SB684: Bill Text

LRB-4497/1

MED&AJM:all

2015 - 2016 LEGISLATURE

2015 Senate BILL 684

February 1, 2016 - Introduced by Senator Nass, cosponsored by Representative Knodl, by request of Department of Workforce Development. Referred to Committee on Labor and Government Reform.

SB684,2,11 An Act to repeal 102.07 (8) (d), 108.02 (24g), 108.04 (8) (e), 108.05 (1) (q), 108.05 (1) (r) (figure), 108.05 (2), 108.05 (2m), 108.09 (2) (cm), 108.14 (27) and 111.327; to renumber and amend 108.04 (8) (d), 108.04 (11) (g), 108.04 (12) (f) 1., 108.04 (12) (f) 2., 108.09 (7) (d), 108.151 (3) (b) and 108.19 (1s) (a); to amend 108.02 (13) (k), 108.02 (21) (b), 108.04 (1) (bm), 108.04 (2) (h), 108.04 (7) (c), 108.04 (7) (e), 108.04 (7) (h), 108.04 (8) (c), 108.04 (12) (e), 108.04 (13) (d) 3. (intro.) and a., 108.04 (13) (d) 4. (intro.) and a., 108.04 (16) (b), 108.05 (1) (r), 108.09 (2) (a), 108.09 (2) (d), 108.09 (2r), 108.09 (4) (c), 108.09 (4) (d) 1. and 2., 108.09 (4) (e), 108.09 (4) (f) 1., 108.09 (4) (f) 2. (intro.), 108.09 (4) (f) 3., 108.09 (4o), 108.09 (5) (b), 108.09 (5) (d), 108.09 (6) (a), 108.09 (6) (b), 108.09 (6) (c), 108.09 (6) (d), 108.09 (7) (a) and (b), 108.095 (2), 108.095 (3), 108.095 (7), 108.10 (1), 108.10 (2), 108.10 (4), 108.10 (6), 108.14 (8n) (e), 108.141 (3g) (a) 3. (intro.), 108.141 (4), 108.141 (7) (a), 108.151 (4) (b), 108.152 (6) (a) (intro.), 108.16 (6) (g), 108.16 (7m), 108.16 (10), 108.18 (7) (a) 1., 108.18 (7) (h), 108.18 (9c), 108.19 (1m), 108.22 (1) (b), 108.22 (1) (c), 108.22 (1m), 108.22 (9), 108.225 (1) (a) and 108.24 (2m); to repeal and recreate 108.04 (1) (b), 108.09 (4) (d) 3., 108.09 (5) (c) and 108.19 (title); to create 108.04 (7) (cg), 108.04 (8) (d) 2., 108.04 (8) (dm), 108.04 (8) (em), 108.04 (11) (g) 2. and 3., 108.04 (12) (f) 1m., 108.04 (12) (f) 2m., 108.04 (12) (f) 3. b. to d., 108.04 (13) (d) 4. c., 108.09 (7) (c) to (h), 108.151 (3) (b) 2., 108.155, 108.16 (6m) (i), 108.19 (1f), 108.19 (1s) (a) 2., 108.19 (1s) (a) 3., 108.19 (1s) (a) 4. and 108.221 of the statutes; and to affect 2011 Wisconsin Act 198, section 4m, 2011 Wisconsin Act 198, section 6m, 2011 Wisconsin Act 198, section 37m, 2011 Wisconsin Act 198, section 47m (1) and 2013 Wisconsin Act 36, section 236m; relating to: various changes to the unemployment insurance law.

Analysis by the Legislative Reference Bureau

This bill makes various changes in the unemployment insurance law, which is administered by the Department of Workforce Development. Significant changes include:

Employers, contributions, and finance

Misclassification; assessments and penalties

Under current law, an employer engaged in construction projects or in the painting or drywall finishing of buildings or other structures who willfully provides false information to DWD for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee under the UI law is subject to a criminal fine of $25,000 for each violation. Similar penalties apply to such employers who so act with the intent to evade any requirement of the worker's compensation law or the fair employment law. DWD is required to promulgate rules defining what constitutes a willful misclassification of an employee as a nonemployee for purposes of each of these provisions.

This bill does the following with respect to these provisions:

1. Repeals the prohibitions that apply with respect to the worker's compensation law and the fair employment law, as well as the requirement that DWD promulgate rules defining what constitutes a willful misclassification of an employee as a nonemployee for purposes of these provisions.

2. Requires DWD to assess an administrative penalty against such an employer who knowingly and intentionally provides false information to DWD for the purpose of misclassifying or attempting to misclassify an individual who is an employee of the employer as a nonemployee under the UI law. The bill provides for a penalty of $500 for each employee who is misclassified, not to exceed $7,500 per incident, and requires DWD to consider certain factors in determining whether an employer committed a violation.

