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.

Update (12 June 2021): Fixed broken DWD links to labor proposals and management proposals that the Advisory Council agreed to.

New Internet Claims Filing Process for 2016

The Department of Workforce Development is revamping its Internet Claims Filing process with a much more complicated and detailed series of questions and screens. At the December 17th Advisory Council meeting, the Department was scheduled to present to the council what these changes would entail. Because of other issues, however, the council never got to see this presentation. Luckily, the Department sent me a copy.

Those filing their weekly claim certifications will now be told about fraud warnings at the start and end of their claim filing. See pp.2 and 17. And, the 14 questions now being asked are at least 20+ questions. Furthermore, rather than simplifying the information being asked about, the new questions continue to be legalistic and leave key information out.

NOTE: For comparison, here are the questions Massachusetts asks claimants (in Massachusetts, the phone questions are the same as when filing by Internet).

NOTE: Also compare the information available in the Massachusetts Guide to Benefits for Claimants with Wisconsin’s Handbook for Claimants. Notice the kind of information available in Massachusetts and the tone of how that information is presented as compared to Wisconsin.

For example, in Wisconsin there will now be a question about school attendance. See p.3. Usually, when you attend school during your regular work shift you are ineligible for unemployment benefits. But, if you work during the evenings while attend classes during the day, you should still be eligible for unemployment benefits when laid off from your evening job. In this case, the schooling does not interfere with your availability on your typical work shift. The new Internet filing form, however, only asks about attending classes during the day and does not include or ask for any information about regular work shifts.

Able and available status are now two separate questions as well. See pp.4 and 5. Missing work because of illness usually leads to a reduction in weekly benefits because work was missed. The question on p.4, however, only asks about your regular employer. Because many claimants who have temporary, part-time work do not think of those employers as their “regular” employers, they will not think a question about missing work with a temporary employer because of sickness is included in this question. This question should be asking about any current or future employer and make no reference to a “regular” employer.

Problems with other questions continue. Claimants are supposed to report all wages earned in the week for which they are filing, regardless of when they are actually paid those wages. So, the Department goes into detail about how to report those wages and hours (and minutes) of work for employers (see pp.6-8) as well as how commission work and sales are to be reported (see p.9). But, then the Department asks about sick pay, bonus pay, holiday pay, and other kinds of pay (see pp.10-12) as already received for the week — “did you receive?” — or to be received — “will you receive?” As a result, these questions imply that regular wages that are to be paid in the future do not need to reported since there is no question about reporting wages that “will be received?” Instead of two questions for vacation pay et al., only one should be asked: “Are you to receive?” And, instead of all of these separate kinds of wage income that now has to be reported separately, the Department should simply ask claimants to report “Any and all kinds of income connected to the work with EMPLOYER you are to receive for the week at issue.” By breaking these kinds of income into separate categories, the Department is requiring claimants to have an accountant’s understanding of their income in order to correctly fill out their weekly claim certifications rather than just asking for the total, gross amount of all income regardless of kind.

NOTE: The Department will even have a screen for miscellaneous income, such as baby-sitting, that has to be reported. See p.13.

Specific work search information for each job action will also now have to be provided. See p.15.

Given all the information that has to be provided in the proper category now, opportunities for mistakes will abound. And, any mistake will be an opportunity for charging claimants with fraud. In short, this new Internet filing process will NOT make it easier for claimants to file their weekly claims. But, this new process will make it easier for the Department to charge claimants with concealment.

UI jurisdiction changes going forward

In September of this year, the Department of Workforce Development announced in D15-11 a new, comprehensive rewrite of circuit court review of unemployment decisions. Some of the problems with these changes were previously described in this blog.

At its October 12th meeting, the Advisory Council approved of the changes in D15-11 before the Labor and Industry Review Commission could even respond. Just prior to the council’s October 29th meeting, the Commission did provide a response to D15-11 and asked the council to reconsider its approval of D15-11 in light of those comments. The council asked the Commission to make a formal presentation about the issue that was no more than ten minutes in length at the Council’s November 19th meeting.

The Commission did so and asked the Advisory Council to hold off on D15-11 so that the Department and the Commission could discuss these changes and work out a compromise. The Commission pointed out that D15-11 had been developed without consultation with the Commission and, given the Commission’s role in circuit court review of Commission decisions, there should be some consultation with the Commission in these matters. In the meantime, the Department presented a response to the Commission’s comments. Without comment or explanation regarding the Commission’s plea for some consideration in making these changes, the council approved of LRB draft legislation that had already incorporated D15-11.

