Present and Future UI Policy Issues

NAUIAP Annual Conference

Los Angeles, CA

May 13, 2013

Maurice Emsellem

Policy Co-Director

National Employment Law Project

Oakland, California

(510) 663-5700

emsellem@nelp.org

Overview

The long-term unemployment crisis and the impact

on UI appeals.

Federal funding cuts hit the UI system hard.

The unprecedented state attacks on the UI program.

The Maine controversy provides a reminder of the

critical significance of “fair hearing” protections. The expanding role of third-party representatives.

The whole truth about UI overpayments.

Prioritizing language access services in the UI claims

and appeal process.

National Employment Law Project 2

National Employment Law Project 3

UI Appeals Surge As Claims Increase

1980 to 2012 (in millions)

Sources: US DOL-ETA 5130, 5159, and

207 Reports.

Lower-Authority UI Appeals Increase Sharply as a

Percentage of All Initial UI Claims (1980 to 2012)

Sources: US DOL-ETA 5130, 5159, and

207 Reports.

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Federal UI Cutbacks Hit Hard

After federal EUC cuts, numbers on EUC reduced

by almost 1 million in one year (from 2.7 million

workers in April 2012 to 1.8 million today).

Over 6 months, federal “sequester”cuts reduce EUC benefits by $2.3 billion and almost $190

million in administrative funding to the states.

EUC sequester cuts increase the longer states

take to implement, now averaging $38 a week for

the typical worker and $57 for workers collecting

the maximum benefit.

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National Employment Law Project 8

NASWA Survey of State Agencies

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Unprecedented State UI Attacks Weeks Cut: 9 states slashed the basic 26 weeks of UI, including NC

(12-20 sliding scale), Kansas (16-26), GA (14-20), FL (12-23), SC

(20), MI (20), MO (20). NC rejects 47 weeks of EUC (starting in July).

Benefits Reduced: NC cuts weekly maximum by one-third (to

$350/week); AR removes indexing; RI reduces average benefits by

$100; WI adds waiting week; TN repeals dependent allowance.

Eligibility Restricted: AZ doubles “high quarter”earnings (now 2d highest in nation); IN restricts the eligibility formula; PA cuts 10% of

claimants with earnings required in 3 quarters outside “high quarter”; NC, KS, TN eliminate “alternative base period.”

Drug Testing: AZ, MS, TN, IN, adopt “suitable work” rule (i.e., job offer withdrawn by prospective employer after positive drug test or

worker refuses drug test); MS passes bill conforming with the

federal law and KS passes non-conforming bill testing all claimants.

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Florida’s New Roadblocks to Access Required On-Line Filing and “Skills Review”: In 2011, Florida

required all workers to file for UI on-line (eliminating phone

claims-taking and in-person registration) and complete a 45-

question “initial skills review.”

Sharp Decline in Access to Benefits: From July 2011 to July

2012, initial claims fell 23% (compared to 9% nationally) and first

payments fell 41% (10% nationally). 16 percent of the

unemployed now collect state UI and only 43% of Floridians who

file for UI are found eligible (70% nationally).

Violates Federal Law: Last month, DOL’s Civil Rights Center (CRC) issued a 56-page decision ruling the practices

discriminated on the basis of disability and Limited English

Proficiency. NELP/Florida Legal Services complaint pending

under the “when due” clause.

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Florida “Initial Skills Review”

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Florida “Initial Skills Review”

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Protect the Impartiality of Appeals Officers

On March 21, Governor LaPage of

Maine called 8 appeals officers to

the Governor’s office for an “educational session” over charges of bias against

employers.

Meeting characterized as a “group scolding” by one hearing officer present and as 20 years of

jurisprudence “going out the window” by another supervisor.

DOL’s Acting Secretary Seth Harris spoke with the Governor and sent

the U.S. Solicitor of Labor to

investigate the unprecedented

allegations of intimidation and

political pressure.

Governor Paul LaPage

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Maine Controversy Offers a Timely

Reminder of the “Fair Hearing” Principals The Social Security Act [Sections 503(a)(1), (a)(3)]

requires an “opportunity for a fair hearing tribunal, for all individuals whose claims for unemployment compensation are denied” and the “maintenance of personnel standards on a merit basis....”

DOL’s appeals guide (ET Handbook No. 382) says: “The essence of a fair hearing lies in the manifest impartiality of the appeal tribunal.”

DOL’s merit systems guidance (UIPL 12-01) says: “[E]mployees covered by a merit system are able to administer the law in an unbiased professional manner without undue outside influence.”

Percentage of UI Appeals Decided

in Favored of Appellant, 1980 to 2012

Sources: US DOL-ETA 5130, 5159, and

207 Reports.

Employers More Successful than Claimants in Lower

Authority and Higher Authority Appeals (1980-2012)

Note: The success rate is the percentage of lower-authority appeals filed by the claimant or the employer that

the claimant or the employer won. Sources: US DOL-ETA 5130, 5159, and 207 Reports.

Federal UI Advisory Commission (1996)

Studied Key Appeals Success Factors

Statistically Significant Factors Predicting Employer and Claimant Success on Appeal: -Claimants: More likely to win on appeal when they appear at the hearing and are represented. -Employers: More likely to win when the firm had more than 100 employees, the employer appeared at the hearing and was represented. -Both claimants and employers are less likely to win when multiple issues are contested and the hearing is conducted by telephone.