3. Revises the current prohibition regarding such employers who provide false information to misclassify an individual under the UI law so that the bill 1) changes the standard from "willfully" providing such false information to "knowingly and intentionally" doing so; 2) requires, as an element of the crime, that the employer was previously assessed a penalty by DWD for providing such false information; and 3) revises the penalty to be $1,000 for each employee who is misclassified, subject to a maximum fine of $25,000 for each violation.

In addition, the bill requires DWD to assess an administrative penalty against such an employer who, through coercion, requires an individual to adopt the status of a nonemployee in the amount of $1,000 for each individual so coerced, but not to exceed $10,000 per calendar year.

Program integrity assessment

Currently, all employers that engage employees in work that is covered under UI, other than governmental, nonprofit, and Indian tribal employers that elect to pay directly for the cost of benefits, must pay taxes to finance UI benefits. An employer's contributions are assessed based on the employer's contribution rate and the employer's solvency rate, each of which varies with the employment stability of the employer and the solvency of the state's unemployment reserve fund. An employer's contributions payable as a result of the employer's contribution rate are credited to the employer's account in the fund, while an employer's contributions payable as a result of the employer's solvency rate are credited to the fund's balancing account, which is used to fund benefits not payable from any employer's account.

In addition to these contributions, this bill levies an annual assessment on each employer that is currently subject to a contribution requirement in the amount of 0.01 percent (or a lower rate if prescribed by DWD) of an employer's taxable payroll for each year, unless the employer is not required to pay a solvency contribution. An assessed employer's solvency rate is then reduced by the amount of the assessment rate. The levy is not effective for any year unless DWD, no later than the November 30 preceding that year, publishes a class 1 notice giving notice that the levy is in effect for the ensuing year. DWD must consider the balance of the state's unemployment reserve fund before prescribing the levy, and the secretary of workforce development must consult with the Council on Unemployment Insurance before DWD prescribes a levy. Under the bill, assessments are deposited in the unemployment program integrity fund and must therefore, as provided under current law, be used for payment of costs associated with program integrity activities.

Transfer of moneys from the unemployment interest payment fund

Under current law, an employer must pay an assessment to the state unemployment interest payment fund at a rate established by DWD that is sufficient to pay interest due on advances from the federal government from the federal unemployment account in the federal unemployment trust fund. Such advances are made when the state's unemployment reserve fund is depleted. If the assessments collected are in excess of the amounts needed to pay interest due, DWD must use any excess to pay interest owed in subsequent years on advances from the federal unemployment account. However, if DWD determines that additional interest obligations are unlikely, DWD must transfer the excess to the unemployment reserve fund's balancing account.

This bill instead provides that DWD must transfer the excess in the state unemployment interest payment fund to the balancing account, the unemployment program integrity fund, or both in amounts determined by DWD.

Charging of benefits financed by reimbursable employers in cases of identity theft

Under current law, UI benefits are financed by employers in one of two ways:

1. Through contribution financing, under which an account in the state's unemployment reserve fund is maintained for an employer; the employer pays contributions, which are deposited into that account in the fund; and benefits for employees of the employer who file claims for UI benefits are generally financed by that employer's account in the fund. Such employers must additionally pay solvency contributions, which are credited to the fund's balancing account.

2. Through reimbursement financing, under which an employer reimburses the fund directly for benefits for employees of the employer who file claims for UI benefits. Reimbursable financing is available only to public employers, nonprofit organizations, and Indian tribes. In the case of reimbursement financing, DWD maintains a reimbursement "employer account" for each employer as a "subaccount" of the fund's balancing account.

Current law provides that if benefits charged to the account of an employer subject to contribution financing have been erroneously paid to an employee without fault by the employer, DWD must, to correct the payment if not otherwise adjusted, restore the proper amount to the employer's account in the fund and charge that amount to the fund's balancing account. With respect to employers subject to reimbursement financing, however, current law does provide for restoring the proper amount to the employer's account and charging that amount to the fund's balancing account. These provisions in current law do not distinguish between instances in which benefit payments are erroneously paid to an employee who received the payments and instances in which the erroneous payment resulted from a false statement or representation about an individual's identity (i.e., cases of identity theft in which a third party, and not the employee, receives the benefit payments).

This bill provides that, with respect to UI benefits financed by an employer subject to reimbursement financing, if an erroneous payment of UI benefits results from a false statement or representation about an individual's identity and the employer was not at fault for the erroneous payment, DWD must restore the proper amount to the employer's account in the balancing account.

In addition, the bill requires DWD to do all of the following:

1. Set aside $2,000,000 in the fund's balancing account for accounting purposes and, on an ongoing basis, tally the amounts restored to reimbursable employers' accounts as provided under the bill and deduct those amounts from the amount set aside plus any interest calculated thereon.

2. Annually determine the amount remaining of the amount set aside plus interest and the amount restored to reimbursable employers' accounts as provided under the bill in the preceding calendar year.