The Commission’s comments point to some obvious defects in the Department’s proposed changes. And, the Department’s response highlights a fundamental defect in the Department’s rationale and reasoning for these changes. The Department maintains that a party in an unemployment case who does not file an answer is subject to default and should be subject to default.

Under the proposed change, a court may enter an order declaring that a non-appearing party is in default for failing to timely or properly answer the complaint. In the absence of a defendant’s excusable neglect for failing to answer the complaint, that declaration of default should ordinarily be the result. The defaulting party should be precluded from seeking to litigate the case later. The proposal conforms to the longstanding law and practice in court actions in Wisconsin in cases of other types.

DWD Response to LIRC Comments at 1-2. Right now, the parties who have “won” a Commission decision receive the following cover letter from the Commission when a circuit court complaint seeking review of a Commission decision is filed:

On [date], the Labor and Industry Review Commission received copies of pleadings seeking judicial review of the commission’s decision noted above. You are named as a party in these judicial review proceedings. As required by Wis. Stat. § 102.23, we are sending you a copy of these pleadings. You have the right to participate in this proceeding if you choose.

The commission will file a timely responsive pleading and will defend its position before the court. We will send you a copy of the commission’s response when we file it with the court.

We will be happy to answer any questions you may have about the case.

In other words, parties who agree with the Commission decision essentially piggy-back on the Commission’s efforts in defending its decision. Because unemployment proceedings are not intended to entail much administrative costs, this procedural mechanism for defending the parties interest during court review of a Commission decision makes a great deal of sense. Understandably, when parties feel that they have a concern or interest in a case distinct from the Commission, they have the option of filing their own answer to a complaint.

The Department’s now council-approved changes in D15-11 up end this procedure and require any party in an unemployment to file its own answer to a complaint or risk a default judgment. For employers who are NOT sole proprietors, such answers MUST be drafted by an attorney since corporations can only appear in Wisconsin courts through legal representation. For employer-side counsel, this requirement will certainly lead to more billable hours. For employers who have to hire attorneys to file these answers . . . well, attorneys usually are not cheap.

The first of the DWD-sponsored proposals have appeared in legislation

At the 12 October 2015 Advisory Council meeting, the council gave final approval to the following proposals:

  • D15-10 — eliminating the publication of the claimant benefit tables within the statutes,
  • D15-11 — changes to circuit review review previously described here,
  • D15-12 — allowing the same protocols for unemployment taxes in regards to fiscal agents in adult care to apply to fiscal agents in child care situations, and
  • D15-13 — ending 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.

Previously, the council had approved the following Department proposals:

  • D15-02 — adding the ability 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 — applying the Treasury offset program to employers, as described previously in this post, and
  • D15-07 — changes to how work share benefits are calculated so as to comply with federal requirements for work share programs.

With the legislature currently in session, these three proposals — D15-03, D15-07, and D15-02 — have appeared in bills AB416 and SB341. The legislature will most likely enact these provisions shortly.

Several Department proposals, however, remain in limbo or are still being debated. The council has extensively discussed D15-04 in regards to setting 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. Proposal D15-05 was to correct a hole in the statutes that accidentally left LLPs out of the definition of employer (see also this DWD memo on this issue). Appeals modernization, D15-06, continues to be discussed by council members. 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. On the other hand, there has been no word on D15-09 — distinguishing able and available determinations from separation determinations — since this proposal was introduced at the 19 May 2015 council meeting. Finally, the proposed changes to the definition of concealment in D15-08 (described in this previous post) may be discussed again at subsequent council meetings.

Filing for unemployment? It’s a trap!

Thanks to an information request from one of the members of the Advisory Council, concealment data for the 2014 calendar year is now available. Of 21,694 initial determinations that led to appeal tribunal decisions in 2014, fully 11,040 were initial determinations that found claimant concealment. That is, nearly 51% of the initial determinations in 2014 concerned (and found) claimant concealment.

