Total Tax
April 2010
Massachusetts QUEST Article Retraction
The Massachusetts Department of Unemployment Assistance (DUA) implemented a new employer self service system, QUEST, that can be accessed at www.detma.org. If you received the ADP UCS Update asking that you log on to this web site and assign ADP Unemployment Compensation Services (UCS) the appropriate roles to handle your unemployment insurance (UI) benefit matters, please disregard those instructions. All ADP Total Tax and Total Tax Plus clients do not need to take any additional steps in order for ADP UCS to assist you with your UI matters. If you have already made this change online, please remove ADP UCS as your agent on the Massachusetts QUEST system.
For ADP Tax Filing clients, if you have not already done so, please assign ADP (TPA ID# 100093) the Payments Update and Submit role and the Employment and Wage Detail Update and Submit role to ensure ADP can continue to file your quarterly contribution reports to Massachusetts DUA. Please call your ADP representative with any questions.
Unemployment Insurance Is Controllable
Unemployment insurance is a tax, and like other taxes, it reduces profits. However, unlike other taxes, it is controllable—the more you pay in unemployment benefits, the more you will pay in taxes. In an effort to assist with reducing and controlling these costs, we have outlined common causes for unnecessary unemployment benefit charges and provided some tips to assist you with minimizing the expense. Because layoffs might be impacting your unemployment costs, you want to ensure that you do a thorough job in preparing for those ineligible unemployment claims that you should contest. Reasons for ineligibility could be because the claimant was discharged due to misconduct or the claimant resigned without good cause connected with the job.
Misconduct Evidence
When an employee is discharged, the employer must show that the employee was separated due to misconduct. Misconduct is generally defined by most states as an intentional or willful act committed against the best interests of the employer. If an employer is unable to prove misconduct was the reason for the discharge, then the claimant will most likely receive unemployment benefits. One of the best ways to establish misconduct is with well documented proof of the events leading to the termination. Documentation may include the company policy or handbook, proof that the claimant received a copy of the policy, written warnings, video surveillance, or signed confessions. Often, employees are discharged based upon suspicion, hearsay, or for other intangible reasons that cannot be substantiated. Documenting the misconduct can be as simple as giving a written warning when a problem arises and then following through when the next incident occurs.
No Firsthand Testimony
Generally, a sworn denial of wrongdoing or misconduct carries more weight than hearsay evidence. This means that employers should always ensure that the firsthand witnesses to the misconduct are interviewed, their statements are documented, and that they are available to testify at an appeal hearing. This includes any witness, employee or otherwise, who saw or heard the incident that caused the claimant to be discharged. This could be a co-worker who found the claimant sleeping in the break room or a customer who was present when the claimant was using foul language in the workplace. Make sure that you document the information when it’s still fresh and the details are easily recalled by the witness.
Loss of Appeal Rights
Don't risk losing an unemployment claim because you waived your rights to contest the claim at the appeal process and are no longer able to present additional information. Be sure to have the details of the claimant's separation ready to be submitted with the claim response. Never assume that you can present documentation or additional details at the appeal or hearing level. Many state agencies are not allowing employers to present or discuss any new evidence with the appeal or at the hearing unless it was presented with the claim response. Even if the initial determination is in your favor, the claimant still has appeal rights and the case could end up at the hearing level.
When a claim for unemployment benefits is filed, each state agency allows the employer a specific amount of time to respond to the claim with all the details of the claimant's separation. On average, the period allowed to make a protest is only ten days or less. Responding to the claim is the first opportunity to protect an employer's state unemployment tax account and avoid unwarranted charges. Failure to respond to the state agency within the statutory time limit is generally interpreted as waiving all rights to protest or to appeal payment of unemployment benefits. In addition, the process to reverse an unfavorable claim ruling is very time consuming and costly for all parties. Some state agencies will also levy a monetary penalty against employers for failing to respond timely. ADP UCS Claims Representatives are knowledgeable in the statutory time frames allowed for each form in the different states. ADP UCS will coordinate the response with you to make sure that it is returned timely.
Insufficient Disciplinary Action
Many employees are discharged after repeatedly violating an employer's policies but without ever receiving a formal warning. Written "warnings" are the best way to inform an employee that his or her job is in jeopardy. This warning enables the employer to document the employee's behavior as well giving the employee the opportunity to correct the behavior. A paper trail could make all the difference in winning or losing an unemployment case.
Inability to Perform the Work
An employee's inability to do the work is not considered misconduct. If an employee is never able to satisfactorily meet an employer's standards and is discharged for this reason, the employee will most likely qualify for unemployment benefits. On the other hand, it may be considered misconduct if an employee demonstrates the ability to perform the work, but subsequently the work deteriorates. This is where the prior warnings (paper trail) play an important role. For example, an employee demonstrates average or above average work ability until receiving a warning for too many absences then either as a form of retaliation or other reasons, the work quality decreases. If the decrease can be tied to the issuing of the warning, then misconduct may be proven.
In addition, other reasons why employers lose unemployment cases include: allowing too much time to pass between an incident of misconduct and the discharge, making a substantial change to the hiring agreement, or failing to establish employee policies and procedures.
Hiring Practices
Begin working on controlling your unemployment insurance tax when you make your hiring decisions. With the high number of layoffs today, it is not uncommon to have hundreds of applicants for one position. Use this to your advantage by performing thorough background and reference checks, testing of ability, or other methods.
By paying close attention to the details, employers can increase their chances of winning more unemployment claims. Our overall goal is to control your unemployment costs through a client-driven partnership. Working together, we will ensure timely compliance to statutory requirements with a common goal of reducing your unemployment costs. Good hiring practices will deliver the best results.
Legislative Highlights
President Obama’s FY ’11 Budget Proposal
President Obama’s budget proposal for Fiscal Year (FY) 2011 was released and contains provisions that impact employers with regards to unemployment insurance (UI). As in prior years, there are proposals included to assist the states in identifying, collecting, and preventing overpayments. In 2009, over $11.4 billion in UI benefits were erroneously paid. This budget proposal requires the states to charge employers found to be at fault when their actions lead to claimant overpayments. Failure to provide the state with complete and accurate separation information during the fact-finding investigation is a significant cause of claimant overpayments. Should this provision pass, employers in all states would be held liable for benefits paid to claimants in error when the employer is found at fault. Increased benefit charges directly affect employer UI tax rates in future years.
Other proposed provisions include making the FUTA 0.2% Surtax permanent, and improving the accuracy of the data in the National Directory of New Hires (NDNH). Making the FUTA surtax permanent is expected to raise an additional $14.2 billion in revenue through 2020. Improving the data in the NDNH will further allow the states to reduce improper UI payments by identifying individuals who are collecting benefits after they have secured new employment.
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Unemployment Compensation Services Update is a quarterly update for ADP’s Total Tax clients to address the issues of employee personnel practices, state unemployment tax, and payroll tax filing matters. This publication is distributed with the understanding that the publisher is not engaged in the practice of law. If legal issues arise in the context of your business, independent legal counsel should be consulted.
Submit unemployment-related documents, including your company payroll code, company name, and contact telephone number on all correspondence to:
Automatic Data Processing, Inc., Total Tax Department, P.O. Box 6000, San Dimas, California 91773-9060
Hotline Number: (800) 959-6246
For even more information about our products and services, please visit our Web site at www.adp.com .