LIRC’s elimination

Governor Walker’s proposed FY2018-FY2019 budget includes the startling elimination of the Labor and Industry Review Commission.

Previously in 2015, DWD raided the Commission’s budget and had its general counsel demoted and replaced.

This attack was apparently not enough. All sources available to me indicate that DWD’s unemployment division pushed for the Commission’s elimination, and Governor Walker acceded to DWD’s demands (more on this issue below).

The agency description document reveals basic numbers about this elimination: the Commission is only funded for six months into the next budget year, and so the Commission will cease to exist on midnight, 31 December 2017. More than 26 staffers will be let go, including three Commissioners (only two currently appointed, as Commissioner Jordahl saw the writing on the wall and jumped to the Public Service Commission). As almost all the Commission’s funding is from federal sources or specific fees, only $265,500 in actual state tax revenue is being saved by the Commission’s elimination.

The budget bill, AB64, has the details about what is happening. For unemployment, see pp.663-74 of the bill.

In general, the budget bill makes a division head (who is a political appointee serving at the pleasure of the governor) as the appellate review authority in place of the Commission.

In this proposed budget bill, these division heads will take over for the Commission effective on July 1st of this year. In other words, on July 1st or afterwards any appeals filed with the Commission will no longer be valid. As a result, these division heads will need to provide notice about appeal rights to parties in workers’ compensation, equal rights/discrimination, and unemployment cases perhaps as early as June 1st. And, they will need to do so regardless of when the budget bill is actually passed.

Neither the workers’ compensation or equal rights divisions have staff attorneys on hand to handle these appeals. In 2015 (the latest year case load data is available), there were 214 workers’ compensation cases filed with the Commission, 230 decisions issued, and 32 cases appealed to court that the Commission had to defend. As there were 422 workers’ compensation decisions by administrative law judges that year, over 50% of those decisions were appealed to the Commission in 2015.

For equal rights cases that same year, there were 77 appeals filed with the Commission, and it issued 94 decisions, of which 19 were appealed to court and hence defended by the Commission. The 239 decisions by administrative law judges include many kinds of cases for which there is no appeal to the Commission (such as fair employment or medical leave cases), only appeal to circuit court. So, the percentage of discrimination cases appealed to the Commission is probably much higher than the 32% suggested by this raw data and is probably close to 50% of the cases for which appeal rights to the Commission exist.

In 2015, there were 59 appeals of employer tax cases to the Commission. The Commission issued 49 decisions that year, and three of those were appealed into circuit court. Administrative law judges issued 397 employer tax decisions that year.

The unemployment numbers are eye-popping for claimants. Unemployment appeals involving claimants numbered 1,735 in 2015 (~144 a month), and the Commission issued 1,773 decisions (~147 a month). Forty-eight of these cases were appealed to circuit court. Administrative law judges issued 18,172 claimant benefit decisions that year.

None of these division heads is loosing any of their current job duties, and there appears to be no provisions for hiring additional staff to handle their new appellate review duties. So, appellate review by division heads will have to occur when they find the time. As obvious from these numbers, that review will be perfunctory at best. For workers’ compensation and discrimination cases, the budget bill is simply shifting the responsibility for review into circuit and appellate courts. These division administrators are likely to rubber stamp all appeals that arrive on their desks (at least initially). Of course, costs to employers and employees associated with this move to court review will be increased, because they will need to pay for attorneys and filing fees after going through the motions for the perfunctory division review. As a result, the number of cases being appealed will likely decline because employers and employees simply cannot afford the additional costs that court review entails. In other words, injustices and basic mistakes at the hearing stage will likely go uncorrected and lawyers will have fewer paying clients.

The unemployment review process represents a slightly different picture from the other agencies. DWD’s unemployment division already has six to eight staff attorneys available to it. Indeed, it is these attorneys who prosecute employer tax cases, who conduct training of administrative law judges, and who occasionally prosecute claimants in unemployment concealment cases. These staff attorneys will most likely take on the task of reviewing the 1,700+ division appeals that land on Joe Handrick’s desk. So, employers will face an attorney prosecuting the tax cases against them and then having that same attorney or a co-worker of that attorney reviewing the merits of any appeal. Indeed, the same DWD attorney who lost a decision before an administrative law judge could appeal that lost decision and then conduct or advise on the division review.