Of these 11,040 initial determinations, however, only 470, or 4.25% of the total, were appealed. Appeal tribunals overturned 216 or 46% of these 470 concealment appeals and affirmed 254 of these concealment cases. In 2014, the Labor and Industry Review Commission heard 196 concealment appeals and only affirmed 34 appeal tribunal decisions. The Commission overturned nearly 63% (123 cases) of the appeal tribunals that found concealment, and the Commission remanded 20% (23) of the 2014 concealment cases that reached it for additional evidence. That is, only 92 (34 affirmed by LIRC and 58 never appealed to LIRC) concealment decisions out of 470 appeals — i.e., 20% of the concealment appeals — were actually confirmed as concealment after review of some kind. So, while very few concealment cases are appealed, those that are appealed are usually overturned either by the appeal tribunal or the Commission.

And, given what has happened in the concealment cases the Commission has overturned — see, e.g., O’Neill v. Riteway Bus Service, Inc., UI Hearing Nos. 15600518MW and 15600519MW (28 May 2015) (“ALJ placed the burden of proving concealment on the wrong party. The ALJ stated that it was the employee’s burden to prove that there was no concealment. This is incorrect. As the commission and the department have stated for decades, the burden to establish that a claimant concealed information is on the department.“) (emphasis in original) and Dabo v. Personalized Plus Home Health, UI Hearing Nos. 14609522MW and 14609523MW (16 April 2015) (“The employee, as a non-native English speaker, missed the ‘did you work’ part of the multi-part question. It is a common mistake, one long acknowledged by the department.”) — it seems that many of the cases that are alleging concealment do not contain actual concealment.

Since less than five percent of concealment determinations are ever appealed, however, the Department has had a relatively unchecked hand in charging claimants with concealment. Unemployment claims, then, have essentially become a vehicle for alleging concealment against claimants. As they say in a galaxy far, far away:

It's a Trap!

Changes to unemployment venue now and in the future

In DWD v. LIRC, 2015 WI App 56 (“Froehlich,” after the claimant at issue in the case), the Department filed an unemployment appeal case in Milwaukee County even though none of the parties resided in that county.

Normally, unemployment cases in circuit court must be brought in the county where the claimant or the employer (i.e., the plaintiff in the case) resides. But, the Department also has the ability to appeal any LIRC decision even if the parties to that case do not. And, in Froehlich, the Department did just that. Under Wis. Stat. § 102.23(1)(a), when the Department of Workforce Development is the appealing party, venue is in “the county where the defendant resides.”

Typically, when a claimant or employer appeals a LIRC decision in the wrong county, the Commission immediately moves to dismiss the action for lack of venue. And courts routinely grant such motions, ending the unemployment appeals before the merits of the case are ever addressed.

But, in Froehlich the Department was the appealing party, and the Commission did not immediately move for dismissal. Instead, the Commission said it was willing to agree to venue in Milwaukee County subject to what other parties wanted and the circuit court’s permission. For some reason, the Department did nothing. When additional Department appeals were filed in numerous other cases throughout Wisconsin (and again in counties where no defendants resided), the Commission moved to dismiss Froehlich. The circuit court granted that request, and the Department appealed that dismissal to the appeals court.

NOTE: In the past, when the Department appealed a Commission decision because of a fundamental disagreement with the Commission over the meaning of unemployment law, the Department filed those appeals in Dane County, where the defendant Commission resided.

The court of appeals held that dismissal was NOT warranted in Froehlich because the Commission had accepted jurisdiction in Milwaukee County and the other defendants never objected to venue in Milwaukee County. Since the active parties to the case — the Department and the Commission — had indicated that Milwaukee County was a proper venue, dismissal for lack of venue was improper. But, the case was still remanded to the circuit court to determine whether it would agree to jurisdiction, and the appeals court strongly hinted to the circuit court that it should agree. See n.4 in Froehlich.

The end result in Froehlich is that a wrong venue no longer leads to automatic dismissal, at least when the Department is the plaintiff. Whether Froehlich might also lead to claimants and employers being able to keep their cases alive despite filing in the wrong venue remains an open question. But, a colorable claim is now viable that such cases should NOT be dismissed but remain either in the county where filed or transferred to another county where venue is proper before any dismissal for lack of venue takes effect.

