, services, etc., discussed in this guidance via electronic methods, but may not require that individuals communicate only through electronic means. Such policies unduly restrict program access, as not all individuals have the ability or capacity to communicate electronically.

Id. at 4-5. This advisory then goes into detail about what these non-discrimination requirements mean and describes the numerous steps that state agencies need to take. Of particular note are the following requirements and objectives:

Use of free, web-based translation services (also known as machine translation software) is not sufficient to ensure that the translation is appropriate and conveys the same meaning as the English version. Information about effective translation resources may be found at: [Lost in Translation.]

* * *

State UI agencies should also ensure that web-based claims filing systems also maintain a system for receiving and addressing complaints from limited English proficient persons and persons with a disability. This includes, but is not limited to, providing in-language notice regarding how to file an online complaint about delayed or denied service resulting from language barriers.

* * *

States may promote on-line filing as a primary method of filing UI claims, but they may not have policies and operational practices that make on-line filing the exclusive method of filing and certifying UI claims. As with persons with disabilities or those with [Limited English Proficiency], or older individuals, states must offer an alternative option for accessing information and benefits, such as by telephone and/or in person, in a manner that ensures equal access for persons unable to access or use a web-based system in order to avoid disparate impact on other protected groups. Further, states must broadly and conspicuously disseminate information about alternative access options in ways that ensure that people who may need to use such options are aware of the options. State UI agencies must ensure that use of new technologies and systems for administering UI programs and providing services do not create barriers (e.g., procedural, technological, or informational) that may prevent individuals from accessing UI benefits, such as by denying them a reasonable opportunity to establish their eligibility.

* * *

State UI agencies must also take reasonable steps to ensure that, if technology or other issues discussed in this UIPL interfere with claimants’ access, they have established alternative methods of access, such as telephonic and/or in-person options. The alternative access points must be communicated clearly in a manner that reaches the population that may need to use them. The processes the state UI agency uses to offer alternative methods of access must be documented in the agency’s policy documents and operating procedures. In addition, a state must train UI and American Job Center staff on the alternative methods of access to ensure that claimants and others who experience challenges are properly directed to alternative access options so that they may be served in a timely manner. Excessive delays experienced by potential claimants as they are referred to alternative access methods can result in a denial of access to services, in conflict with Federal UI law and nondiscrimination law requirements.

* * *

Action Required. State Administrators must:

  1. Ensure that processes exist or are implemented to provide all claimants access to UI benefits as discussed in this UIPL;
  2. Disseminate this guidance to appropriate state agency staff, including the state’s [Equal Opportunity] Officer;
  3. Ensure that state [Equal Opportunity] Officers are involved early in all appropriate information technology modernization and business process reengineering plans to promote the full integration of equal opportunity requirements into agency technology plans; and
  4. Work with state [Equal Opportunity] Officers to evaluate the avenues available to the public to participate in the UI process to help ensure access to everyone including individuals with disabilities and [Limited English Proficient] individuals.

Id. at 9, 10, 12, 13, and 14.

The recent developments in Florida and the push in Wisconsin for similar obstacles to filing unemployment claims have been going on for some time now. See, e.g., the posts about job searches changes and waivers. These advisories, however, demonstrate for the first time that federal authorities are pushing back. Stay tuned to see what happens next. The National Employment Law Project has declared: “By staking out a strong enforcement position in support of fairness and accessibility, we believe that the Department [of Labor] has taken a critical first step toward ensuring that unemployment insurance will be there when America’s workers need it, no matter who you are or where you live.”