NOTE: under this budget bill, DWD also retains the ability to appeal any decision of the division administrator to circuit court. DWD, in essence, can appeal itself. Huh?

Recall that the Commission was created as an independent agency in the late 1970s. Previously, the Commission managed the entire Department of Industry, Labor, and Human Services (DWD’s previous incarnation) and also handled appellate review of discrimination, workers’ compensation, and unemployment cases. At the time, there were concerns raised about staff attorneys and administrative law judges who were involved in cases having a hand in the appellate review of those cases by the Commission, even though at that time there was a separate division dedicated to appellate review. To address those concerns, in part, the Commission and the staff section dedicated to appellate review were separated and made into a distinct agency. In this way, the Commission would be insulated from political concerns and improper communications among attorneys who were connected to the parties in a case.

As obvious, the proposed budget bill reverses this change and does so without any of the protections needed for keeping Department attorneys who handle a case before an administrative law judge or who advise that judge about how to handle cases on a certain topic from also having a voice in the appellate review of that case. Furthermore, without additional staff, this proposal essentially makes the Department’s concerns about how a case should be resolved of primary importance. After all, cases have to be decided in a timely manner, and the increased case loads from this change will focus attorney’s attention pretty much on the Department’s own substantive goals rather than on the concerns of the parties for a fair and impartial hearing free of any thumbs on the scales.

And, this thumb on the scales leads to why the Commission is being eliminated in the first place. My sources indicate that the unemployment division of DWD is furious with the Commission because it has not accepted the Department’s push to charge claimants’ simple mistakes with concealment. The Commission continues to follow the statutory requirements that for the Department to demonstrate claimant concealment the Department must present evidence that the claimant made a mistake on his or her weekly claim certification and that the claimant understood or knew by making that mistake she or he would get extra unemployment benefits beyond what he or she should have received.

NOTE: the purported rationale for the Commission’s elimination is to get the average age of the Commission’s pending unemployment decisions at or below 40 days. That is, the Commission on average should issue an unemployment decision within 40 days of the appeal. Through September of 2016, the average age of the Commission’s unemployment cases was 37 days. So, the Commission is ALREADY meeting this requirement. See p.2 of the agency description document.

Here is a run-down of some of the concealment issues the Department wants over-turned:

