GOVERNOR WALKER’S BUDGET SUBSTANTIALLY CHANGES WISCONSIN’S UNEMPLOYMENT INSURANCE SYSTEM – FOR THE BETTER

By: Daniel Finerty

Governor Scott Walker recently signed the 2013-2015 biennial budget bill, which was enacted as 2013 Wisconsin Act 20 (“Act 20”). Act 20 makes substantial changes and amendments to Wisconsin’s unemployment insurance law.

This E-Alert summarizes the Act 20 changes. Initially, it is important to note that these statutory changes are currently in effect; however, the changes will not affect unemployment insurance (“UI”) benefit determinations until the week of January 5, 2014. However, at that time, the changes will likely have a dramatic effect on the adjudication of UI claims by current and former employees against Wisconsin employers.

Act 20 changes several key provisions governing the payment of UI by Wisconsin employers. It strengthens the necessary “reasonable” search for work in which each claimant collecting UI must engage each week in order to keep collecting UI. It enhances the provisions which govern employee disqualification from UI eligibility as a result of misconduct, which is now defined to include specific conduct/offenses. It also creates a secondary, lower standard for disqualification as a result of the employee’s “substantial fault.” It eliminates, or amends, several of the

available exceptions which permit an employee to voluntarily quit work and collect UI benefits.

In doing so, Act 20 is expected to reduce the amount of benefits paid out by Wisconsin employers and strengthen the overall fiscal health of the UI system. Initially, when the UI changes were proposed before the Joint Finance Committee, the Department of Workforce Development estimated the changes would reduce UI benefit payments by Wisconsin employers by an estimated $14.1 million between July 1, 2013 and June 30, 2014 and

by $23.1 million between July 1, 2104 and June 30, 2015.

While these savings, in excess of $37 million over two years, may be partially offset by a higher UI tax rate that will be placed on Wisconsin employers, these reductions in payments to UI claimants amount to real, and much needed, savings for Wisconsin employers. That is, reductions for employers that effectively use the Act 20 changes and contest UI claims in order to both protect their UI reserve account and, in doing so, seek a reduction of their UI tax rate in the following year. Below is a bullet-point summary of the changes.

Eligibility

  •   Act 20 requires a UI claimant to undertake at least four (4) actions each week in order to establish that a reasonable search for suitable work has been made in order to maintain eligibility that week. A UI claimant is currently required to undertake two (2) actions.
  •   Additionally, the Department may increase an individual’s minimum number of actions required beyond four (4) actions in any week so long as it is a uniform change for similar types of claimants.Misconduct and Substantial Fault Disqualifications

 Act 20 revises the commonly-cited definition of “misconduct” by codifying the prior Labor and Industry Review Commission (“Commission”) and other case law to now specifically include the following situations where a claimant will be found guilty of misconduct if the employee is found to have committed the following offenses/conduct:

o Violation of an employer’s reasonable substance abuse policy concerning the use of alcohol beverages, use of a controlled substance or use of a controlled substance analog if the employee: 1) had knowledge of the alcohol beverage or controlled substance policy; and 2) admitted to

the use of alcohol beverages, a controlled substance, or controlled substance analog, refused to take a test or tested positive for the use of such substances in a test used by the employer in accordance with a DWD-approved testing methodology;

o Theft of an employer’s property, services, money (of any value), felonious conduct connected with an employee’s employment with his or her employer, or intentional or

negligent conduct by an employee that causes substantial damage to the employer’s property;

o Conviction of a crime or other offense, while on or off duty, involving a civil forfeiture that precludes the employee from working for the employer;

o One or more threats or acts of harassment, assault, or other physical violence instigated by an employee at the employer’s workplace;

o Absenteeism on more than two (2) occasions within the 120

days before the date of termination, unless permitted by the employer’s employment manual of which the employee acknowledged receipt, or excessive tardiness in violation of the employer’s policy, if the employee does not provide notice and one or more valid reasons for the absenteeism or tardiness (note: this provision replaces and strengthens the existing absenteeism/tardiness misconduct provision at Wis. Stat. § 108.04(5g));

o Falsifying the employer’s business records, unless directed by the employer; and,

o A willful and deliberate violation of a written and uniformly applied standard or regulation of the federal, state, or tribal government, an agency of which licenses the employer, which standard has been communicated by the employer to the employee and which violation would cause the employer to be sanctioned or to have its license or certification suspended by the agency, again, unless directed by the employer.

 Act 20 creates a secondary misconduct-type disqualification provision, referred to as “substantial fault,” which is defined to include those acts or omissions of an employee over which the employee exercised reasonable control and which violate

reasonable requirements of the employer but does not include the following:

o One or more minor infractions of rules unless an infraction is repeated after the employer warns the employee about the infraction;

o One or more inadvertent errors made by the employee; or,

o Any failure by the employee to perform work because of insufficient skill, ability or equipment.

