Unemployment Insurance Advisory Council
Summary o3 19, 1998 Meeting
Management: James Buchen, Ed Lump, Earl Gustafson
Labor: Dennis Penkalski, Robert Lyons, Phil Neuenfeldt, Michael Bolton, and Red Platz
Chair: Greg Frigo
Department staff present: Bill Clingan, Bruce Hagen, Al Jaloviar, Richard Tillema, Lee Carter, Mary Anderson, Carla Breber, Michelle Kho, Tom Smith, Michael Mathis, Nadine Konrath.
10:00 p.m. – Frigo welcomed Council members.
Agenda Item 6. EnABLES (Benefits and Legal System Redesign) Bill Clingan indicated that he had met with all the Council members with the exception of Phil Neuenfeldt to discuss the enormity of the Enhanced Automated Benefits and Legal Enterprise System (EnABLES) in order to garner the Council’s support for the project. Hagen gave an illustrated presentation on EnABLES to explain the need for a unified system to fully deliver all aspects of the UI program.
The Tax Redesign (SUITES) project was begun 8 months ago and now the second half, EnABLES has begun. Hagen reviewed what the UI program has done with automation in the past to get us to where we are today and put forth our strategy for our future under EnABLES. Wage Record reporting system and the introduction of IVRs (interactive voice response system) to take initial and weekly claims were the major automation projects in the recent past. EnABLES will allow us to deliver a high quality product to our customers and achieve the Secretary of Labor’s standards for our program in a more efficient manner with fewer staff in the highest workload levels we have experienced to date. Current system is old, out of date, difficult and very expensive to maintain and based on obsolete technology.
Hagen gave an overview of the four phases and timelines of the EnABLES project. UI Reforms could have a profound, future effect on our ability to fund future automation projects. We have opted to act now and go forward with this extensive redesign. Funding for the project will come from a combination of Reed Act funds, special Reed Act funds, the administrative fee and portion of the Interest and Penalty fund. Hagen further explained that the product (both hardware and software) we have proposed to purchase for EnABLES is Curam, a product out of Ireland which is extremely comprehensive in its functionality, customer centric and should meet the needs of the UI program well. Estimated investment for this project is between $22 to $23 million. The DWD cost for staff, including BITS staff, is estimated at $7.8 million. Hagen enumerated the many savings this project will garner for the UI Division, totaling $5.5 million in administrative costs.
Buchen questioned the cost of DWD staff. Hagen explained the blended cost of BITS staff (Bureau of Information Technology Services staff), regular UI staff, the business people and the costs of the vendor.
Neuenfeldt questioned the elimination of 85 positions inherent in the implementation of this new system. Clingan responded that the object of the redesign is not the elimination of staff but to increase efficiency. Although we can potentially do with less we need to maintain certain efficiencies now. This will be the argument that will be made with the Secretary’s office when it comes to staff cuts. Neuenfeldt then asked if UI had spoken with Council 24. Answer was ‘no’.
Discussion ensued regarding which type of staff may be eliminated and how would we account for the vast number of retirements expected in the near future in the UI Division.
Lyons asked how many of the 85 positions to be eliminated would be from the ranks of bargaining unit positions that would be covered by a union as opposed to management level positions that are not covered by a union. Clingan responded that the process for ‘hitting the mark’ for staff reduction by the end of the biennium is just in its beginning phase at the Secretary’s office level and the details are as yet unknown.
Buchen questioned the cost to DWD of outside vendors for this project. Both Clingan and Lee Carter, Project manager of EnABLES, responded. Plan is for a time-limited use of outside vendor, just until they can teach BITS staff the workings and the maintenance of the new system.
Discussion ensued on the payrolling/costs of BITS staff, contractors, regular UI staff, staff deployed to SUITES and EnABLES and the project positions used to back-fill the positions transferred to those two projects.
Gustafson asked what the impact would be on the Fund’s balance of this project. Would it trigger a tax increase? Hagen responded that it would have no affect. Hagen also promised that whenever UI would draw down funds from the Administrative Fee and the special Reed Act funds, we would come to the Council every step of the way to keep it apprised of our actions and any affect they may have on the fund or UI tax schedules.
Frigo asked the Council if the members wished to caucus. Motion was made to go into closed caucus. Motion was seconded. Authority for the closed caucus is provided by WI Statutes section 19.85(1)(ee). Purpose of the caucus is to deliberate proposed UI law changes. Motion carried by a unanimous vote among the Council members present.
Council agreed to caucus for 10 minutes. Frigo reconvened the meeting.
Neuenfeldt indicated that Labor has a few concerns that did not allow them to vote in support of the EnABLES project at this time. Given the enormity of this project Labor believes that it should be discussed with the bargaining units involved, given the fact that government is in the midst of downsizing. Questioned the validity of reducing federally funded positions only to have the money saved thereby returned to the Federal DOL to distribute to other states. Neuenfeldt also noted that Wisconsin is one of the last states with Federal resources coming in. Also questioned the outsourcing of staff or business to do this project. Isn’t there anyone in Wisconsin government or anyone in the state who could do this work for us? Concerned about Wisconsin monies leaving the state, much less leaving the nation. Encouraged UI to have discussions with the bargaining units as soon as possible.
