Unemployment is going away

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

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

Two issues arising from these news items deserve additional comment.

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

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

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

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

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

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

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

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

UI claim initial screen

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

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

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

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

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

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

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

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

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

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

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

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

Unemployment criminalization in court

Back in December 2016 I described how the state’s justice department announced its expanded effort to prosecute unemployment concealment.

That effort is showing results. The entire caseload for two DOJ prosecutors — Annie Jay and Devra Ayala — is apparently just for prosecuting claimants for past unemployment concealment.

UPDATE (8 Nov. 2016): I have learned that a third prosecutor, Amber Hahn, has another sixteen cases alleging criminal theft for unemployment concealment. That means there are 48 criminal cases for concealment in Dane County.

For Ms. Jay, all of her criminal felony cases from 2015 on in Dane County involve unemployment concealment. For Ms. Ayala, all of her criminal felony cases in 2016 in Dane County involve unemployment concealment. Combined, there are 32 cases in total (each prosecutor has 16 cases).

It appears that all of the defendants in these cases originally lived in Milwaukee. These cases are being filed in Dane County, however, because the alleged “crime” happened in Madison. The claimant’s allegedly false unemployment claims were made on the Department’s computers here in Madison.

In some of these cases, the claimants have paid back all of the monies connected to their alleged concealment. Still, DWD and DOJ have turned around and charged them criminally for that same alleged concealment

It appears that the Department of Workforce Development and the Justice Department are prosecuting these cases in order to lay the groundwork for adding new criminal penalties to unemployment claims in 2017. In 2015, there were several bills intended to add new and significant criminal penalties for unemployment concealment that were not passed by the legislature. I expect that these criminal prosecutions by DOJ will serve as “evidence” for why the legislature needs to take up these bills again in 2017 and make felony prosecutions that much easier. After all, if criminal concealment is happening, the reasoning will be, then prosecutors should have all the tools available for going after that concealment.

So, if anyone needs another reason NOT to file for unemployment benefits, here is one more: facing felony convictions and jail time for nothing more than a mistake on your unemployment claim.

Darth Maul is your claim adjudicator

DWD implementing its new concealment definition

The Department of Workforce Development has issued a new directive about the new definition of unemployment concealment set forth in 2015 Wis. Act 334.

As noted already, the new concealment definition makes claimants strictly liable for their mistakes and places the burden of proof on them to explain that any mistakes at issue were not their fault. If they fail to make that case, then the concealment charge and all the associated liabilities will stand.

There are two issues to take away from this directive.

First, this new directive points out that the new concealment definition is effective for all initial determinations issued after 3 April 2016. So, understand that the Department will be applying this new definition regardless of when the mistakes actually occurred. Mistakes that took place in 2012 will now be subject to this new concealment definition simply because the Department is alleging concealment after April 3rd of 2016.

Second, the Department explicitly acknowledges that this new concealment definition actually aligns with its prior concealment enforcement. The action required by the Department to enforce this new concealment definition is simply: “None, UI Staff currently use this definition of concealment to make eligibility decisions. Staff should continue to consider all relevant factors when determining if any individual has concealed information.”

So, the Department stopped following Commission and court precedents on concealment and now has rewritten the statute to reflect what the Department is currently doing. This development represents a government agency pursuing an ideological goal of punishing people who collect unemployment benefits rather than just trying to help people understand and follow claim filing requirements. If these and other legal developments continue, in five or so years employers will be paying UI taxes into a system to which only very few have access. And then many will be asking why have an unemployment system at all.

Concealment charges and collections

As noted in February of this year, concealment cases jumped to 2.79% of all unemployment benefits paid out. For the three previous years, concealment cases had always been under 2% of all unemployment benefits paid.

NOTE: a 0.8% increase is remarkable and unprecedented. If such a change in the unemployment rate or GDP took place from one year to the next, that change would receive headlines across the state.

Because 2015 collection data was not available at the time of the February post, I estimated how much concealment money the Department was taking in for 2014 when compared to previous years. That estimate indicated that concealment monies being collected from claimants was rising markedly.

Now, in 2016, the Department’s updated fraud report is available. This report, furthermore, has data for both how much concealment is being assessed and how much concealment monies are being collected.