 Be aware that “misconduct” and “substantial fault” determinations will disqualify an employee from collecting UI benefits for differing periods of time until certain conditions are met by the employee which may permit them to be eligible for UI payments.

“Voluntary Quit” Exceptions

 Act 20 eliminates nine of the “voluntary quit” exceptions and,

accordingly, an employee who quits employment for the following reasons will not be entitled to unemployment benefits after January 5, 2014:

o If the Department of Workforce Development (DWD) determines that the employee quit to accept a recall to work for a former employer within 52 weeks after having last worked for such employer;

o If the employee: 1) maintained a temporary residence near the work; 2) maintained a permanent residence in another locality; and 3) quit work and returned to his or her permanent residence because the work available to the employee had been reduced to less than 20 hours per week in at least two consecutive weeks;

o If DWD determines that the employee quit or lost his or her work because of reaching the compulsory retirement age used by the employer;

o If the employee quit part-time work if the employee is otherwise eligible to receive benefits because of the loss of the employee’s full-time employment and the loss of the full-time employment makes it economically unfeasible for the employee to continue the part-time work;

o If the employee quit work with a labor organization if the termination causes the employee to lose seniority rights granted under a collective bargaining agreement and if the termination results in the loss of the employee’s employment with the employer which is a party to that collective bargaining agreement;

o If the employee, serving as a part-time elected or appointed

member of a governmental body or representative of employees, quits work while being engaged in work for a different employer and was paid wages in the work quit by the employee constituting not more than 5% of the employee’s base period wages for purposes of benefit entitlement;

o If an employee quits one of two or more concurrently held positions, at least one of which is full-time work, if the employee terminates his or her work before receiving notice of termination from a position which is full-time work;

o If DWD determines that an employee, while claiming benefits for partial unemployment, quit work to accept employment or other work covered by UI law of any state or the federal government, if that work offered an average weekly wage greater than the average weekly wage earned in the terminated work; or,

o If DWD determines that the employee owns or controls, directly or indirectly, an ownership interest, however designated or evidenced, in a family corporation, and the employee’s employment was terminated by the employer because of an involuntary cessation of the business of the corporation under certain circumstances.

 Three of the remaining “voluntary quit” exceptions remain in effect but are amended as follows:

o An employee who accepts work which the employee could have failed to accept with “good cause” under Wis. Stat. § 108.04(7)(b) and terminated such work with the same good cause may only terminate such work within thirty (30) days after starting the work in order to be entitled to UI benefits, instead of the ten (10) week period formerly provided for in this section;

o An employee who quits work to accept certain types of employment or other work covered by UI laws of any state or the federal government will no longer be required to have earned wages in the subsequent work, repealing the former four (4) week earning requirement;

o An employee who quits work because his or her spouse

Analysis

changes their place of employment such that a commute is impractical and the employee quit to follow the spouse would only be permitted to collect UI benefits where the employee’s spouse is a member of the U.S. Armed Forces on active duty, the employee’s spouse was required by the U.S. Armed Forces to relocate to a place to which it is impractical for the employee to commute, and the employee terminated his or her work to accompany the spouse to that place.

These changes will impact not only the adjudication of UI claims but also will impact decision-making by Wisconsin employers involved in unemployment insurance benefits claim disputes during the initial claim investigation stage, at Appeal Tribunal hearings and throughout the process.

While the amendments broadly cover most of the territory that is commonly cited as among the “most frustrating” for Wisconsin employers, the most notable provisions may permit employers to contest more UI claims, and more garden-variety claims, by terminated employees.

Among these provisions are the changes that address more garden-variety employee terminations such as:

 The absenteeism/tardiness changes, provided the valid attendance/tardiness policy exists and has been provided to or acknowledged by the employee;

 The disqualification for an employee’s willful and deliberate violation of an employer’s written and uniformly applied standard, the violation of which could cause the employer “to be sanctioned,” which arguably includes an employer’s safety policies (note: it is not clear whether or not an actual sanction would have to be shown and is likely that the potential for sanction

will be sufficient if established by the employer); and,

 The disqualification for “substantial fault,” provided the employer can provide sufficient evidence of the employee’s reasonable control over the acts/omissions at issue, that the acts/omissions violate the employer’s policy, and that the acts/omissions are not minor infractions, inadvertent errors or failures due to insufficient skill, ability or equipment.

If you have questions about the proposed UI changes, Appeal Tribunal hearings or other appeals, or other issues, please contact Daniel Finerty at 414-226-4807, or any other Lindner & Marsack attorney at 414-273-3910.

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