The Expanding Role of Third-Party

Representatives in UI Claims & Appeals

Roughly 20%-40% of employers represented by third-

party representatives (TPAs).

Dominated by TALX, purchased by Equifax for $1.4

billion with clients including Wal-Mart, Wells Fargo,

Target, FedEx, Marriot, AT&T.

In 2010, DOL audit data documented TPA abuses: -higher rates of requests by state agencies for additional information on

claims (60.5% for TALX cases v. 30% for employers with no TPA)

-inadequate completion of state forms (65% for TALX compared to 85%

for employers with no TPA)

-cases requiring new fact-finding (17% for TALX v. 10% for employers

with no TPA)

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Despite Dominating TPA Presence, Still

Limited Legal Authority to Regulate Abuse

Federal Law: No federal law specifically regulates TPAs. New state

mandate (P.L. 111-121, Section 521-522), charging employers for

“pattern” of failing to respond to state requests “timely or adequately,” covers “agent” conduct but no penalties against the TPA.

State Laws: Some states require TPAs to register as agents and comply

with conduct mandates. -Connecticut: “No authorized agent may represent any party before a referee or board for a fee unless the agent is registered with the board.”

-Iowa: “An accounting firm, agent, unemployment insurance accounting firm, or other entity that represents an employer in unemployment claims matters and demonstrates a

continuous patter of failing to participate in the initial determinations to award benefits . .

. shall be denied permission by the department to represent any employers in

unemployment insurance matters.”

- Wisconsin: “The department may suspend the privilege of any agent to appear before the department at hearings . . . for a specified period of time if the department finds that

the agent has engaged in an act of fraud or misrepresentation or repeatedly failed to

comply with department rules . . . .”

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Unprecedented Federal Push to

Reduce “Improper” UI Payments Required Reductions: Implementing the 2010 Improper Payments

Elimination and Recovery Act (IPERA), DOL pledged to reduce

“improper” UI payments to below 10% and implement new state performance standards (UIPL 34-11), state “action plan” and “task force” mandates (UIPL 19-11), and extensive oversight for the most

“high risk” states. Mandatory Fraud Penalty: In fraud cases, P.L. 111-121 requires

states to impose at least 15% penalty of amount of overpaid benefits

due to fraud (effective by October 2013)

Treasury Offset: In 2011, Treasury Department began accepting

referrals of “legally enforceable” UI debts from states to be offset against individual’s income taxes. Workers must be provided 60 days notice to “present evidence” challenging state’s offset determination that debt is past due and legally enforceable (31 CFR 285.8(3)(i),(ii))

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The Whole Truth About

Fraud and Error in the UI Program Fraud accounted for 23.6% percent of UI overpayments

in CY 2010, or 2.7% of all UI benefits paid.

Workers lose out on more in benefits that are

improperly denied or underpaid ($2.18 billion in CY

2010) compared to overpayments due to fraud ($1.56

billion).

Employer fraud and abuse contribute significantly to

overpayments and taxes withheld from UI program. In

2010, employers failed to report $4.4 billion in wages,

mostly due misclassification of employees as

independent contractors (Source: Audit Data, ETA 581

Contributions Operations Report).

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Under- vs. Overpayments, 2010 ($ million)

0.58%, $334.1

2.69%

$1,562.0

11.41%

$6,624.9

Improperly

Denied Claims

3.18%

$1,846.8

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Underpayments Fraud Overpayments All Overpayments

(including Fraud)

Paid

Claims

Pe

rce

nt

of

Tota

l UI B

en

efi

ts

Pa

id

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With Large Sums of Overpayments, Strong

Worker Protections More Critical than Ever

Workers can innocently get caught up in overpayment

proceedings, especially with large claims backlogs.

Complex EUC rules contribute to $5,000 to $20,000

overpayments (e.g., claimants must totally exhaust

benefits from other states, which they often do not know

they qualify for).

Due process protections must be strictly enforced: 1. Scrutinize confusing notices, application and continued claims

questions.

2. Verify that findings are based on first-hand knowledge and credible

evidence.

3. Carefully distinguish between intentional fraud and good faith errors.

4. Severe penalties and liability exposure require legal representation.

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Time to Prioritize Language Access to

the UI Claims and Appeals Process The Obama Administration taking key steps to enforce Title VI and

provide limited English proficient (LEP) with full access to the UI program (e.g, CRC’s 56-page Florida decision and the 2011 LEP guidance, UIPL 30-11).

Adopt LEP UI appeals plan that includes the minimum Title VI protections adopted by other states and other benefits programs: 1. “Babel” notices in multiple languages informing LEP claimants of their basic appeal rights and deadlines (DOL model posted on-line). 2. Adopt formal “good cause” provisions for late filing of appeals due to LEP where workers otherwise exercised reasonable diligence. 3. Make clear provision to limit and, where appropriate, waive UI overpayments incurred due to the individual’s LEP. 4. Agency employees and interpreters should receive training in specialized UI language and translate glossary of UI terms in most common languages. 5. Provide training for hearing officers on working with interpreters in UI proceedings.