Q:  What happens when state unemployment funds run out of money?  Do the benefits stop being paid?

A:  No.  Federal law provides that a portion of the federal unemployment tax employers pay is contributed to a trust fund called the Federal Unemployment Account (FUA).  When a state fund becomes insolvent, loans are made from FUA to the state fund and benefit payments are continued.  Employers in the affected state are ultimately responsible for paying back the loans with higher state unemployment taxes, higher federal unemployment taxes or both.  In the history of the system, benefits have never stopped being paid when a state trust fund went broke.

Q: Is it possible that the FUA could become insolvent during this recession? 

A: In fact, it already has.  The FUA did become insolvent for the first time in the history of the UI system in July this year.  However, Congress passed legislation that transferred funds from the Treasury to the FUA so that loans could continue to be made.  There was no limitation to the amount that could be requested in loans to FUA.

Q: Aren't these loans going to get pretty expensive in terms of employer taxes?

A: Yes, and more so than you may think.  According to Steve Carter, Sr. Manager, Government Relations, "This situation is going to get pretty severe for employers in the years to come.  While the Obama administration granted the states some relief by making these federal loans interest free through the end of 2010, the money being lent to the FUA does have interest that will have to be paid back in addition to the amount borrowed. In essence, the feds are borrowing interest bearing loans to make interest free loans to the states, that's a little goofy.  To give you some perspective, about 25 states have become insolvent and have borrowed about $20B.  USDOL estimates that 40 states may become insolvent in this recession with borrowing about $90B.  That number may be low.  California recently upped its estimate of needed borrowing from $18B to over $27B...and that number may be low." 

Q: So, if the states are using interest bearing money to borrow on interest free loans, who pays back the interest? 

Any guesses?

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Tammy Mullin

During interviews with potential employees, ask probing questions requiring detailed responses, not just “yes” or “no” answers.  It probably goes without saying that the goal is to evaluate whether the applicant is capable of and willing to perform the job requirements.  Utilize what you learn on the job application, resume and through testing to ask very specific questions associated with the job requirements.  Some things to keep in mind are:

·         Before the interview (and really testing) determine what skills and personality traits would be well suited for the position.

·         Review the application and test scores to determine what traits the applicant has that fit with the requirements of the job and what traits do they have that just don’t?  Example; you generally would not want a timid salesperson or a finance person that was not detail oriented.

·         Just because the applicant was working in a similar position before doesn’t mean they were capable of doing the job.  Ask very specific questions like:

o    How did you perform your job?

o    What skills do you have that made you well suited for the work you were performing?

·         Ask “How have you handled _____ in the past?” type questions related to the job requirements and necessary skills to perform the job.

·         You are looking for a skill set and the right person for the job might not always have the most experience.

·         Look for accomplishments that the applicant has had in the past not just activities performed.  Accomplishments should really be about results.  Example; I worked in an outbound call center and my call rate was ___ per hour compared to the company average of ____ and I converted ____ calls to sales.  Then ask a follow up question regarding how they were able to accomplish it.

·         Get a feel for how well the person’s personality fits with the rest of the group.  

This is really just a sample of the types of questions you can ask and evaluations you should be making during the interview process.  Some skills tests will actually give you probing questions that should be asked and an indicator of how the person’s personality will fit in certain types of professions.  To learn more, go to www.panpowered.com, where you can find a multitude of tests to fit your needs.  Remember, extra care on the front end to hire the best match can save on unemployment costs on the back end.  The average claim will cost an employer about $4,500 in benefit charges. 

Tammy Mullin

The importance of testing skills can’t be under-estimated in terms of making sure you hire people who are capable of doing the job.  I a lot of cases, a former employee will be able to collect unemployment even if they were let go because they couldn’t do the job.  Making sure you have the right fit is absolutely essential and the first line of defense in controlling unemployment costs.

It’s important not only from the employer’s perspective, but if you think about it, it makes more sense from the job seekers perspective as well.  Most job seekers are looking for opportunities where they can contribute to an organization’s success and make a difference.  At the very least, they are looking for a place where they can be happily employed and I’m fairly certain they don’t want to work in an environment where they are failing and are just waiting to be fired.  It’s demoralizing for the employee and increased churn can also hurt the remaining employees’ moral and possibly hurt employee retention, further increasing unemployment costs and causing an additional litany of problems within the organization.  Right now I hear from employers that employee retention as the economy improves is their #1 concern.

So how do you deal with this?  Well, if specific skills are required in the job (such as typing, dictation, cash register use, etc.) develop a way to test these skills prior to hiring.  Be sure the tests you administer are valid and represent the actual content of the job. All tests should be uniformly given to all applicants for a position. It is your responsibility to find out as much as possible about an applicant's abilities and attitude before deciding whether to hire the individual. 

Having a consistent testing plan is perfectly acceptable.  Employers start getting into trouble when they inconsistently apply testing in the hiring process and if testing is the sole basis for evaluation.

To learn more view this free eSeminar “Recession Proofing your Selection System: Cost-effective Use of Assessments in a Weak Economy”

Tammy Mullin

Hiring the right individual for a job is one of the first ways in which you can control your unemployment compensation costs. Failing to hire an individual suited for a position may ultimately lead to his/her discharge, because he/she lacks the ability to perform the job duties. If this person files for unemployment compensation, he/she could be awarded benefits, which may be charged against your company.

Therefore, in an effort to minimize future unemployment costs, you should carefully review the individual’s job application before hiring.

Review the Job Application

• Does this applicant’s work experience and/or educational experience meet the requirements of the position?

• Was a reference check performed?

• Did the applicant follow instructions when completing the application?

• Was the application thoroughly reviewed?

• Are all areas on the application completed?

• Are there any unexplained breaks in employment history?

