UI Forum (ADP Unemployment Group)

Fourth Quarter 2011

The UI Hearing – Prepare in Order to Prevail

Unemployment Insurance (UI) hearings are generally held when the initial claim determination regarding eligibility for benefits has been disputed. It is the responsibility of the hearing officer conducting the proceedings to uncover all relevant facts, develop the record and apply the UI laws of the particular state so that an appropriate decision can be rendered in the case. The employer, whether the appellant (the party filing the appeal for a UI hearing) or the appellee (the party against whom the appeal is filed), can best prevail by properly preparing for the hearing.

Pre-hearing preparation starts with identifying the "first-hand" witness or witnesses to provide testimony at the hearing. Whether the witness attends the hearing alone or with an ADP Unemployment Group hearing representative, it is critical the person have direct knowledge of the separation and is equipped with the facts. Next, the witness should secure and review all documents needed at the hearing to support the employer’s position. Remember, in discharge cases the burden of proof for misconduct and good cause for termination rests with the employer, as the moving party in the separation. A copy of the company policy, verbal and written warnings, and/or a progressive disciplinary action plan are all items that help establish that the employer gave the worker every opportunity to correct the behavior prior to the final action of termination.

During the hearing, credible testimony by the "first-hand" witness is critical. This testimony should provide specific details such as date, times, names and a description of the events leading up to the separation, especially the final incident. The witness should have quick and easy access to all relevant documents related to the UI case, including the worker’s employment records. When asked a question by the hearing officer or another party, the witness should listen to it, take a moment to consider it, and then provide a direct response to that question only, without adding additional or irrelevant information. Questions should be answered that are within the scope of the witness’ knowledge. Answers should be done with conviction and without hesitation, but don’t be afraid to say, "I don’t know," if you do not know the answer to a particular question. The witness is free to ask that a question be clarified or restated.

The hearing proceeding is a last chance to enter facts into the UI claim proceedings. Once the hearing has been concluded, the employer normally will not be allowed to submit any additional information. Therefore, the witness should take full advantage of this final opportunity to ensure all relevant testimony and documents become part of the case record.

The experience and expertise of the ADP Unemployment Group can help employers not only navigate the complexities of the hearing process, but give them the necessary tools to prevail.

UI Integrity Language May Result In Higher Claim Costs

On October 21, 2011, President Obama signed legislation renewing Trade Adjustment Assistance (TAA). The bill language includes unemployment insurance (UI) related provisions known as "UI Integrity." The language says, in part, that states are prohibited from benefit non-charging to an employer's UI account, if the unemployment agency determines benefits were erroneously paid due to a pattern of failure on the part of the employer or its agent to respond to a request for information, or of providing insufficient information. This means you could remain liable for claim costs even if you win the UI hearing.

The UI Integrity provisions are said to have been included in the bill to help offset the costs of the TAA program. The language is aimed at reducing the high cost of improperly paid unemployment benefits and holding employers accountable for their part in overpayments. Beginning with President Obama’s Executive Order – Reducing Improper Payments and Eliminating Waste in Federal Programs - in 2009, followed by the Improper Payments Elimination and Recovery Act (IPERA) signed into law in 2010, this new UI Integrity language is the latest action in a continuing trend in which employers are expected to drastically improve in the quantity and quality of relevant information provided to state unemployment agencies at the front end of the claim process, rather than waiting until an unemployment hearing to provide separation details.

The U.S. Department of Labor reports that the second leading cause of overpayments is lack of sufficient separation information provided by employers, which drains millions of dollars, unnecessarily, from UI trust funds. Many times only minimal information is provided at the claim level, UI benefits are allowed, then the employer appeals and comes to the hearing with full details and supporting documentation that should have been provided early on. The employer wins the hearing and expects to be credited for any benefits paid out between the time the claim was allowed and the denial at the hearing. However, by the time a hearing is held a claimant has collected weeks of UI payments, which UI agencies have to then try and get back, often without success. The UI Integrity language effectively halts the credit or non-charge to an employer’s unemployment account, as a consequence of not providing details.