For its sake, the Department is not sitting on its laurels. At the September 17th Advisory Council meeting, the Department presented a new proposal to create a new unemployment venue provision, D15-11. In place of Wis. Stat. § 102.23, a new Wis. Stat. § 108.09(7) is created and which includes a host of changes to how unemployment appeals will be handled in the future. These changes include:

  • Who is a party — Under new 108.09(7)(c)1, “every other party to the proceedings before the commission shall be made a defendant.” So, the parties of interest from workers’ compensation precedents no longer have to be included.
  • DWD is a required defendant — Under new 108.09(7)(c)1: “The department shall also be made a defendant if the department is not the plaintiff.” So, copies of complaints and summons have to made for the Department in every unemployment case. And, the Department explained to the Advisory Council that it will most likely file a routine answer in all of these appeals. Moreover, the Department may decide to take an active role in some cases. Certainly, if the Department does not receive its summons and complaint, expect a motion to dismiss from either the Commission or the Department for failing to serve a necessary party. See also new 108.10(4). At the very least, this new provision will make unemployment appeals that much more expensive, especially for large employers involved in numerous unemployment cases.
  • Commission excluded as a defendant for purposes of venue — Under new 108.09(7)(c)2: “if the plaintiff is the department, the proceedings shall be in the circuit court of the county where a defendant, other than the commission, resides.”
  • Proceedings in any court — Under new 108.09(7)(c)2: “The proceedings may be brought in any circuit court if all parties appearing in the case agree OR if the court, after notice and a hearing, orders.” So, the parties can agree to venue in a court whether or not that court agrees to venue. Or, a court might order the parties to file in another venue or accept venue itself if one of the parties disputes venue (and, as noted below, the court will have no reason for declining venue).
  • Lack of venue is NOT lack of competency — Under new 108.09(7)(c)2: “Commencing an action in a county in which no defendant resides does NOT deprive the court of competency to proceed to judgment on the merits of the case.” In other words, the Department can file its own unemployment appeals in any county it wants, regardless of whether the claimant or employer have any connection to that county whatsoever.
  • A 60-day time limit for submitting the record to circuit court is mandated. See new 108.09(7)(c)5.

Unemployment benefit payments continue to decline

The Advisory Council met yesterday, September 17th, and much information was put forward, including current financial reports for the state’s unemployment system.

As noted previously, unemployment taxes are slated to decline. Next year, 2016, will see a reduced tax schedule for employers, as the reserve fund had $735.4 million at the end of July 2015 and should meet the requirements for a reduced tax schedule next year.

The most stunning news, however, is that benefit payments continue to decline markedly. The Department’s Financial Outlook Report released in April 2015 reported that “UI benefit payments in 2014 were the lowest since 2000.” See Report at 21. Now in September 2015, the Department reports that: “Benefit payments charged to the reserve Fund were $371.2 million through July compared to $445.4 million last year.” See UI Reserve Fund Highlights at 1. This level of benefit payments is “$90 million below what is expected” and “has not been seen in Wisconsin since the 1990s,” the treasurer for the state’s unemployment funds told council members. In support of this observation, the financial report included this graph on the last page.

ER taxes relative to total benefits paid

This chart shows that all benefits paid to claimants are taking a deep dive since the recession. Part of the decline is the end in 2010 of federal extended unemployment compensation benefits. But, if the end of those federal benefits told the whole story, then the decline in benefits should level off and possibly increase as employers go through cycles of hiring and layoffs. But, there has been no leveling off in Wisconsin. Rather, benefit payments continue falling off of a cliff. Keep in mind as well that these dollars are not adjusted for inflation or cost of living increases. So, this drop in benefit payments is even more devastating to claimants trying to pay rent and buy groceries than pictured here.

For why this decline in payments is occurring, the main reasons appear to be the Department’s efforts at charging concealment against claimants for their mistakes and the new substantial fault disqualification standard. See Why employer UI taxes are down: concealment and substantial fault. The Department is essentially making it harder for those losing their jobs to qualify for unemployment benefits. And, those that do qualify are increasingly facing concealment charges six to nine months after their claims have ended, forcing them to repay all benefits previously received, pay additional penalties for their mistakes mislabeled as concealment, and then forfeit years of future unemployment benefits as an additional penalty. In short, unemployment benefits do not really exist anymore for those who lose their jobs, and this outcome is by design.

Concealment redefinition approved: Watch out claimants

There have been previous discussions here in this blog about the Department of Workforce Development’s concealment efforts on 27 January 2014, 28 May 2014, 14 April 2015, 15 April 2015, 26 May 2015, 23 April 2015, and numerous other posts.

On 19 May 2015, the Advisory Council approved of a redefinition of concealment that did not make logical sense — reinserting the word “intentionally” in various places of the new redefinition but stating that concealment does not require “an intent or design to receive benefits,” and shifting the burden of proof on claimants to disprove their concealment. In this redefinition of concealment, concealment was both intentional and not intentional.

