SB340: Bill Text

LRB-3666/1

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2003 - 2004 LEGISLATURE

2003 Senate BILL 340

December 5, 2003 - Introduced by Committee on Labor, Small Business Development and Consumer Affairs. Referred to Committee on Labor, Small Business Development and Consumer Affairs.

SB340,2,6 An Act to repeal 108.04 (1) (g) 1L., 108.16 (8) (c) 4. and 108.16 (8) (e) 4.; to renumber 108.225 (16) (b); to renumber and amend 108.04 (2) (a) 3., 108.225 (16) (intro.), 108.225 (16) (a) and 108.225 (16) (c); to amend 20.445 (1) (gg), 20.445 (1) (gh), 20.445 (1) (n), 20.445 (1) (nb), 20.445 (1) (nd), 108.02 (12) (a), 108.02 (12) (b) (intro.), 108.02 (12) (bm) (intro.), 108.02 (15) (L), 108.02 (15m) (a) and (b), 108.025 (title) and (1), 108.025 (2) and (6), 108.04 (1) (g) 1., 108.04 (1) (g) 2. and 3., 108.04 (1) (gm) 1., 2., 3. and 4. (intro.), 108.04 (7) (h), 108.04 (7) (r), 108.04 (11) (cm), 108.04 (16) (a) (intro.), 108.04 (17) (a) 1. and 2., (b) 1. and 2., (c) 1. and 2., (d), (e), (f), (g), (h), (i) and (k) (intro.), 108.05 (7) (a) 1., 108.05 (7) (b), 108.05 (7) (c), 108.05 (7) (d) 1. (intro.), 108.05 (7) (f) (intro.), 108.09 (4) (c), 108.14 (8s) (a) and (b), 108.16 (3) (a), 108.16 (6m) (a), 108.16 (6m) (e), 108.16 (8) (b) (intro.), 108.16 (8) (b) 2., 108.16 (8) (f), 108.161 (4) (c), 108.161 (8), 108.162 (3), 108.19 (1e) (a) and (d), 108.22 (2) (b), 108.22 (8) (b), 108.225 (1) (b) and 108.225 (15); to repeal and recreate 108.04 (16) (a) 1. to 4. and 108.04 (16) (b) and (c); to create 20.445 (1) (ne), 108.02 (6m), 108.02 (12) (dm) and (dn), 108.02 (20r), 108.02 (25s), 108.025 (1) (b), 108.04 (2) (a) 3. a. to c., 108.04 (16) (a) 5., 108.04 (16) (d) and (e), 108.05 (7) (cm), 108.068, 108.16 (12) and 108.225 (16) (am) of the statutes; and to affect 2001 Wisconsin Act 35, section 72 (2) (a) 2. and 3.; relating to: various changes in the unemployment insurance law, granting rule-making authority, and making appropriations.

Analysis by the Legislative Reference Bureau

This bill makes various changes in the unemployment insurance law. Significant provisions include:

Benefit changes

Employee status

Currently, in order to be eligible to claim unemployment insurance benefits, an individual must, in addition to other requirements, be an "employee" as defined in the unemployment insurance law. Generally, an "employee" is an individual who performs services for an employer in employment covered under the unemployment insurance law, whether or not the individual is directly paid by the employer. However, an individual is not an "employee" if the individual performs services as an independent contractor.

Prior to the year 2000, in order to qualify as an independent contractor, an individual, other than a logger or trucker performing services for an employer other than a governmental or nonprofit employer, was required to meet at least one of two conditions (having a federal employer identification number or having filed federal business or self-employment tax returns based on services performed as an independent contractor), plus at least six of eight other conditions relating to the individual's relationship to or control over his or her business or the services that he or she performs. During the four-year period beginning in the year 2000 (the specific date varies in different situations), an individual, other than a logger or trucker performing services for an employer other than a governmental or nonprofit employer, must meet at least seven of these ten conditions in order to qualify as an independent contractor.

This bill eliminates the expiration date for the test that is in effect prior to 2004 to determine "employee" status of individuals other than loggers and truckers performing services for an employer other than a governmental or nonprofit employer, thus making that test permanent.