  • The Commission refuses to accept financial need as a reason for finding a claimant intended to steal unemployment benefits (unemployment benefits are by their very nature intended to address a financial need). Wallenkamp v. Arby’s Restaurants, UI Hearing No. 13607281MW and 13607282MW (15 May 2014), aff’d DWD v. LIRC, 367 Wis.2d 749, 877 N.W.2d 650 (2 February 2016); Gussert v. Springhetti Landscaping and DWD, UI Hearing Nos. 16400598AP-16400609AP (27 January 2017).
  • The Commission refuses to find concealment for non-reported wages when claimants subsequently report those wages a few weeks later. Bilton v. H & R Block Eastern Enterprises, Inc., UI Hearing Nos. 13605766MW and 13605682MW (9 Jan. 2014); Perlongo v. Joey’s Seafood & Grill, UI Hearing Nos. 13610060MW & 13610061MW (22 July 2014).
  • The Commission continues to find that an October 2012 transformation of a weekly claim certification question into a compound question was confusing and did not warrant a finding of concealment for mistaken claims based on that confusion (beginning in week 43 of 2012, the week ending 27 October 2012, Question No. 4 was modified from “Did you work?” to “During the week, did you work or did you receive or will you receive sick pay, bonus pay or commission?”). Harris v. Arandell Corp., UI Hearing Nos. 13606535MW and 13606536MW (9 Jan. 2014); Henning v. Visiting Angels, UI Hearing Nos. 13606277MW and 13606278MW (9 Jan. 2014); Chao v. Eagle Movers Inc., UI Hearing No. 13607069M and 13607071MW (17 Jan. 2014); Maurer v. Manpower US Inc., UI Hearing No. 13607416MW and 13607417MW (28 Jan. 2014); Wallenkamp v. Arby’s Restaurants, UI Hearing No. 13607281MW and 13607282MW (15 May 2014), aff’d DWD v. LIRC, 367 Wis.2d 749, 877 N.W.2d 650 (2 February 2016); Audwin Short, UI Hearing No. 14600693MW (10 July 2014); Smith v. Journal Sentinel, Inc., UI Hearing Nos. 13610174MW (31 July 2014); Jackson v. Securitas Security Services, Inc., UI Hearing Nos. 14606875MW and 14606876MW (9 June 2015).
  • The Commission continues to raise questions about the conduct of administrative law judges who take it upon themselves to chastise claimants for their presumed concealment rather than hearing the evidence as presented and presuming claimant eligibility as the law requires. Henning v. Visiting Angels, UI Hearing Nos. 13606277MW and 13606278MW (9 Jan. 2014); Fera v. South East Cable LLC, UI Hearing Nos. 13607375MW (31 July 2014); Vasquez v. Fedex Smartpost Inc., UI Hearing Nos. 14602073MW and 14602074MW (24 September 2014).
  • The Commission continues to find that claimants who are confused about what needs to be reported are just making mistakes and not committing concealment. Hollett v. Douglas Shafler, UI Hearing Nos. 13003690MW and 130003691MW (8 May 2014); Dabo v. Personalized Plus Home Health, UI Hearing No. 14609522MW and 14609523MW (16 April 2015); O’Neill v. Riteway Bus Service Inc., UI Hearing No. 15600518MW and 15600519MW (28 May 2015); Gussert v. Springhetti Landscaping and DWD, UI Hearing Nos. 16400598AP-16400609AP (27 January 2017).
  • The Commission continues to find that claimants who are confused about their status as employees or independent contractors are not committing concealment. Haebig v. News Publishing Co. Inc. of Mt. Horeb, UI Hearing Nos. 13000910MD, 13000911MD, and 13000912MD (31 January 2014); David Mumm, UI Hearing No. 13003988MD (28 Feb. 2014); Martin R. Lash, UI Hearing No. 13403269AP (30 May 2014).
  • The Commission refuses to give the Department three chances to prove concealment against claimants. Terry v. Jane Schapiro, UI Hearing Nos. 14601971MW and 14601972MW (12 Sept. 2014).
  • The Commission refuses to find concealment for claimants who fail to report wages they do not know about when they file the weekly certifications. Bilton v. H&R Block Eastern Enterprises Inc., UI Hearing Nos. 13605766MW and 13605682MW (9 January 2014).
  • The Commission refuses to find concealment for claimants who mistakenly report their earnings when received rather than when earned. Waoh-Tobin v. Banana Republic, UI Hearing No. 16602900MW (18 October 2016).
  • The Commission even refuses to allow a finding of concealment when there is no information in the record about whether the employee worked any specific weeks, received any wages in those weeks, filed possible claims for those weeks, and then possibly provided information on those non-existent claims that were somehow mistaken from the unknown work and wages allegedly done. Fera v. South East Cable LLC, UI Hearing Nos. 13607375MW (31 July 2014).

The Department disagrees with the Commission on all of these concealment issues. So, the Department has decided to have the Commission eliminated and anoint itself as the Commission’s replacement. Anyone interested in the impartial rule of law should be aghast at this development. Review will by design be done by political appointees whose job is to accomplish the political objectives of the governor who appointed them.

If this change goes forward, no one — not employer nor employee — should expect a fair hearing in any DWD case.

The problems in unemployment matters will appear almost immediately. First and foremost, the Commission is being eliminated because it disagrees with the Department about concealment issues. So, the message is clear and direct that disagreement with the Department puts a person’s job in jeopardy. When the Department can eliminate an independent agency, administrative law judges certainly will understand that they must do what the Department wants or face similar elimination.