At the 18 June 2015 council meeting, new concealment language was made available in Department-sponsored legislation (see pp.6-7). In this draft legislation, Wis. Stat. § 108.04(11)(g) is re-numbered (g)(1) and amended to read:

For purposes of 1. In this subsection, “conceal” means to intentionally mislead or defraud the department by withholding or hiding information or making a false statement or misrepresentation.

And, Wis. Stat. §§ 108.04(11)(g)(2) and (3) are created to read:

2. As a condition of eligibility for benefits under this chapter, a claimant has a duty of care to provide an accurate and complete response to each inquiry made by the department in connection with his or her receipt of benefits. If a claimant, in response to such an inquiry, makes a false statement or representation regarding a material fact relating to his her eligibility for benefits or regarding his or her wages earned or paid or payable or hours worked in a given week, there is rebuttable presumption that the claimant has violated par.(a) or (b), whichever is applicable. A claimant may rebut that presumption with competent evidence that the claimant did not intentionally mislead the department, but competent evidence does not include evidence that a claimant provided false or misleading answers due to any of the following:

a. The claimant’s failure to read or follow instructions or other communications of the department related to a claim for benefits.

b. The claimant’s reliance on the statements or representations of persons other than an employee of the department who is authorized to provide advice regarding the claimant’s claim for benefits.

c. The claimant’s limitation or disability, where the claimant has not brought such limitation or disability to the attention of a department employee authorized to provide service to claimants before issuance of the initial determination and has not provided competent evidence of the disability or limitation.

3. It is not a prerequisite to a finding that a claimant concealed a material fact relating to his or her eligibility for benefits as provided in par.(a) or concealed wages or hours as provided in par.(b) that the claimant has an intent or design to receive benefits to which the claimant knows he or she was not entitled.

This draft legislation is as illogical as the initially approved proposal. Concealment is still intentional, but under sub-section (3) a finding of concealment does not require any actual intent to conceal. Furthermore, the burden of proof will still be on claimants to disprove their concealment. And, folks cannot claim in their defense: (a) confusion or lack of understanding of departmental materials, (b) reliance on advice from others unless they can demonstrate that the advice was from someone in the Department “authorized to provide advice regarding the claimant’s claim,” or (c) a learning disability of some kind unless the learning-disabled claimant has the foresight to notify the Department beforehand of his or her learning disability and provide “competent evidence” establishing that disability (so, simply claiming a disability will not suffice). In other words (and as noted previously), claimants will be strictly liable for this mistakes.

A May letter to the Advisory Council illustrates these issues:

May 25, 2015

Janell Knutson, Chair Unemployment Insurance Advisory Council 201 E. Washington Avenue PD. Box 8942 Madison, Wisconsin 53708

Dear Ms. Knutson,

I have recently read the proposed law changes to Statute 108.04(11)(g) regarding the definition of “conceal” which will eliminate the word “intentionally” mislead or defraud. As a claimant who has had to pay overpayments that were not done intentionally, this concerns me.

Recently, I incurred an over-payment because my reported wages were “under reported.” I work highway construction. My pay scale is all over the place due to varied projects. For example, I worked on a county road project. As a conscientious person, I called the payroll division to clarify the wages and reported accordingly. What the payroll division didn’t tell me is that we were also paid benefitt pay. County jobs typically don’t include benefits; state highway projects do. Though this was a county road, the job was state funded. As soon as I received my pay check I called and gave correct information. If the “intent” element is removed, a claimant in my position may not realize he or she has received benefits to which he or she is not entitled, thus might be accused of concealment. Because these errors may not be discovered for a length of time, this could lead to hefty consequences for an honest mistake.

I have another personal scenario involving a friend. She had just signed up for benefits and wanted my help to access the dwd online web services. When she got onto her account, I noticed that she had reported wages of only $10. She works ten hours a week as a crossing guard and had actually earned $100. She reported these wages because she misunderstood the question. She thought that she was to report what she earned per hour and then how many hours she had worked. To my knowledge, she has never filed before. This also was an honest, understandable mistake. She also called and corrected this immediately. Had she not, it’s possible that this could have gone undetected for some time. Repayment of the monies, imposing the new penalty of 40%, and not allowing benefits until 2x her overpayment would be an excessive penalty for a misunderstanding.