Approved training

Currently, benefits may not be denied to an otherwise eligible claimant because the claimant is enrolled in a vocational training course or a basic education course that is a prerequisite to such training ("approved training") under certain conditions. Current law also provides that a claimant is not subject to certain requirements to requalify for benefits by obtaining new work after voluntarily terminating work or failing, without good cause, to accept suitable work or recall to work for a former employer if the failure occurs as a result of participation in a federal training program or the claimant leaves work to enter or continue in such a program.

This bill expands the types of approved training programs for which a participating claimant retains benefit eligibility to include certain programs administered by the Department of Workforce Development (DWD) and job readiness training. The bill expands the types of disqualifications from and suspensions of benefits that do not apply as a result of a claimant's participation in approved training and also specifies certain disqualifications from and suspensions of benefits that do not apply to a claimant who is enrolled in an approved training course even if the course does not directly preclude the claimant from adhering to benefit qualification and requalification requirements. The bill provides that the current exemptions do not apply to a claimant who fails to provide to DWD a social security number or who provides a false social security number. The bill also expands a current benefit disqualification exemption that permits workers obtaining training under the federal Trade Adjustment Assistance Act to receive benefits during such training so that the exemption applies, in addition, to dislocated workers.

Currently, if a claimant is paid benefits for which the claimant would otherwise be ineligible because the claimant terminates his or her work or fails accept suitable work or recall to work for a former employer as a result of enrollment in approved training, the costs of benefits that could otherwise be chargeable to the claimant's employer or employers are charged to the balancing account of the unemployment reserve fund (which is financed from contributions of all employers that are subject to a requirement to pay contributions) instead of to the account or accounts of each of the claimant's employers. This bill provides, in addition, that if a claimant is paid benefits for which the claimant would otherwise be ineligible as a result of certain other benefit disqualification exemptions created by the bill because the claimant is enrolled in certain types of approved training, the costs of those benefits are also charged to the balancing account.

Search for work

Currently, in order to remain eligible to receive benefits for a week in which a claimant earns no wages, a claimant is required, among other things, to seek suitable work within that week.

This bill provides, in addition, that in order to remain eligible to receive benefits for a week in which a claimant earns no wages, the claimant must conduct a reasonable search for suitable work within that week, which must include two actions that constitute a reasonable search as prescribed by rule of DWD. The bill also provides that the requirement does not apply to an individual if DWD determines that the individual is currently laid off from work with an employer but there is a reasonable expectation of reemployment of the individual by that employer.

Exemption of wages from levies

Currently, DWD may administratively levy against property held by a third party who holds the property of a person who is indebted to DWD for the purpose of enforcing collection of the debt. If the levy is to collect a benefit overpayment or a forfeiture (civil penalty) imposed upon an employer, an individual debtor is entitled to an exemption of the greater of: 1) 75 percent of the debtor's earnings (excluding amounts withheld by law, insurance premiums, union dues, child support payments, and prior garnishments) then due and owing; or 2) an amount equal to 30 times the federal minimum wage per week or a proportionate amount for any partial week of earnings received.

This bill applies the current exemption only to forfeitures imposed upon an employer. The bill also provides that if the levy is to collect a benefit overpayment, an individual debtor is entitled to an exemption of 80% of the debtor's disposable earnings, except that: 1) a debtor's disposable earnings are totally exempt from levy if the debtor's wages are below the federal poverty line for a household of the debtor's size or the levy would cause that result; 2) DWD may allow a greater exemption upon a showing of hardship; and 3) DWD may decrease or eliminate the exemption under certain conditions if there is an outstanding adjudication that the debtor made a false statement or representation in order to obtain benefits.

Recovery of benefit overpayments

Currently, DWD may offset any benefits that are overpaid to a claimant against benefits that the claimant would otherwise be eligible to receive. This bill provides for DWD to recoup any overpayment instead of offsetting it. The change facilitates collection of overpayments during bankruptcy proceedings.

