Plain Language Summary of 2007 UI Law Changes

Beginning in calendar year 2009, each employer will pay unemployment insurance taxes on the first $12,000 of wages it pays each employee. The wage base increases to $13,000 in calendar year 2011 and $14,000 in calendar year 2013.

Beginning in January of 2009 employers with positive account balances will have a decrease of 0.2% (two-tenths of one percent) in their basic tax rate and an increase of 0.2% their solvency tax rate. Employers with overdrawn account balances will have a decrease of 0.4% (four-tenths of one percent) in their basic tax rate and an increase 0.4% in their solvency tax rate.

Beginning with UI benefits years that begin 04/06/08, Act 59 requires claimants to have 35 times their weekly benefit rate in total base period wages. Former law required 30 times the weekly benefit rate.

Act 59 defines concealment as intentionally misleading or defrauding the Department by withholding or hiding information or making a false statement or misrepresentation. When concealment is discovered for the first time, the Department will issue an appealable determination notifying the claimant that the claimant will forfeit future benefits in an amount equal to one times his or her weekly benefit rate for each act of concealment described in the determination. The penalty for acts of concealment occurring after the first forfeiture determination will be increased to 3 times the weekly benefit rate for each act. The penalty for acts of concealment occurring after the first determination at the 3 times level will be increased to 5 times the weekly benefit rate for each act.

Penalties are assessed in a similar manner to employers that aid and abet claimants to commit fraud. The penalty levels are:

Level 1 - $500 for each act
Level 2 - $1,000 for each act
Level 3 - $1,500 for each act

In addition to the increased forfeiture penalties, Act 59 makes the claimant ineligible for benefits for any week in which the claimant concealed wages. Currently a claimant may be eligible for partial unemployment benefits for a week in which wages were concealed.

As of the week beginning 01/04/09, the maximum weekly benefit rate will increase from $355 per week to $363 per week. The minimum benefit rate will also increase from $53 per week to $54 per week.

A claimant must be able to perform suitable work and available for suitable work to be eligible for unemployment benefits. Under the new rules, a claimant is considered able to work if he or she has the physical and psychological ability to perform suitable work. And a claimant is considered available for work if he or she maintains an attachment to the labor market and is ready to perform full-time suitable work in the claimant’s labor market. Former rules required that claimants be able and available for a specific percentage of suitable jobs in the labor market to be eligible for benefits.

A claimant who is partially unemployed receives reduced benefits if the earnings exceed $30. If the claimant is unable or unavailable to perform all scheduled work with the employer during a week, the claimant will not be eligible for any benefits that week if more than 16 hours of scheduled work is missed. If 16 or less hours are missed, partial wage formula will be applied to the additional wages that could have been earned to reduce benefits. Under former law the partial wage formula was applied to the additional wages that could have been earned regardless of the number of hours missed.

If an employee is terminated by an employer or employment is suspended because the employee is unable or unavailable for work with the employer or if the employee is on a leave of absence, the able and available test will be applied to determine whether the employee is eligible for benefits. If the employee is not able to perform and available for suitable work in the employee’s labor market he or she will not be eligible, except that for the first week of the separation, if 16 or less hours are missed, benefits payable for that week will be determined by applying the partial wage formula to wages earned and additional wages that could have been earned. Under former law, eligibility for benefits varied depending on the details of the situation.

Act 59 allows full unemployment benefit entitlement to parents who are employed in their child’s family owned corporation, partnership or limited liability corporation but by themselves or in conjunction with their children have limited or even no ownership interest in the business. Former law reduced benefits for parents that had limited or no ownership in their child’s business in the same way former and current law reduces benefits for owners. Owners control their own employment and unemployment. But parents that have little or no ownership will now be treated as regular employees and allowed full entitlement. Adult children who are over the age of 18, are employed by their parents, and have little or no ownership in their parents’ business have always been allowed full benefit entitlement when laid off from work.

Act 59 reinforces the interpretation of the attendance disqualification provision that when attendance issues are involved in a discharge, a misconduct disqualification may be applied if the attendance provision does not result in disqualification. It also removes a sunset date and makes the disqualification for absenteeism and tardiness a permanent part of the statutes.

In the 2005-2006 session of the Legislature, benefits granted due to employer fault were expanded. That change reduced instances of employers or employer agents not providing complete, timely and correct information when requested by the Department during fact-finding investigations prior to eligibility determinations. Act 59 makes the change permanent and specifies that Department records about the failure to respond may be admitted as prima facie evidence of that failure in appeals decisions on employer fault.

Beginning with the first quarter 2009, employers with a first quarter tax liability of $1,000 or more may defer up to 60 percent of the tax due for the first quarter. Act 59 specifies that employers taking advantage of the deferral must notify the Department electronically of their intent to defer and must file all quarterly contribution, employment and wage reports electronically in the manner and form prescribed by the Department.

Beginning with payments made in 2009, all employer agents who make payments on behalf of their clients will be required to pay taxes electronically. Also, any employer with a tax liability of at least $10,000 for any twelve month period ending on June 30 will be required to make all future tax payments electronically beginning January 1 of the next calendar year. The penalty for failing to pay properly is the greater of $50 or ½ of 1% of the amount due.

108.22(1)(a);

108.22(1)
(ac,ad,ae,af)

Beginning with tax and wage reports due for the 3rd quarter 2008,

• employers with 25 or more employees are required to file tax and wage reports electronically in the manner and form required by the Department,
• the penalty for filing wage reports incorrectly increases from $10 to $15 per employee, and
• the penalty are late wage reports is the same as for employers.

Beginning with reports due for the 3rd quarter 2009, the penalty for filing wage reports incorrectly increases from $15 to $20 per employee.

Previously, all tax and wage reports and payments were timely if they were postmarked no later than the due date, or the department received the report or payment no later than three days after the due date. With the new law, beginning with reports and payments due for the 3rd quarter 2008, reports and payments are timely if received by the Department on or before the last day of the month following the end of each calendar quarter. Due dates are: April 30, July 31, October 31, and January 31. Penalties are assessed on the employer for late wage reports; interest is assessed on late tax payments.

Assessed at one hundredth of one percent of taxable wages, this fee will continue until June 30, 2010, unless extended by law. The fee is offset by an equal reduction in the employer’s solvency tax rate. The fee is not charged to employers with zero solvency tax rates.

Use of Reed Act funds.

Act 59 permits use of up to $1 million in Reed Act funds for unemployment administration, if needed, in each of federal fiscal years 2008 and 2009 (October 2007 – September 30, 2009). The Department received legislative authorization to use Reed Act funds for administration during the previous biennium but did not expend any of the funds.

Act 59 directs the Unemployment Insurance Advisory Council to appoint a committee to study the definition of “employee” in the unemployment statute, §108.02(12) for possible changes and to provide any recommendations by June 30, 2009.