I realize that fraud and concealment are major issues, but I am concerned that the passing of this proposal may deny a person their right to due process. I hope you will take my insights into consideration. Thank you for your time.

NOTE: At the June 18th council meeting, Ms. Knutson advised council members that there had been e-mail correspondence with the individual who authored the letter and that no discussion or response from the council to the letter was needed. Ms. Knutson did NOT say what her response to the letter was.

Both “mistakes” here were caught early through foresight and extreme carefulness. But, if not caught early, both situations would easily qualify as concealment, and there would be little the claimants could do to counter that accusation. A claimant who never corrected the “benefit pay” she received would be guilty of a concealment mistake even though she did NOT know at the time she filed her weekly claim that she would be receiving such wages. If she did not correct the mistake on her own, concealment would be charged because the burden is now on the claimant to prove his or her mistake was not actually a mistake she had any control over. Since she eventually knew about the benefit pay via a pay stub, the Department would likely allege that she was responsible for correcting the mistake even though she did not know about the mistake at all when she first filed her weekly claim certification.

The claimant who mis-understood her weekly claim reporting obligations by reporting her hourly wage rather than the total weekly wages she received is completely out of luck. Her mis-understanding will, by law, be excluded as any kind of explanation for her mistake. In short, the only chance a claimant will have to win such a concealment case will be to dispute the mistake ever occurred. Claiming that the mistake took place for reasons for which the claimant had no knowledge or awareness is not possible here since the claimant cannot allege that she does not know how many hours she worked or the total earnings she received for that work.

SSDI and unemployment: recent developments

A previous post in April 2015 described how the Department of Workforce Development is attempting to get around the Labor and Industry Review Commission’s decision in Kluczynski.

Since that post, there has been a series of new developments.

The number of SSDI claimants keeps increasing

When the Department first proposed eliminating eligibility for unemployment benefits for all those receiving SSDI benefits, the Department indicated that the prohibition was likely to affect no more than fifty claimants.

In February 2015, the Department informed the Advisory Council that the SSDI ban affected 687 claimants in January 2014 when enforcement began.

In May 2015, this number has increased even further. The Advisory Council’s 2015 report at p.8 has the following update on the SSDI prohibition:

SSDI and UI Payments

2013 Wisconsin Act 36 provides a claimant cannot simultaneously collect both Social Security Disability Insurance (SSDI) benefits and UI benefits.

Primary Statute Created: Wis. Stat. §§108.04 (2) (h) and 108.04 (12)(f).

The ban on simultaneously collecting both Social Security Disability Insurance (SSDI) benefits and UI benefits saved hundreds of thousands of dollars for the UI Trust Fund as close to 3,500 UI claims have been denied through early May 2015.

DWD wants to back-date its new SSDI legislation to 4 January 2014

As previously noted, in April 2015 the Advisory Council approved a new prohibition on SSDI benefits intended to fix the poor drafting of the original SSDI prohibition.

At the May 19th council meeting, the Department announced that this new SSDI prohibition would be back-dated to 4 January 2014, the date of the original SSDI prohibition. This back-dating is already included in the DWD-sponsored bill being drafted.

A recent court case found in favor of the Department

A few cases continue to be appealed concerning claimants receiving SSDI benefits who still want their unemployment benefits because of their prior work. Here is an excerpt from a recent letter I sent the Commission in one of those cases. In this letter, I describe a circuit court decision that found Kluczynski unpersuasive.

This appeal to the Commission concerns the Commission’s understanding of Wis. Stat. § 108.04(12)(f)(1), enacted pursuant to 2013 Wis. Act 36, and as detailed in Kluczynski, UI Hearing No. 14400214AP (30 May 2014).

In Kluczynski, the Commission held that this statute unambiguously restricted receipt of unemployment benefits to the “given week” a claimant “actually receives” his or her SSDI benefits. In other weeks where unemployment benefits can be received and for which no disability benefits are actually received, claimants are still eligible for their unemployment benefits.

As the Commission and the Department are aware, Judge Neiss recently held in DWD v. LIRC, Dane County Circuit Court Case No. 2014-CV-3249 (27 May 2015) that the statutory text at issue here was ambiguous because two state agencies — the Commission and the Department — offered opposing interpretations of the statute. The court then goes on to observe that an intransitive definition of “receives” means the act of receiving, and so a person who “actually receives [SSDI benefits] in a given week” is, pursuant to Wis. Stat. § 108.04(12)(f)(1), someone who is identified as an SSDI recipient for each week of their unemployment eligibility. As a result, Judge Neiss concluded, this prohibition on receiving unemployment benefits applied constructively to all the weeks in a month despite the modifiers “actually . . . in a given week” in the statute about “receiving” SSDI benefits. In reaching this conclusion, Judge Neiss has seemingly stretched statutory text to create an ambiguity and reach an intended outcome rather than first reading the text itself as part of the state’s unemployment law as a whole.