Tax changes

Special assessments for information technology systems

Currently, each employer that is subject to a contribution requirement must pay an annual special assessment for each year prior to 2004 in an amount that may not exceed the lesser of 0.01% of the employer's annual taxable payroll for unemployment insurance purposes or the employer's solvency contribution for that year for the purpose of financing the renovation and modernization of the unemployment insurance tax and accounting system. DWD must reduce the solvency rate that an employer must pay in each year prior to 2004 by the special assessment rate applicable to that employer for that year. (The solvency rate is the portion of an employer's contribution rate that is used to maintain the solvency of the unemployment reserve fund.) This bill makes the special assessment requirement and solvency rate offset applicable to calendar years 2004 through 2007. The bill also permits DWD to use the revenue generated by the assessments to upgrade unemployment insurance information technology systems.

Duration of levies

Currently, an administrative levy does not apply for more than one year after the date of service. This bill removes that limitation. Under the bill, a levy is effective until the debt is satisfied or until DWD releases the levy, whichever occurs first.

Enforcement of assessments against imposters

Currently, if any person makes a false statement or representation in order to obtain benefits in the name of another person, DWD may, by administrative action or by decision in an administrative proceeding, require the person to repay the benefits and may also penalize the person by levying an assessment against him or her in an amount not greater than 50 percent of the benefits wrongfully obtained. The assessment may be enforced by obtaining a judgment against the person in court and then by levying against the nonexempt property of the person to enforce the judgment. This bill provides, in addition, that DWD may recoup the amount due from other benefits that the person would otherwise be eligible to receive or may issue an administrative levy against the property of the person without a court proceeding.

Other changes

Treatment of limited liability companies

Currently, limited liability companies are generally covered under the unemployment insurance system. Current law does not expressly treat the issue of whether members of a limited liability company are considered to be employees of the company and therefore whether they are eligible to receive benefits. Currently, a corporation may, under certain conditions, elect to exclude its principal officers from unemployment insurance coverage, with the result that the corporation pays no contributions based on their services and the officers are not eligible to receive benefits. Currently, if a business has one owner or if a business is organized as a partnership, the owner or partners pay no contributions based on their services and they are not eligible to receive benefits.

This bill provides that a limited liability company shall be treated as a corporation for unemployment insurance purposes, including payment of contributions and eligibility of its members for benefits if it is so treated for federal tax purposes, beginning on the date it becomes so treated by the federal Internal Revenue Service, if the company files proof of such treatment with DWD, except that for benefit purposes the treatment does not apply earlier than proof of such treatment is filed with DWD. If a limited liability company is not treated as a corporation for federal tax purposes, the company is treated as a partnership if it has more than one member or as a sole proprietorship (business owned by one individual) if it has only one member, except that, under the bill, DWD may in the interests of justice or to prevent fraud upon the unemployment insurance program determine a member of a limited liability company to be an employee of the company. In this case, the services performed by the member are subject to contributions and the member potentially qualifies to receive benefits.

Treatment of stepchildren

Currently, stepchildren are not treated as children for purposes of the unemployment insurance law. This bill treats stepchildren as children for that purpose. Among other effects, the change means that: a) unless an employer otherwise elects, with the approval of DWD, the wages of the stepchildren of a nonresident alien who has nonimmigrant status are not subject to contribution requirements and these stepchildren may not claim benefits based on their employment; b) ownership of a business by the stepchild of a claimant may result in a limitation of benefit availability based on employment with that business; c) the need to obtain child care for a stepchild or domestic abuse involving a stepchild may serve to permit a claimant to obtain benefits after voluntarily terminating work without requalifying by engaging in new work, under certain conditions; and d) ownership of a business by a stepchild of another owner may result in treatment of the business as the successor of the previous business rather than treatment of the business as a new business, under certain conditions.

Partial successorship

Currently, if a business is transferred from one employer to another employer, the transferee may, under certain conditions, request that DWD treat it as a successor to the transferor for purposes of unemployment insurance experience, including contribution and benefit liability, if 100 percent of the transferor's business is transferred to a single transferee. In addition, DWD must treat a transferee as a successor, under certain conditions, if 100 percent of the transferor's business is transferred to the transferee or if the transferor's unemployment insurance account is overdrawn on the date of the transfer. This bill deletes the restriction that precludes a transferee from requesting that it be treated as a successor unless 100 percent of the transferor's business is transferred to a single transferee and the requirement that DWD must treat a transferee as a successor under the conditions specified above.

