UI Forum (ADP Unemployment Group)
First Quarter 2011
Voluntary Quits – Is UI Benefit Disqualification Automatic?
Many employers assume when a worker quits that he or she is automatically ineligible to collect unemployment insurance (UI) benefits. While most “quits” are disqualifying, there are exceptions. State laws vary, but the basic premise is if the quit is voluntary and not attributable to the employer, the person will be disqualified from benefits. The “burden of proof” falls on the individual to show there was “good cause” for leaving that is directly attributable to his or her employer, in order for the UI agency to determine benefits should be paid. Below are common reasons for quitting and how it is usually viewed in terms of “good cause.”
Quits Which May Not Constitute Good Cause
The following are generally viewed as leaving due to personal reasons that are not connected to a worker’s employer.
- Attend school
- Career change/new job
- Job abandonment
- Stay at home with children
Leaving for certain personal reasons may be considered “good cause” even though they are not attributable to the employer. Over the years, UI laws have been amended and benefit eligibility expanded to take into account “compelling personal reasons” where a worker has no reasonable alternative but to quit his or her job. Such reasons are:
- Medical reasons on advice from a doctor
- Caring for an ill or dependent parent or child
- Following a spouse who is transferred or in the military and it is impractical to commute
Quits Which May Constitute Good Cause
Good cause for quitting may exist if an employer substantially changes the terms of hire or an employment contract for reasons such as:
- Demotion or loss of responsibility
- Harassment or discrimination
- Significant reduction in hours or pay
- Violation of wage and hour laws
- Working conditions detrimental to a worker’s health or safety
- Worksite relocation resulting in worker hardship
Normally, the change must be deemed detrimental to the worker’s best interests.
There can be instances when good cause is not established, if the individual continues to work for a significant period of time after employment changes are made. The UI agency may determine that by remaining in the job, the worker condoned the change.
Employers should clearly document the details of a worker voluntarily leaving. Your ADP Unemployment Group representative can also help you navigate the complexities of quits in order to better manage your unemployment costs.
UI Tax Changes Included in President’s Budget Proposal
On February 14, 2011, President Obama’s Fiscal Year 2012 budget was officially presented to Congress. Included in the proposal are a number of changes aimed at short-term tax relief and long-term restoration of the Trust Fund for the Unemployment Insurance (UI) Program. Highlights are outlined, below.
- Waiver of interest for 2011 and 2012 on Title XII loans given to the majority of states to continue paying UI benefits. Similar provisions contained in the Recovery Act expired 12/31/2010, meaning employers would face special tax assessments in order for states to pay interest due.
- Waiver of FUTA credit reductions for states subject to reductions for the period 2011 – 2012. Employers would see increased federal UI taxes through loss of FUTA credit, which is required by law when states are unable to repay loan balances within a specified timeframe. Approximately 22 states are positioned for credit loss over the next two years.
- Reduce the FUTA tax rate from 0.8% to 0.38%, but increase in the FUTA taxable wage base from $7,000 to $15,000, effective 2014, and thereafter it would be permanently indexed to growth in wages. Employers would not only see an increase in FUTA taxes, but in state taxes too, since the law requires a state’s taxable wage base to be at least equal to the federal wage base. Many states would need to increase their wage bases beginning in 2014.
- Extend the 0.2% FUTA surtax through 2013. This tax is set to expire in 2011.
The combined short-term interest and credit reduction relief is estimated to be over $9 billion. Changes to the FUTA wage base and tax rate are expected to cost employers roughly $58.5 billion in payroll taxes over the next ten years.
Employer advocates and members of Congress have concerns with these proposals, especially since increased UI costs could negatively impact the ability of businesses to invest in job growth.
Also included in the President’s FY 2012 budget are funding proposals for various UI-related initiatives including worker misclassification, state paid-leave programs, and expanded shared-work programs as an alternative to permanent layoffs.
Washington – Important UI Legislation Enacted
Washington’s Governor, Chris Gregoire, recently signed two pieces of important unemployment insurance legislation into law. SB 5135 and ESHB 1091 were fast-tracked so that UI tax reductions could be applied to employers’ 2011 taxes.
The new legislation outlines both tax and benefit changes. The five primary provisions are:
- a cap on the social cost factor tax – a component of the UI tax rate
- an adjustment of the proportion of taxes paid in each rate class
- expansion of the training benefits program
- aligning state law so unemployed individuals can take advantage of state extended benefits currently being funded by the federal government
- a short-term temporary increase in the weekly unemployment benefit amount.
Many employers will see reduced tax rates, due to the cap on the social cost factor, accompanied by lower multipliers that set the social cost tax rate for rate classes 1-20. Rate classes 21-40 remain unchanged.
Employers originally received tax rate notifications in December 2010. Because of the new legislation, the Employment Security Department is currently identifying employers who will now pay lower taxes in 2011. Revised statements are expected to be mailed on March 3, 2011.
The tax reductions are estimated to keep $300 million in the hands of employers this year.
Enhancements to the current Training Benefits program go into effect on July 1, 2012. They include:
- adjusting the definition of dislocated worker
- elimination of application and training-enrollment deadlines
- elimination of the “full-time training only” enrollment requirement
- removing the “once in five years” limitation
- paying training benefits after extended benefits, rather than before
- eliminating the $20 million annual funding cap
Changes to the Training Benefits Program are expected to increase utilization of the program and enables Washington to receive $98 million in additional federal UI funds.
A portion of the federal funds - $68 million - will be used to pay for a temporary benefit increase. For new UI claims filed between March 6, 2011-November 5, 2011, only, an amount of $25 will be added to the weekly benefit paid. This temporary benefit increase will not be charged against an individual employer.
Note: The Employment Security Department needs time to make the necessary computer programming changes to accommodate the benefit increase, which won’t be completed until July 2011. Claimants who are eligible for the additional $25 dollars will receive retroactive payments for weeks claimed between March and July.
The new law amendments also allow state extended benefits to remain available through 2011, by changing the “look back” period from two years to three years for the triggering on and off of extensions. The revised “look back” is in accordance with congressional authorization so states may continue to assist the long-term unemployed and take advantage of the current federal funding of state extended benefit costs.
A Fact Sheet detailing the new UI tax and benefit changes can be found on the Employment Security Department website at:
2011 legislation: tax reduction and benefit enhancements
Save the Date! – UWC Annual UI Issues Conference
The 2011 National UI Issues Conference sponsored by UWC’s National Foundation for Unemployment Compensation and Workers’ Compensation has been scheduled for June 28-30, 2011 in St. Louis, MO at the Hilton St. Louis at the Ballpark.
Once again, the most up to date information from industry experts will be provided on the major unemployment insurance policy and administrative issues affecting employers, states and unemployed workers.
For conference details, go to:www.uwcstrategy.org/Conferences.aspx