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Unemployment Insurance Reform: A Little Something For Everyone

December 20, 2011

On December 19, Governor Snyder signed S.B. 806 into law.  The most significant aspect of the legislative package in which the bill was included calls for a State Bond Issue  to raise monies sufficient to repay Michigan’s massive UI debt to the federal government.  S.B. 806, however, also contains one of the most broad-based arrays of changes to the Employment Security Act in years, even if those changes are more incremental than monumental. 

Many of the changes are designed to both toughen disqualification standards and facilitate the Agency’s recovery of improperly paid benefits from claimants. Some of the remaining changes of particular significance to Michigan employers include:

● Section 13 – Employers will now be able to correct errors on timely-filed Quarterly Reporting forms without penalty if they do so within 14 days of Agency notification.  Also, employers with 25 or more employees will be required to file all quarterly reports electronically beginning January 1, 2013.  There is a more gradual phase-in of this requirement for smaller employers, some of whom will also be given the opportunity to spread UI taxes out over all four calendar quarters of a given year, as opposed to getting “socked” in the first and second quarters.

● Section 17 – Benefits paid to a claimant solely on the basis of combining Michigan and out-of-state employment during a base period will be charged to the Nonchargeable Benefits Account and not the Michigan employer.

● Section 19 – The look-back period for calculating the largest portion of the employer’s tax rate, the Chargeable Benefits Component, will change from the current 5 years to 4 years in 2012, and then to 3 years in 2013.

● Section 27 – The earnings reduction in weekly benefits and corresponding cap on the combination of weekly earnings and UI benefit payments will change from $.50 per dollar of claimant earnings and a maximum combined equal to 150% of the claimant’s weekly benefit rate, to $.40 per dollar of earnings and a maximum combined of 160% of the weekly benefit rate. This provision will sunset in 2015, and the Agency will be required in the interim to report on its impact.

● Section 29(1)(a) – The definition of and disqualification for “voluntary leaving” has been expanded to include 3-day no-call, no-shows and an employee’s loss of a fundamental job requirement (i.e., licensure or other required certification).  Also, in cases of medically-driven separations from employment, the leaving will be deemed involuntary only if a claimant: 1) obtains a medical professional’s statement the job is harmful to the claimant; 2) shows no alternative work is available with the employer; and 3) shows no leave of absence is available.  Also, if an individual working two jobs quits the part-time job and later loses the full-time job, any benefits otherwise based on earnings in the part-time job would be charged to the nonchargeable benefits account, and not to the part-time employer’s account.

● Section 29(5) – The transfer of base period wages that occurs when an individual resigns employment to accept full-time employment with another employer will now apply to separations occasioned by Union hiring halls that reassign employees to other contractor employers.

● Section 29(6) – After a claimant collects half of his or her total weeks of entitlement, the claimant must apply for and accept any job that pays at least 120% of his or her weekly UI benefit rate.

● Section 42 – The Agency will convert to the IRS 20-factor test for determining whether an individual is an employee or independent contractor under the Act, thereby eliminating possible ambiguity and confusion arising from its traditional use of the narrower “economic reality” test.

● Section 44 – The annual taxable wage base for Michigan employers will increase from the current “first $9,000 of every employee’s earnings” to the first $9,500 of those earnings, although there is a provision allowing this standard’s return to $9,000 in the event the UI Trust Fund regains a sufficient positive balance in the future.

Employers who are actively involved in the administrative adjudication process should also remain alert to procedural changes that will occur, either as a result of this legislation or the new Administrative Rules on appeals the legislation requires the Michigan Administrative Hearings System to promulgate in the future.             

NOTE TO PEO EMPLOYERS: Slipped into S.B. 806 were a couple of provisions on client level reporting that may merit your immediate attention.

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