Rule making

2001 Wisconsin Act 35 directed DWD to submit proposed rule changes to the legislative council staff no later than December 1, 2002, to:

1. Establish a specified level of repeated absenteeism or repeated tardiness that will permit an employer to terminate an employee without being required to pay the cost of any benefits for which the employee may qualify resulting from the base period applicable to the date of termination, and that will preclude the employee from receiving benefits without requalifying by working for a specified period and receiving a specified amount. (Currently, the degree of absenteeism or tardiness that permits such action varies depending upon the facts of each case.)

2. Specify, in accordance with applicable administrative and judicial interpretations, what constitutes an "establishment" for purposes of a current disqualification from receipt of benefits because of a labor dispute in the establishment in which an employee is or was employed.

This bill repeals both rule-making requirements.

Late appeals

Currently, if a party in an unemployment insurance determination files an appeal that is not timely, DWD may schedule a hearing concerning whether the party's failure to file the appeal on a timely basis was for a reason that was beyond the party's control. This bill provides that if a party files an appeal that is not timely, an appeal tribunal (attorney employed by DWD) must review the reasons given by the party for not filing a timely appeal and if those reasons, taken as true and construed most favorably to the party, do not constitute a reason that was beyond the party's control, the tribunal may dismiss the appeal without a hearing and issue a decision finding that the appeal was not filed on a timely basis. If the tribunal finds that the appeal may have been filed late for a reason that was beyond the party's control, the department may schedule a hearing on that issue.

Method of payment of certain court filing fees

Currently, DWD has a lien on the property of each employer for payment of contributions, together with any interest, fees, and forfeitures owed by the employer. DWD may issue a warrant and record the warrant with the clerk of circuit court to secure payment of the amounts due. DWD need not pay the filing fee with each warrant that is recorded, but instead pays semiannually or at another interval that is agreed to by the clerk of circuit court. This bill provides that DWD need not pay the filing fee for any satisfaction of a warrant or release or withdrawal of a warrant at the time it is recorded, but instead may pay the clerk of circuit court periodically in the same manner that fees for recording of warrants are paid currently.

Payment of banking service costs

Currently, the cost of banking services incurred by the unemployment reserve fund is paid by maintaining compensating balances in the bank accounts that are used to make daily transactions. This bill provides for the treasurer of the fund to make estimates, prior to the beginning of each calendar quarter, of the earnings that the fund could anticipate in that quarter if compensating balances are maintained to cover service costs and, alternatively, if the moneys that would otherwise be maintained in bank accounts to cover service costs were instead retained in the federal unemployment trust account and the banking service costs were paid from that account. The treasurer is directed to pay banking service costs using the method that the treasurer determines will permit the fund to realize the greatest net earnings in that quarter.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB340, s. 1 Section 1. 20.445 (1) (gg) of the statutes is amended to read:

SB340,7,6 20.445 (1) (gg) Unemployment tax and accounting system information technology systems; interest and penalties. From the moneys received as interest and penalties collected under ss. 108.04 (11) (c) and (cm) and (13) (c) and 108.22, as a continuing appropriation, the amounts in the schedule for the purpose specified in s. 108.19 (1e) (d).

SB340, s. 2 Section 2. 20.445 (1) (gh) of the statutes is amended to read:

SB340,8,5 20.445 (1) (gh) Unemployment information technology systems; assessments. All moneys received from assessments levied under s. 108.19 (1e) (a) and 1997 Wisconsin Act 39, section 164 (2), for the purpose specified in s. 108.19 (1e) (d). The treasurer of the unemployment reserve fund may transfer moneys from this appropriation account to the appropriation account under par. (gd).