In workers’ compensation and equal rights cases, the political influence arising from division review will take a few months or perhaps even a year to make itself felt. But, it will be obvious to all at some point that the administrative law judges in these areas of law are following a requirement that exists outside of the hearing itself. Just as private arbitration has been rightly criticized as favoring repeat players over one-time complainants, so too will administrative law judges find themselves knowing how their bosses want cases decided and acting on that knowledge in order to keep their employment. After all, the division administrator will get to declare in every appeal what his or her opinion on the issues are. And, certainly any case that has political repercussions will be decided by those politics rather than the merits. These division administrators are political appointees, after all, who serve at the pleasure of the governor. As a result, the governor is free to inquire of them about how an appeal will be decided and inform that division administrator of the outcome the governor desires.

[UPDATE 7 March 2017: added citations to Gussert case regarding discussion of concealment cases the Department wants overturned.]

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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.

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

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

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

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

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

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

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

Unemployment benefits going down the same path as workers compensation

In light of the recent news about states dismantling their workers compensation programs, Rick McHugh from NELP describes how unemployment provides a similarly vital safety net and how states have been reducing unemployment benefits as well. McHugh offers a persuasive explanation for why the recovery from the recession has been so flat and why wages continue to be stagnant.

Nicole Woo of CEPR posted earlier this morning to EARN about a recent series by Michael Grabell of ProPublica and Howard Berkes of National Public Radio. Her post inspired me to follow up and include both workers’ comp (WC) and unemployment insurance (UI) in my observations. Both are central social insurance programs and both are under attack.

The ProPublica/NPR series exposed a combination of political pressure from employers and insurance companies and stern administration that has left many injured and disabled workers without adequate income support and rehabilitation. This demolition process took decades and was propelled by claims that cutting workers comp (WC) would create a better business climate. The achievement of their dismantling goal by opponents of strong WC programs is marked by the fact that the annual legislative fights of the last 3 decades over workers compensation (usually in conjunction with UI issues) no longer take place in most states. In short, the WC program is practically dead in many states and fails to protect injured and disabled workers as the data posted with the series documents.

Why should UI advocates and EARN researchers care about this WC story? As noted by Nicole, Columbia Journalism Review has a piece by Trudy Lieberman encouraging local follow-up reporting to the WC series. Lieberman quotes John Burton, a rare academic focused on workers’ comp, “I think we’re in a pretty vicious period right now of racing to the bottom.”

Racing to the bottom should be a familiar concept to UI advocates. Many of the same forces that dismantled WC are combined to attack UI programs with considerable success in recent years. And, some state programs have already been reduced to levels where the term “dismantled” fairly describes their situations. Reviewing the most recent federal data for the 12 months ending 9/30/14, regular state programs overall paid UI benefits to only 27 out of 100 jobless workers. (Using a recipiency rate calculated as the insured unemployed divided by total unemployed and reported in the UI Data Summary.) In comparison, the overall UI recipiency rate for CY 2007 was 37, representing a 27 percent reduction taking place over the Great Recession and our lingering labor market recovery. The UI race to the bottom continues in 2015. Just last week, a bi-partisan majority of state legislators in the lower house in Arkansas passed a bill cutting the maximum duration of UI benefits from 25 to 20 weeks and reducing weekly benefits an average of $72.

I have studied UI recipiency for many years, and in the past a recipiency rate below 25 placed a state at or near the bottom. Now, 14 states have recipiency rates of 20 or below (AZ, DC, FL, GA, IN, KY, LA, NC, OK, PR, SC, SD, TN, and VA). Some formerly average states, like Texas, Ohio, and Michigan, have 2014 recipiency rates below 25, as do perennial bottom feeders like AL and MO. And, the ability of states with better UI programs to resist the race to the bottom is threatened as a significant minority of states abandon any pretense of protecting their jobless workers under our federal-state UI arrangements.

UI and WC are both minor factors in total labor costs in 2014, with workers comp amounting to 44 cents per hour in the March 11 CPS report and UI coming in at only 22 cents an hour. How can our opposition make a convincing business climate argument in light of these figures?

Despite their low costs, UI and WC programs nonetheless serve as part of the picture in supporting wages, especially for those out of work or out of work due to work-related injuries. As these programs recede, they become another piece that explains the downsizing of the middle class and the absence of growth in wages. This is part of the story we need to tell as UI and WC cannot return as relevant social insurance programs if only their relatively disenfranchised participants care about these programs.