In regards to the concealment being assessed, there is good news and bad news.

over-payments assessed

As seen in this chart, over-payments assessed in 2015 declined to 2.21% of unemployment benefits paid out. Still, the concealment charges are over 2% of benefits, so concealment cases remain abnormally high relative to 2011, 2012, and 2013, when the benefits at issue were two to three times greater than the benefits paid out in 2015.

The story with the Department’s collection efforts, on the other hand, is pretty much bad news (except for the impact on Department coffers arising from these collection efforts).

over-payments collected

Here, the concealment over-payments collected in 2011 were under 1% of the benefits paid out that year. In 2012 and 2013, the concealment over-payments collected were under 2% of the benefits paid out. In 2014, however, the concealment over-payments jumped to nearly 3%, and in 2015 concealment over-payment collections climbed to 3.42% of the total benefits paid out that year. In other words, in 2015, out of every $100 claimants received, the Department took back $3.42 in concealment over-payments.

These collection numbers also reveal how concealment collection is a growing part of the Department’s collection efforts. Whereas assessments in 2015 show a slight decline in concealment/fraud assessments to non-fraud assessments — 121.10% in 2014 to 112.69% in 2015 — collections for fraudulent over-payments relative to non-fraud over-payments continued to increase in 2015 — going from 116.52% in 2014 to 140.11% in 2015. In other words, nearly two out of every three over-payment dollars collected in 2015 were for concealment. The Department is becoming VERY good at debt collection and, essentially through concealment, discounting the benefits being paid out to claimants. The problem is that claimants who apply for unemployment benefits are not aware of this “discount” on their benefits until charged with concealment six to twelve months after first filing their unemployment claims.

So, what I wrote in February 2016 remains valid, especially since the definition of concealment has now been changed formally to make claimants liable for any mistakes they make on their weekly claim certifications:

These numbers show a sudden increase in 2014 in concealment cases and this increase accelerated in 2015. In this light, the Department’s push to change the definition of concealment is part of an agenda to expand the scope and reach of concealment. The Department countered in its testimony before the committee that an intent to conceal is still required under its proposed changes to the definition of concealment. The proposed language, numerous posts on this blog, a Commission memorandum, and Kevin Magee’s testimony at the public hearing belie the Department’s assertions. Mistakes are increasingly being charged as concealment by the Department, and Commission review applying the actual concealment standard is the only way to fight these kind of charges.

Essentially, concealment is becoming the modus operandi of the Department’s efforts in administering the state’s unemployment law. Anyone who makes a mistake is at risk of a concealment charge from the Department, and the Department wants to change unemployment law to reflect this practice.

AB819 signed into law

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

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

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

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

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

Criminalization and strict liability for concealment: moving forward

The official Advisory Council/DWD bill, AB819, passed the Assembly yesterday and is now ready for the Senate to take up (as reported previously, both the Assembly and the Senate had committee hearings on their respective versions of the DWD-UI bill; so far, only one elected official — Sen. Chris Larson — has voted against these changes to unemployment law).

Meanwhile, the criminalization of unemployment mistakes — aka concealment which will soon be redefined as strict liability — via AB533 was also passed by the Assembly this week. This bill even gained a sponsor — Rep. Rohrkaste. It was also significantly amended to criminalize individuals acting on behalf of employers who:

knowingly makes a false statement or representation in connection with any report or as to any information duly required by the department under this chapter, or who knowingly refuses or fails to keep any records or to furnish any reports or information duly required by the department under this chapter and who, as a result of that false statement or representation or knowing refusal or failure, avoids liability to the department for contributions, reimbursements, assessments, or other amounts under this chapter . . .

In other words, employers and their agents who make “knowing” mistakes on their unemployment reports may face the same criminal penalties that claimants do for their mistakes on their weekly claims. Watch out employers.

NOTE (19 February 2016): Mike Ducheck from LRB points out a major mistake of mine: the substitute amendment was NOT passed but tabled. Instead, the Assembly passed an amendment that deleted several lines from the bill, including the requirement that a “person knowingly made false statements or representations” for these new criminal penalties to apply. In other words, there is no criminalization for employers’ mistaken unemployment reporting, only claimants’ mistaken unemployment reporting once the recommended changes to concealment in AB819 pass.

Note as well that these new criminal penalties will only apply for the “mistakes” that occur after this bill becomes law.

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.