SB340, s. 3 Section 3. 20.445 (1) (n) of the statutes, as affected by 2003 Wisconsin Act 33, is amended to read:

SB340,9,2 20.445 (1) (n) Employment assistance and unemployment insurance administration; federal moneys. All federal moneys received, as authorized by the governor under s. 16.54, for the administration of employment assistance and unemployment insurance programs of the department, for the performance of the department's other functions under subch. I of ch. 106 and ch. 108, except moneys appropriated under par. (nc), and to pay the compensation and expenses of appeal tribunals and of employment councils appointed under s. 108.14, to be used for such purposes, except as provided in s. 108.161 (3e), and, from the moneys received by this state under section 903 (d) of the federal Social Security Act, as amended, to transfer to the appropriation account under par. (nb) an amount determined by the treasurer of the unemployment reserve fund not exceeding the lesser of the amount specified in s. 108.161 (4) (d) or the amounts in the schedule under par. (nb), and to transfer to the appropriation account under par. (nd) an amount determined by the treasurer of the unemployment reserve fund not exceeding the lesser of the amount specified in s. 108.161 (4) (d) or the amounts in the schedule under par. (nd) , and to transfer to the appropriation account under par. (ne) an amount determined by the treasurer of the unemployment reserve fund not exceeding the lesser of the amount specified in s. 108.161 (4) (d) or the amount required to pay for the cost of banking services incurred by the unemployment reserve fund.

SB340, s. 4 Section 4. 20.445 (1) (nb) of the statutes is amended to read:

SB340,9,15 20.445 (1) (nb) Unemployment information technology systems; federal moneys. As From the moneys received from the federal government under section 903 (d) of the federal Social Security Act, as amended, as a continuing appropriation, the amounts in the schedule, as authorized by the governor under s. 16.54, for the purpose specified in s. 108.19 (1e) (d). All moneys transferred from par. (n) for this purpose shall be credited to this appropriation account. Notwithstanding s. 20.001 (3) (a), the treasurer of the unemployment reserve fund shall transfer any unencumbered balance in this appropriation account that is not needed or available to carry out the purpose of this appropriation to the appropriation account under par. (n). No moneys may be expended from this appropriation unless the treasurer of the unemployment reserve fund determines that such expenditure is currently needed for the purpose specified in s. 108.19 (1e) (d).

SB340, s. 5 Section 5. 20.445 (1) (nd) of the statutes, as created by 2003 Wisconsin Act 33, is amended to read:

SB340,9,25 20.445 (1) (nd) Unemployment insurance administration; apprenticeship. From the moneys received from the federal government under section 903 (d) of the federal Social Security Act, as amended, the amounts in the schedule, as authorized by the governor under s. 16.54, to be used for administration by the department of apprenticeship programs under subch. I of ch. 106. All moneys transferred from par. (n) for this purpose shall be credited to this appropriation account. Notwithstanding s. 20.001 (3) (a), the treasurer of the unemployment reserve fund shall transfer any unencumbered balance in this appropriation account that is not needed or available to carry out the purpose of this appropriation to the appropriation account under par. (n). No moneys may be expended from this appropriation unless the treasurer of the unemployment reserve fund determines that such expenditure is currently needed for the purpose specified in this paragraph.

SB340, s. 6 Section 6. 20.445 (1) (ne) of the statutes is created to read:

SB340,10,16 20.445 (1) (ne) Unemployment administration; bank service costs. From the moneys received by this state under section 903 (d) of the federal Social Security Act, as amended, all moneys transferred from the appropriation account under par. (n) to be used for the payment of the cost of banking services incurred by the unemployment reserve fund. Notwithstanding s. 20.001 (3) (c), the treasurer of the unemployment reserve fund shall transfer any unencumbered balance in this appropriation account that is not needed or available to carry out the purpose of this appropriation to the appropriation account under par. (n). No moneys may be expended from this appropriation unless the treasurer of the unemployment reserve fund determines that such expenditure is currently needed for the purpose specified in this paragraph.

SB340, s. 7 Section 7. 108.02 (6m) of the statutes is created to read:

SB340,10,18 108.02 (6m) Child. "Child" means a natural child, adopted child, or stepchild.

SB340, s. 8 Section 8. 108.02 (12) (a) of the statutes is amended to read:

SB340,10,23 108.02 (12) (a) "Employee" means any individual who is or has been performing services for an employing unit, in an employment, whether or not the individual is paid directly by such employing unit; except as provided in par. (b), (bm), (c) or, (d), (dm) or (dn).