3. Once there is less than $100,000 remaining of the amount set aside plus interest, begin proportionally assessing reimbursable employers for the total amount restored to reimbursable employers' accounts as provided under the bill in the preceding calendar year, subject to certain exceptions as specified in the bill. DWD may pursue recovery of unpaid assessments as with other amounts.

The bill requires DWD to annually report to the Council on Unemployment Insurance the amount remaining of the amount set aside and the amount restored to reimbursable employers' accounts as provided under the bill in the preceding calendar year.

Personal liability of partners in LLCs and others for UI contributions

Current law allows DWD, in certain circumstances, to hold an individual who is an officer, employee, member, or manager holding at least 20 percent of the ownership interest of a corporation or of a limited liability company personally liable for UI contributions and certain other amounts. This bill adds partners and other responsible persons to the list of persons who may be held personally liable, and allows such a person to be held liable if the person has a 20 percent ownership interest in other forms of business associations, as well as corporations and LLCs.

Repeal of program integrity fund sunset

2013 Wisconsin Act 36 provided for the sunset (repeal) of the establishment of the program integrity fund and related provisions, effective January 1, 2034.

This bill repeals the sunset of the program integrity fund and related provisions so that the program integrity fund and related provisions will continue to exist beyond January 1, 2034.

Fiscal agent for child not an employer

Under current law, a person receiving certain long-term support services through a county department or aging unit may be provided the services of a fiscal agent, either from the county department or aging unit or through a fiscal intermediary with which the county department or aging unit contracts. The fiscal agent is responsible for complying with the person's duties as an employer under the UI law. However, current law specifies that, for the purposes of the UI law, a county department or aging unit that serves as a fiscal agent or contracts with a fiscal intermediary is not considered an employer as to an individual performing services for the person receiving those long-term support services. 2015 Wisconsin Act 55 also provides for such fiscal agent services for a child or a child's parent if the child receives community support services through a county department under the children's community options program. This bill also excludes from the definition of employer under the UI law such a county department that serves as a fiscal agent or that contracts with a fiscal intermediary under the children's community options program.

Benefits and benefit claims

Failure to accept suitable work when offered; good cause for such failure

Under current law, if a claimant for UI benefits fails, without good cause, to accept suitable work when offered, the claimant is ineligible to receive benefits until he or she earns wages after the week in which the failure occurs equal to at least six times the claimant's weekly UI benefit rate in covered employment. Current law specifies, for purposes of this provision, that a claimant has good cause for such a failure to accept suitable work if DWD determines that the failure involved work at a lower grade of skill or a significantly lower rate of pay than applied to the claimant on one or more recent jobs, and that the claimant had not yet had a reasonable opportunity, in view of labor market conditions and the claimant's degree of skill, to seek a new job substantially in line with the claimant's prior job skill and rate of pay. This provision specifying what constitutes good cause, however, applies only with respect to six weeks after the claimant became unemployed. In addition current law requires DWD to define by rule what constitutes suitable work for claimants, with the rule specifying different levels of suitable work based upon the number of weeks that a claimant has received benefits in a given benefit year.

The bill deletes the language in current law specifying what constitutes good cause and the provision requiring DWD to define by rule what constitutes suitable work for claimants and instead provides all of the following with respect to failures to accept suitable work when offered:

1. That with respect to the first six weeks after the claimant became unemployed, "suitable work" means work that 1) is not at a lower grade of skill than that which applied to the claimant on one or more of his or her most recent jobs; and 2) would have had an hourly wage that was 75 percent or more of what the claimant earned on the highest paying of his or her most recent jobs.

2. That with respect to the seventh week after the claimant became unemployed and any week thereafter, "suitable work" means any work that the claimant is capable of performing, regardless of whether the claimant has any relevant experience or training, that pays wages that are above the lowest quartile of wages for similar work in the labor market area in which the work is located, as determined by DWD.

3. That a claimant has good cause for failing to accept suitable work if DWD determines that the failure related to the claimant's personal safety, the claimant's sincerely held religious beliefs, or an unreasonable commuting distance, or if the claimant had another compelling reason that would have made accepting the offer unreasonable.

Concealment by claimants

Under current law, if a claimant for UI benefits conceals any material fact relating to his or her eligibility for UI benefits or conceals any of his or her wages or hours worked, the claimant is ineligible for benefits in an amount ranging from to two to eight times the claimant's weekly benefit rate, depending on the number of acts of concealment committed, for each single act of concealment, and is also liable for an additional administrative penalty. For purposes of these provisions, current law defines "conceal" to mean intentionally misleading or defrauding DWD by withholding or hiding information or making a false statement or misrepresentation. This bill does the following with respect to acts of concealment by claimants for UI benefits:

1. Deletes the reference to defrauding DWD from the definition of "conceal," so that "conceal" is defined as intentionally misleading DWD by withholding or hiding information or making a false statement or misrepresentation.