NOTE: As noted in Kluczynski, constructive receipt of one-time payment across several weeks in order to determine eligibility for unemployment benefits is provided for in Wis. Stat. § 108.05(7)(d) regarding pension payments. So, there is no need to find ambiguity in one provision of unemployment law to reach a result for which another provision of unemployment already offers unambiguous language regarding the constructive receipt of payments. As proffered by the Commission in Kluczynski, this language could have accomplished the intended result simply by replacing “shall allocate and attribute” with “shall deem and attribute” in this constructive receipt language.

The Commission should not adopt this outcome in this appeal but instead affirm its analysis in Kluczynski. The Commission’s explanation of its analysis in Kluczynski did NOT imply that this statutory text was actually ambiguous, as Judge Neiss holds. Rather, the Commission explained in its memorandum opinion in Kluczynski why the Department’s arguments for its proffered interpretation of unambiguous text are mistaken and why its arguments about the statute being ambiguous were insufficient. Because the statutory text as written does not accomplish its intended result, it should not be rewritten by the Commission or the courts to do so.

Why employer UI taxes are down: concealment and substantial fault

A previous post noted that unemployment taxes for employers are going down because the reserve fund’s cash balance is currently and expected to remain more than $500 million.

This success is remarkable, especially since it did not come about because employers’ taxes have been raised substantially. To be sure, the higher unemployment during the Great Recession led to the highest tax schedule — Schedule A — being implemented. And, for three years, 2011 to 2013, the FUTA tax credit available to employers was reduced.

But, recall the UI debt hole Wisconsin was in during the Great Recession. In March 2011, Wisconsin owed just over $1.6 billion because of borrowing to cover unemployment benefits being paid out. Only eleven other states ever owed more during this recession.

One point six billion dollars is a big hole to climb out of. As noted in a recent GAO report, some states reduced the number of weeks claimants were eligible for benefits as a way to fix their UI debt problems. In short, rather than making employers pay more, these states limited the ability of claimants to collect benefits in the first place. With less benefits being paid out, the taxes employers paid went further.

Other than the introduction of a waiting week before unemployment benefits begin being paid out, Wisconsin did not shorten the total weeks of unemployment eligibility. But, Wisconsin did other things on the benefit side of the equation that have starkly reduced the amount of benefits being paid out to claimants.

As noted previously, Wisconsin has been exceptionally aggressive on charging claimants with concealment and is proposing both increased penalties and stricter compliance standards to be applied to claimants that would effectively charge them with fraud when making honest mistakes on their claims. As the Department’s own fraud report shows, DWD has been taking in over $20 million a year the past two years in over-payment collections alone. Forfeiture penalties and charges against future unemployment benefits add significantly to the amounts flowing back into the reserve fund from claimants.

But, forfeiture over-payments and collections only tell part of the story. Department staffers have publicly noted that benefit payments are now at historically low levels. Indeed, at the May 19th Advisory Council meeting it was noted that Wisconsin has not seen such low levels of benefit payments since 2000, fifteen years ago. The big question is why benefit payments in Wisconsin are so low right now.

A look at 2013 and 2014 financial reports to the Advisory Council show large declines in 2014 in benefits being paid to claimants. The benefits charged to taxable employers for the past three years when employees were discharged are:

2012 - $788,019,106.15

2013 - $714,257,663.70

2014 - $580,681,613.52

The ratio of current year benefit payments to benefits paid the previous year, are 0.91 in 2013 but 0.81 in 2014. In other words, there was a nearly 20% decline in benefit payments in 2014 when compared to 2013, nearly double the decline in benefit payments from 2012 to 2013.

Benefits being paid to employees who quit also declined sharply in 2014.

2012 - $85,799,497.23

2013 - $81,861,854.13

2014 - $69,388,417.56

The 2013 ratio of benefit payments relative to the previous for quits was 0.95. That ratio in 2014 declined to 0.85, nearly three times the decline seen in 2013.

