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

Ever want to know what the unemployment insurance tax rate is in your state and how that compares to what you pay or what employers pay in other states?  How about average duration of an unemployment claim or the exhaustion rate for claimants collecting unemployment?

The DOL issues a quarterly report that can tell you this and much more about what is happening in the states in which you do business.    It’s sad to say, but I find it an interesting read.  I thought maybe you all would too.  Check it out at http://workforcesecurity.doleta.gov/unemploy/content/data.asp.

While you might not be able to do anything directly to influnce the statistics for your state, being informed can help you plan for the future.  Understanding whether your state has outstanding federal loans or how much revenue (tax collections) they take in can be an early indicator of what to expect to happen with your tax rates in the upcoming year and can help with forecasting.  I'm sure most companies are going through budget season right now and are just loving every minute of it. 

If you have an unemployment cost management service provider I would encourage you to talk to them about forecasting your rates for 2010.  If not, be aware and do your homework.  We provide legilative updates to employers (free of charge - how often do you hear that?).  Click here to sign up.

Tammy Mullin

I thought I’d send out some more real content today instead of my opinions about the world around us so here goes…..

When the unemployment compensation laws were originally enacted in the 1930s, the intent was to provide a supplement to individuals who were unemployed through no fault of their own.  However, unemployment laws have eroded (well, one opinion) to the point that even a person who voluntarily quits or is discharged may collect benefits!

A best practice for controlling unemployment insurance costs would be to make a probationary period a part of your company’s policy.  A new employee’s performance should be reviewed during an initial “probationary period.” If the employee does not meet expectations, you should determine whether additional training could bring the employee's work up to standards. If retraining is not a reasonable option and no alternatives exist, consider dismissing the employee as quickly as possible.

Even though most states do not recognize employer probationary periods and may award benefits to an employee if he was discharged for inability to do the job. Your liability for benefit charges is based on the amount of wages you paid the employee. Therefore, if you take immediate action regarding unsuitable employees, your unemployment liability will remain low.

Some states do provide for some type of probationary period within their unemployment compensation laws.  The states and particulars are as follows:

Colorado – The employer’s account is not charged if the claimant earned less than $1,000 (this applies to Merit Rated employers only).

Connecticut – The employer’s account is not charged if the claimant was employed for less than 30 days, whether or not consecutive, or if the claimant worked less than 240 hours for the employer.

Florida – The employer’s account is not charged if the claimant was paid less than $100 during the base period of if the claimant was terminated due to unsatisfactory performance during the initial employment probationary period.  The probationary period cannot exceed 90 days and must be an established plan (Employee must be informed of the plan within seven days of the date hired.).

Georgia – The employer’s account is not charged if the claimant was employed for less than 30 days, whether or not consecutive, or if the claimant worked less than 240 hours for the employer.

Illinois – The employer’s account is not charged if the claimant was paid less than $100 during the base period or if the claimant was terminated due to unsatisfactory performance during the initial employment probationary period.  The probationary period cannot exceed 90 days and must be an established plan.  (Employee must be informed of the plan within seven days of the date hired.).

Kentucky – An employer’s account is not charged if it employed the claimant for less than 10 weeks, whether or not consecutive.

Maine – The employer’s account is not charged unless the claimant worked in excess of 5 consecutive weeks or at least 6 consecutive weeks of employment.

Minnesota – The employer is granted relief of charges when an employee is paid less than $500 in the base period.

Missouri – The employer’s account is not charged if it paid the claimant $400 or less during the base period or if the claimant was employed for 28 consecutive days (calendar days) or less and this was noted on the employer’s wage report to the state.

North Carolina – The employer’s account is not charged if the employee’s employment did not exceed 100 days and termination was due to inability to perform the job.

Oklahoma – The employer’s account is not charged if it paid the claimant $400 or less during the base period or if the claimant was employed for 28 consecutive days (calendar days) or less and this was noted on the employer’s wage report to the state.

Rhode Island – For any new claim filed, if an individual works less than 4 weeks, and in each of those 4 weeks earns less than 20 times the state minimum hourly wage, the employer will not be charged.

South Carolina – The employer’s account is not charged if it paid the claimant less than 8 times the weekly benefit amount.

South Dakota – The employer’s account is not charged if it paid the claimant less than $100 during the base period or if the claimant was terminated due to inability during a 90-day pre-arranged probationary period.

Virginia – The employer’s account is not charged if the claimant was employed for less than 30 days, whether or not consecutive, or if the claimant worked less than 240 hours for the employer.