• Are the reasons for leaving past jobs clear?

• Does the employment history on the application match the resume, if one is provided?

• Is the applicant willing to work the hours required for this position?

Tammy Mullin

We provide free legislative updates to employers so they can be informed about changes impacting the states in which they do business.  Click here to sign up.

Tammy Mullin

After much discussion over the past several weeks, additional federal funding for unemployment benefits has been signed into law.  The additional weeks will give much needed support to families struggling through these hard economic times.  As an employer though, here is how the new legislation will impact you.

Situation

President Obama signed HR 3548, the Worker, Homeownership, and Business Assistance Act of 2009, into law on Friday, November 6, 2009.  The legislation provides for additional weeks of federally funded unemployment benefits.

What Employers Need to Know

The federal unemployment benefits extension program, known as Emergency Unemployment Compensation (EUC), originally went into effect in July 2008 and was later extended in November 2008.  The EUC program provided for up to 20 weeks of additional benefits in all states (Tier I) and up to an additional 13 weeks in high unemployment states (Tier II).

The newly enacted legislation modifies Tier II benefits and establishes Tier III and Tier IV of EUC.  Originally, Tier II allowed for up to 13 weeks of EUC in some states, but now will provide up to 14 weeks of benefits in all states – it basically adds 1 additional week to this level of EUC.  Tier III provides for up to 13 weeks of federal extended benefits in states with a total unemployment rate (TUR) of at least 6.0% or an insured unemployment rate (IUR) of at least 4.0%.  Tier IV provides up to 6 additional weeks of EUC in states with a TUR of at least 8.5% or an IUR of at least 6.0%.

All EUC benefits are being federally funded from general revenue, meaning no employer (tax contributing or reimbursing) will be directly liable for the extensions.  However, HR 3548 extends the 0.2% FUTA surtax, set to expire at the end of 2009, through 2010 and for the first 6 months of 2011 as an offset to the general revenue funding of the EUC extensions.

HR 3548 does not extend the effective date of the EUC program.  It is still set to expire December 31, 2009, so EUC claims would need to be filed by the end of this year for benefit entitlement under any of the tiers.  EUC claims established by the end of 2009 will continue to be paid until May 30, 2010.  In addition, the new EUC extensions are only authorized for weeks subsequent to HR 3548 being enacted; there are no provisions in the new law for retroactive EUC weeks.  

Note: The federal EUC legislation is separate from state extended benefits (EB) provisions contained in all state unemployment laws.  Thirty-nine states are paying EB, subsequent to any federal EUC entitlements.  Arkansas, Hawaii, Iowa, Louisiana, Maryland, Mississippi, Montana, Nebraska, North Dakota, Oklahoma, South Dakota and Utah have not currently triggered on state extended benefits.

What You Can Expect

Although individuals could technically collect up to 99 weeks of unemployment payments, taking into account regular benefits (up to 26 weeks),  federal EUC (up to 53 weeks for all tiers) and state EB (up to 20 weeks ), realistically the number of payments weeks will likely fall somewhere in the middle.

Industry officials anticipate Congress will propose more unemployment insurance (UI) amendments, since many of the Recovery Act provisions regarding the UI program are set to expire at the end of 2009.  TALX will continue to monitor and report on any developments.  

We provide free legislative updates to employers so they can be informed about changes impacting the states in which they do business.  Click here to sign up.

Situation

In 2005, due to a law change, the state of Washington changed the way they determined the amount of unemployment benefits claimants were eligible to collect; however, they did not change the way the benefits were charged to each employer. These are the benefit charges used in the employer’s rate calculation. As a result, employers may not have been charged for the full amount of the benefits collected by former employees. It has been determined that this practice is not in conformity with federal unemployment law.

What Employers Need to Know

To make the state benefit charging practices conform to federal law they have made adjustments to benefit charges going back to 2005 that will be used in your 2010 rate calculation. You will be receiving a statement titled "Change in Benefit Charges Summary" detailing the changes made to your specific account.

What You Can Expect

These adjusted benefit charges will only be used in rate calculations for the 2010 rate year and beyond. No amended rate calculations will be made for prior years.

Tammy Mullin

For employers, all unemployment hearings begin with the same initial questions regarding the former employee's employment. The questions, though not apparently crucial to the final outcome, can establish or destroy the witnesses' credibility with the administrative law judge. The questions asked are:

• The former employee's position
• Rate of pay
• First date worked
• Last day worked and last day employed if different

If a witness' testimony is uncertain or incorrect on these basic facts, the remaining testimony may be questioned as to its truth and/or accuracy and credibility.

Unemployment insurance hearings are informal, administrative proceedings designed to be fact-finding, non-confrontational in nature. Though informal in nature, remember that the administrative law judge is responsible for gathering the relevant facts regarding the cause(s) of the former employee's job separation.  Often times, there is conflicting testimony and the administrative law judge will have to rely on who they feel is the most credible.  For more information on unemployment hearings, see What Not to do at an Unemployment Hearing.

Tammy Mullin

Unemployment hearings require first-hand testimony to the facts and/or events under consideration. Therefore, persons with direct knowledge of the issues that caused the job separation, especially those relating to the final incident, are needed to participate at the hearing.

While some states will permit hearsay testimony and accept notarized statements from non-appearing witnesses, this type of information is never sufficient to overcome direct, first-hand testimony from either the claimant or the claimant's witnesses.

So, even if your state does allow hearsay testimony or accept a notarized statement, it is best to be on the safe side and send the witness.  Remember a lost case will cost on average about $4,500 so its worth the time to attend.  You wouldn't want to end up paying for a claim where the claimant wouldn't otherwise be entitled to unemployment benefits under state regulations just because you didn't show up. 

Tammy Mullin