Some recent changes in the Unemployment Insurance (UI) arena will have an impact on employers moving forward in 2014. Congress mandated the states pass tough measures to penalize employers responsible for overpayments of UI benefits, which has been a huge issue during the recent recession. These overpayments have resulted in many states borrowing from the federal government to cover the shortfall in their UI funds. These new UI Integrity Law mandates required states to enact legislation by October 21, 2013. In addition to the UI Integrity Laws, the State Information Data Exchange System (SIDES) was created and will have state workforce agencies exchange information electronically rather than by paper via the U.S. Postal Service.
To understand how the changes affect how employers handle UI claims, it is important to understand the basic UI process which is, in its most basic form, is detailed in the steps below:
Unemployment Insurance Claims Steps
- UI claim is filed
- Employer receives notice of claim and provides employment separation information
- Initial UI decision is made
- Appeal of initial decision can be filed by losing side
- Hearing scheduled
- Second UI decision is made
- Second appeal can be made but typically only for violation of UI code
The process above may vary from state to state but it is a good basic framework of the UI claim process. The UI Integrity Laws & SIDES program were deemed necessary as amount of UI overpayments has skyrocketed.
The changes in the UI system emphasize the need for employers to document performance issues in a timely manner
One of the leading contributors to the overpayment is employees being awarded UI benefits at the initial claim level because the employer did not provide specific, detailed information about the employment separation at the beginning of the claim process. This is the area which will be one of the biggest changes for employers, as they will no longer be able to respond to an initial UI claim with generic protest information and then provide more detailed information later in the UI process.
Employers that fail to follow the new mandates may be penalized in a few different ways such as:
- The employer will be responsible for benefit charges when it fails to provide the state with timely and detailed separation information for the initial claim for UI benefits
- In the instance where a claimant is awarded UI benefits at the initial claim level and the employer is able to overturn that decision at the hearing level, the employer will be responsible for the benefits paid at the initial claim level if they did not provide complete information at the initial claim level
- Most states have enacted a “pattern provision” which allows for additional penalties if the employer establishes a pattern of failing to provide detailed separation information at the initial claim level of the process
In addition to the penalties listed above, an employer’s UI tax rate typically increases based on the number of claims lost and UI benefits awarded on claims. The changes in the UI system emphasize the need for employers to document performance issues in a timely manner and have that documentation readily available when a UI claim is filed. The most commonly asked for information items needed are the final incident that led to the discharge, previous warnings with dates, details and documentation and the name/title of the person that discharged the employee. Providing this information at the time of the initial claim will help you remain in compliance.