In order to prompt employers to provide complete, accurate and timely information at the point in which a former worker files an unemployment claim and, thereby, reduce the overpayment rate, the UI Integrity language in the TAA legislation will not allow employers to "get back" the money erroneously paid out. Even if you prevail at an unemployment hearing, but it is determined you did not provide full separation details on the initial claim response, you will no longer be credited or non-charged for any benefit payments paid out prior to you winning the unemployment hearing. This change means you could see increased claim costs which might, in turn, impact your tax rates.

State UI laws must comply with the UI Integrity provisions by 2013. The U.S. Department of Labor is expected to issue guidance to the states within the coming months. Employers should take all necessary steps to gather complete and accurate details at the time a separation occurs, and provide full information to their ADP Unemployment Group representative.

UI Benefit Extension Legislation Introduced

The Emergency Unemployment Compensation Act (HR 3346 and S 1804) was introduced by Democrats in both the House and Senate on November 3, 2011. This legislation would continue the current federal unemployment insurance extension programs through 2012.

Right now, the federally funded Emergency Unemployment Compensation (EUC) program and the federal funding of state Extended Benefits (EB) is set to expire at the end of 2011.

Provisions in the proposed legislation would also relieve states with federal unemployment loans from interest charges next year, prevent higher federal unemployment taxes in January 2012 on employers in states with insolvent UI trust funds, and provide a solvency bonus to states without any outstanding loans.

The bills have been referred to committee for consideration.

State Updates

California – On October 9, 2011, Governor Jerry Brown signed into law strict employee misclassification legislation. The legislation was Senate Bill 459, now known as Public Act 706, joins numerous legislative and administrative efforts at the federal and state levels to deter and punish the misclassification of employees as independent contractors.

The law prohibits willful misclassification, as defined, of individuals as independent contractors. It authorizes an individual to file a complaint, as specified, to request the Labor Commissioner to issue a determination that a person or employer has violated these prohibitions with regard to the individual filing the complaint. It directs the Labor and Workforce Development Agency to assess specified civil penalties from, and would require the agency to take other specified disciplinary actions against, persons or employers violating these prohibitions. Penalties for violations of the law include monetary assessments ranging from $5000 to $15,000 for each violation.

The law includes an amendment to California Code Section 2753 which subjects third party or non-lawyer consultants to joint liability for knowingly advising an employer to classify a worker later deemed an employee as an independent contractor; and require an offending employer to post a notice on its website for one year containing specific information about its violation of the law. This amendment does not apply to a person who provides advice to his or her employer or an attorney authorized to practice law in California or another United States jurisdiction who provides legal advice in the course of the practice of law.

Connecticut – The maximum weekly unemployment benefit amount increased to $573 from $555, effective October 2, 2011.

Florida - Beginning January 2012, the maximum unemployment benefit weeks in Florida will range from 12 to 23, depending on the state’s unemployment rate.

Also, 2012 rate factors have been released. Legislation that was originally passed in 2009 will soon be in effect, resulting in considerable increases over the 2011 factors. The multiplier increased to 1.1382 from 0.5833, a 95% increase, and the minimum rate to 2.02% from 1.03%, a 96% increase. Coupled with the taxable wage base increase from $7,000 to $8,500 in 2012, employers will experience significant tax cost increases next year. Tax rate notices will be issued in mid to late December 2011.

Illinois - Beginning January 2012, the maximum unemployment benefit weeks in Illinois will decrease from 26 to 25.

Indiana – This is a reminder to employers about recent UI law amendments that impact benefits and eligibility.

As of October 1, 2011, severance pay will be deducted from weekly unemployment insurance benefits. In addition, workers who accept a voluntary buyout to resign or retire will not be eligible for benefits.

Effective January 1, 2012, claimants may choose to have state and local taxes withheld from their weekly unemployment benefits. Additionally, for claims filed on or after July 1, 2012, the benefit amount will be calculated based on a claimant’s annual income; however, the maximum weekly benefit amount will remain $390.

