Total Tax
September 2011
The Importance of Information
In an effort to reduce unemployment overpayments, a number of states have adopted rules that penalize employers and/or agents for not providing complete and accurate data at the initial request for information.
Proper documentation is pivotal for success in unemployment claims management. Providing the complete details of a discharge, including information on policy violations and infractions, can mean the difference between a favorable or unfavorable ruling on your behalf. Take a look at the following case.
The Claim
After a large company discharged an employee, the subject's personnel file was sent to the centralized Human Resources (HR) department. Unfortunately, the unemployment claim arrived first. A company HR representative responded to the claim, without the benefit of supporting documentation from the claimant's file, stating that the reason for discharge was a policy violation. The employer received an unfavorable determination.
The Appeal
The employer appealed the determination maintaining that the claimant was discharged because of a verbal altercation on the job and that the employer had a policy prohibiting such behavior. The appeal letter itself did not contain information about previous counseling sessions with the claimant for similar incidents, nor did it indicate that the claimant had been given a final written warning four months prior to the discharge. Also, the appeal failed to mention that the employer had several witnesses to the final incident and that the verbal altercation included racial epithets directed at a customer.
The Hearing
When the notice of hearing arrived, the employer contacted ADP for assistance. ADP reviewed the issues, prepared the witnesses for testimony, and assembled the documents as exhibits for the employer's defense. An ADP representative attended the hearing with the employer.
At the hearing, the full details of the case finally emerged. Two employees repeated statements the claimant made to them about the customer, and other company witnesses testified that the discharged employee had been counseled about his language and demeanor. Also, it was shown that the claimant knew the employer's policy regarding acceptable language. Records of the previous counseling sessions, the company policy statements, and a statement signed by the claimant acknowledging receipt of the policy handbook were all submitted as exhibits.
The Decision
The judge found in favor of the employer, concluding that the claimant had been involved in misconduct related to the job and that, at the time of his misconduct, he was aware that his employment was in jeopardy.
The Final Word
Start with a good offense. Always submit complete information and documentation of events leading to a discharge when you first respond to a claim. This can avoid potential penalties and it will save time and reduce the amount of work it takes to win a favorable decision.
Program Integrity Act of 2011
The integrity of the Unemployment Insurance (UI) system is getting national attention. The UI program has been deemed non-compliant under the Improper Payment Elimination and Recovery Act because overpayments have surpassed 10%. From July 2009 through June 2010, the UI overpayment rate was 11.2%, which translated to $17.4 billion. The two most prevalent reasons for overpayments are claimants who are working and collecting benefits as well as the lack of detailed separation information provided by employers.
Preventing improper payments up front is the key and Congress has several provisions in the Unemployment Compensation Program Integrity Act of 2011 to reduce such overpayments. The highlights of this proposed legislation are as follows:
- Permits states to use up to 5% of unemployment compensation overpayments recovered for integrity activities, ensuring that proper payments are made only to valid unemployment beneficiaries.
- Permits states to use up to 5% of contributions collected due to employer fraud or tax evasion, including misclassification of employees, for integrity activities.
- Requires states to assess a penalty not less than 15% of the amount overpaid on any claim for benefits that is due to claimant fraud. These penalty funds would only be used for integrity activities.
- Requires employers to report former workers they rehire to the National Directory of New Hires (NDNH) after a separation of at least 60 days.
- Prohibits states from relieving an employer of benefit charges if the employer's (or its agent's) fault has caused an improper payment and if the employer (or agent) has established a pattern of failing to respond timely or adequately to requests for information.
Currently in many states, employers may be relieved of charges when an overpayment is declared or collected, even if the overpayment was caused by the employer's failure to timely or adequately respond to requests for information from the state. If this legislation is adopted, the last provision above would prohibit this, which could have significant impact on an employer's benefit charges and ultimately their UI tax rate.
It is extremely important that employers take the necessary time to gather all of the pertinent details at the initial fact-finding level to prevent an improper payment from being issued.
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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 .