These declines in benefit payments in 2014 directly arise from changes in unemployment law contained in the 2013 budget act2013 Wis. Act 20 — regarding the elimination of numerous quit exceptions and the adoption of a new, substantial fault standard for discharges (see this previous post about these changes being included by the Joint Finance Committee in the budget bill). Understand that the original estimates presented to the Joint Finance Committee for these changes in unemployment law were a reduction of $14.1 million in benefit payments during the first fiscal year and a $23.1 reduction in benefit payments during the second fiscal year. As noted above, the actual decline for quits alone in 2014 was just over $12 million, and for discharges the decline was approximately $134 million.

NOTE: The financial reports given to the Advisory Council lack specific data about the number of claims at issue. The recent report about the activities of the Advisory Council, however, states that the new substantial fault standard led to “4,654 denied cases in 2014. See p.7 of the activities report. Using the average claim duration of 15.3 weeks and the average weekly benefit amount of $285 from the Department’s 2015 financial report, see pp. 37 and 38, each substantial fault disqualification amounted to $4,360.50. Adding up all of the denied cases in 2014 means that $20,293,767 in benefits were NOT paid out that year, $4 million more than what the Department estimated in its 2015 financial report, see p.33 of the financial report.

Because the decline in benefit payments is significantly more than what can be pieced together from available data, using a ratio of benefit payments from one year to the next to track these changes indicates at least how extraordinary the declines in 2014 were and, as indicated below, provides a mechanism for predicting what will happen in 2015 using currently available data.

Estimates for 2015 show that the decline in benefits being paid pursuant to discharges will continue. Using data for the first four months of each year, the total amount of benefits estimated to be paid in 2015 to discharged employees will be just over $480 million, $100 million less than in 2014. And so if current trends continue, the estimated level of benefits going to discharged employees in 2015 will only be 83% of the already record low amount that went to discharged employees in 2014.

On the other hand, estimated benefit payments in 2015 for employees who quit will only be $3 million less from what claimants who quit received in 2014. That is, benefits paid to employees who quit are expected to be within 97% of the 2014 numbers. Accordingly, it appears that the application of the new quit standards to claimants has stabilized and subsequent declines in benefits pursuant to quits are unlikely.

The Department has yet to acknowledge the impact the substantial fault disqualification has had on the benefits being paid out to claimants. The Department’s estimates set forth in its 2015 annual Financial Outlook Report call for a $16 million reduction in benefits to discharged employees because of substantial fault (much less than the $100 million estimated here for 2015) and an $11.5 million reduction in benefits through the elimination of various quit exceptions (nearly $9 million more than estimated here for 2015 but similar to the decline in quit benefits seen in 2014). See pp. 32-3 of the report.

These estimates severely under count the impact substantial fault has had on claimants. In its Financial Outlook Report, the Department presents for the first time a public description of the new substantial fault standard:

Substantial fault essentially means that if an employer establishes a reasonable job policy to which an employee can conform, failure to conform constitutes substantial fault.

See p.33 of the report. According to the Department, then, employees are disqualified whenever they fail to follow a reasonable employee policy. Given how steep the decline in benefits has been for discharged employees in 2014 and the first four months of 2015, it is obvious that the Department has begun applying this broad conception of substantial fault.

And so, with less money being paid out as unemployment benefits, employers’ taxes could that much more quickly fill the hole in the reserve fund created by the Great Recession. There simply has been no need in Wisconsin to reduce the number of weeks claimants are eligible for benefits when those claimants are likely to be disqualified in the first place from receiving any benefits at all.

Finally, it should be noted that even though Wisconsin now has a positive reserve fund balance, the unemployment fund is still not all that healthy. Based on standard UI fund metrics, a recent Trust Fund Solvency Report shows that Wisconsin still fares about as well as most other states do — that is, not so well (see p.56 of the report). The fund’s solvency is rated at 0.13 and a minimum of 0.60 is needed for Wisconsin to be eligible for interest free loans to cover future benefit payments. For how Wisconsin compares to other states, see p.59 of the solvency report. Among mid-western states, Wisconsin fares worst except for Indiana and Ohio, which both still have outstanding debt. Presentations by the Department to the Advisory Council have described the reserve fund’s financial problems in detail. See, e.g., the presentation contained in the Advisory Council activities report, pp.16-44. But, raising employers’ unemployment taxes appears to be unnecessary when benefit payments to claimants continue to decline markedly.