Additional information can be found at http://www.in.gov/dwd/ under "Latest Headlines and Events."

Kansas - Rates to be effective January 1, 2012 were issued on November 8, 2011. The minimum rate is 0.11% and the maximum rate is 9.40%. The taxable wage base remains $8,000. As of June 30, 2011 the total of the taxable wages paid during the preceding 12 month period is divided into 51 approximately equal "rate" groups. The positive rates remained the same; however, the ratios changed. The negative table increased significantly with the addition of a surcharge ranging from 0.1%-2.0% added to all negative balanced employers' rates to pay the interest on the Title XII loan. The contributions attributable to this rate are not certified by the state to the IRS for FUTA tax credit purposes nor are they credited to your account balance for rate calculation purposes.

Massachusetts – The maximum weekly unemployment benefit amount increased from $625 to $653, effective October 2, 2011.

Michigan – Employers are reminded that a bill signed into law in March 2011 which lowers the number of weeks a claimant may collect UI from 26 weeks to 20 weeks, takes effect beginning January 2012.

Also, the Unemployment Insurance Agency recently posted their Fall 2011 issue of the Michigan Employer Advisor newsletter. Included on page 2 is Information regarding the solvency tax on negative balanced employers and the 2012 state tax credit. To see the newsletter, go to http://www.michigan.gov/documents/uia_advisor_90020_7.pdf.

Mississippi – The UI agency has changed how it determines "timely" claim responses and filed appeals, due to a recent Court of Appeals decision. It has been the agency’s practice to use the postmark as the governing standard of timeliness, although there is no authorizing law or regulation to support this practice. Because of the Court of Appeals decision, which said time limits must be strictly construed, the UI agency must now receive documents within their specified time limit. They will no longer accept a postmark as the timeliness standard.

Minnesota – The maximum weekly benefit amount increased from $578 to $597 as of October 30, 2011.

New Hampshire – The law was amended, effective September 11, 2011, regarding gross misconduct and theft. The unemployment statutes now say the term "gross misconduct" includes a single theft or multiple thefts in the aggregate amount of $250 or more. Previously, the law established theft as gross misconduct if it was in the amount of $500 or more. In addition, the benefit disqualification for theft in an amount greater than $100, but less than $250 ranges from 4 to 26 weeks.

New Jersey – Form BC-10, Instructions for Claiming Unemployment Benefits, is being revised, due to recent legislative changes regarding its use. Currently, form BC-10 does not provide the worker detailed information about the time sensitivity for filing a claim for unemployment benefits. The amended form must include, but is not limited to, the following information: (1) the date upon which the worker becomes unemployed, and, if the unemployment is temporary, the date upon which the worker is recalled to work; and (2) that the individual may lose some or all of the benefit to which he/she is entitled if he/she fails to file a claim in a timely manner.

Employers are required to complete a BC-10 and give it to any worker separated for any reason, be it permanent or temporary, under Section 6 (a) of the unemployment law. A copy of the form may be found at: http://lwd.dol.state.nj.us/labor/ui/content/forms_index.html.

Oregon – The law was recently amended so the initial unemployment claim form may be directly mailed to the employer’s authorized agent. Historically, the initial claim notice had to be mailed to the employer, because of statutory language about "giving written notice to the employing unit." Oregon was able to amend its laws, because of impending system improvements known as SIDES (State Information Data Exchange System.) The unemployment agency is working out the administrative procedures for the change.

South Carolina - Law amendments enabled legislators to appropriate roughly $146 million to be deposited directly into South Carolina’s UI trust fund. These funds allowed the agency to recalculate and reduce tax rates for all employers, retroactive to January 1, 2011. Revised rate notices were issued in September 2011. The agency was also able to make a substantial payment towards the state’s Title XII loan (a federal loan taken in order to continue paying UI benefits), which enables them to qualify for an exemption to the previously anticipated FUTA credit reduction for employers’ 2011 federal unemployment taxes.

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