So, consider the best practice of making a probationary period a part of your company policy and refer to the probationary guidelines when reviewing new employees.   Be sure to review any changes to policy that you plan to make with your Unemployment Cost Management services provider to be sure your policy will meet the requirements in your state. 

Tammy Mullin

Wanted to send out some follow up information about 2010 Unemployment Insurance Tax Rate Calculations.  I posted some information the other day about an issue in Texas indicating that the extension of the filing date for 3rd quarter 2009 could impact your rate calculations if you aren't careful.

This is applicable to Texas only.  Other states may or may not extend the deadline, but either way, it won't impact the tax rate calculations.  I thought employers not in Texas might want some clarification as well.

Tammy Mullin

The national unemployment rate is currently 9.8%. The number of individuals claiming unemployment has placed a substantial strain on state unemployment trust funds. In January 2008 the national unemployment rate was 4.9%. Unemployment benefit payments have more than doubled while tax revenues have decreased. Given this scenario, many states are finding it difficult to maintain solvent trust fund balances and have been forced to take Federal Title XII loans. In response to the current economic situation, states have passed legislation to increase tax revenues to replenish depleted trust fund balances.

The following states have passed legislation in order to boost revenues:

Florida – SB 810 increases the taxable wage base from $7,000 to $8,500 for tax years 2010 through 2014 and changes the rules for calculating the final and variable adjustment factors used in tax rate calculations.

Indiana – HB 1379 increases the taxable wage base from $7,000 to $9,500 and institutes a new set of rate schedules to be used beginning in 2010. The penalty rate has also increased from 5.6% to 12.0% in 2010.

New Hampshire – SB 129/LSR 998 increases the taxable wage base from $8,000 to $10,000 for 2010, $12,000 for 2011 and $14,000 for 2012 and beyond. In addition, another 0.5% surcharge, on top of the 0.5% mentioned below, will be added to all employers’ rates and a 1.5% fund balance increase will be added to all negative balanced employers’ rates effective for at least the first and second quarters, 2010.
Due to a low state trust fund balance, an emergency 0.5% unemployment tax surcharge will be applied for the remainder of 2009.

South Dakota – Due to a low state trust fund balance, an emergency 1.5% unemployment tax surcharge will be applied to employers on taxable wages paid 10?1?09 through 12?31?09. This surcharge is expected to remain in effect through at least the second quarter, 2010.

Tennessee – HB 2324/SB 2315 increased the taxable wage base from $7,000 to $9,000 retroactive to January 1, 2009 and increased unemployment tax rates by 0.6% effective January 1, 2009. The 0.6% increase is expected to remain in effect through at least the second quarter, 2010.

Vermont – HB 442 increased the taxable wage base from $8,000 to $10,000 for tax year 2010.

West Virginia – SB 246 increased the taxable wage base from $8,000 to $12,000 effective second quarter, 2009.

TALX has a team dedicated to track and monitor pending and new unemployment tax legislation. Our tax experts can assess how legislative activity will impact unemployment taxes. Employers who are forecasting the impact of legislative changes on 2010 unemployment costs will avoid unexpected tax increases and budget variances throughout the coming year.

We previously reported that Indiana employers could expect an increase in not only unemployment taxable wage base (going from $7,000 to $9,500), but tax rate as well (changing from a range of 1.1% to 5.6% in 2009 to 0.7% to 9.5% in 2010.)

Some recent activity in the state senate however could give Indiana employers a break, at least in 2010.  Lawmakers are proposing a delay in the unemployment insurance tax increases to give business owners a break and hopefully encourage new job growth in the state.

While I wholeheartedly agree with a delay in the tax increases, it appears that certain lawmakers may be banking on a bailout of state unemployment insurance funds as the rationale for why a delay could make sense. 

It is interesting given the position that the Nevada Economic Security Council took when they considered reducing the tax on employers in 2010 and statements made by South Carolina Board of Economic Advisors Chairman, John Rainey.  (See my previous blog "What would happen if interest was waived...?")  These state advisors took the position that the federal loans had to be repaid or employers would end up paying more later.

In my heart I don't believe in government bailouts, however, it has been a practice for so long that is has come to be expected (as evidenced by comments made by Indiana lawmakers).  We have created a situation where there is almost no longer a choice in whether to bailout a sector of the economy or not. 

So, if there is any thought by federal lawmakers out there that a bailout of the trust funds could happen, I wish they would just go ahead and do it so employers in all states could possibly benefit from some relief. 

We'll keep a close watch on what happens in Indiana, but don't expect a decision quickly.  The delay won't be discussed until the next Senate session in January. 

Tammy Mullin