Buchen stated that Management is interested in adding to this proposal some kind of payback on the special Reed Act money; a mechanism by which we can return it to the Fund for the next project, a "revolving loan" concept. Hagen added that, in past conversations, Bob Oyler concurred with this proposition. Gustafson also agreed that this is a good idea. Council asked that the UI Division come up with some options to make this happen.
Hagen addressed the outsourcing concern. Bids were universal but only four responded. Most had overseas components, even IBM who connected with Curam, out of Ireland. Carter responded that only the expertise and/or product that is not available in Wisconsin is what will be outsourced. All other staff and components are in-house and in state.
Clingan responded to the issue of reducing federally funded positions by stating that it is a state-wide issue and he would get back to the Council on it at a later time.
Agenda Item 2. March 2003 Minutes. Frigo redirected the meeting to the agenda items. Minutes of last meeting were reviewed. Penkalski requested an addition to those minutes regarding the apprenticeship funding issue. The fact that he sits on both those Councils will be added. Following that addition, the minutes were approved.
Hagen asked for a tentative approval by the Council of the EnABLES proposal pending UI Division successfully resolving the four issues raised by the Council. Council unsure how to respond. Hagen and Clingan attempted to clarify. Jaloviar commented that UI is not looking to layoff staff but to strategize how to deploy current staff to fill-in behind the many, expected retirees in the Division. All such deployments would follow the contractual process of the appropriate bargaining units and Civil Service regulations.
Ed Lump asked if a teleconference meeting of the Council can be arranged some time next week to be given the resolutions to the four outstanding issues and approval can be elicited at that time from the Council in that manner. Frigo explained the details in setting up such a meeting. (NOTE: UIAC meeting by teleconference call was scheduled and held on May 15, 2003.)
Clingan gave a brief update on the DWD/DOR proposal. There is acknowledgment between the agencies that cost factors are a real issue. The existing UI/DOR workgroup will create a draft and present it to some employers. The goal is to have a customer-friendly system that is also efficient. Time frame for this proposal may delayed by 6 months to a year due to actions taken by DOR on their system. Buchen states the delay is of no real concern. Anderson responds that SUITES project will proceed now with building in the ability to collect this additional data. Easier to do it now, than later.
Motion made to go into closed caucus. Motion carried by unanimous vote of all members present. Caucus is for the purpose of deliberating proposed changes to Wisconsin UI Law.
Meeting reconvened following caucus at 1:20pm
Next meeting dates were discussed. June 18 and June 24, both at 9:30am in Madison were agreed upon.
Agenda Item 8 d. Technical Changes to Approved Training Statute Breber gave a presentation on technical changes to the approved training section of the statutes, 108.04(16). Mostly housekeeping changes. Only change to application of this provision is to extend the approved training protection to three additional sections of law: suspension of employment under 108.04(1)(b)1 and leaves of absence under 108.04(1)(b) 2 & 3 from unsuitable work to enter or continue in TAA or EDWAA (dislocated worker) training. Voting on this proposal is held until more information on Federal regulations/requirements is obtained.
Agenda Item 8 a. Treatment of Limited Liability Companies Mathis, Enforcements Attorney with the Bureau of Legal Affairs, presented changes to the treatment of limited liability companies (LLC) under UI Law. Since this provision became effective in 1994 LLC has become the preferred method of doing business in Wisconsin.
In the beginning, the application of the law was straightforward. If the LLC had one member, it was treated as a sole proprietor, no employees and not eligible for benefits. If the LLC had multiple members, it was treated as a partnership, no employees and no eligibility for benefits, no responsibility for reporting wages or UI taxes. That stood firm until this application began to crumble.
Proposed solution is basically straightforward. An LLC which makes an election for Federal tax purposes to be treated as a corporation or as a partnership, that choice would drive how the members of the LLC would be treated for state UI tax and benefits as well. If a multi-member LLC elects to be treated as a corporation for Federal UI purposes, WI UI would treated them as corporate officers. If they perform service for pay, they would be considered as employees, would be expected to report their wages, pay UI tax and would be benefit eligible. If they make the opposite election and chose to be treated as a partnership, members would be treated as members in a partnership, not reportable, not employees and not benefit eligible. There is default in federal law such that if a multi-member LLC makes no election, the members would be treated as members in a partnership, that same default would be carried through to state UI law. We are also proposing legislation that would specially state that partners are not employees.
Smith added that we would be plugging this provision into our normal treatment of family corporations under 108.04(1)(g) whereby if a corporate owner owned 25% or more of the corporation, his/her benefits would be reduced to the approximate equivalent of four weeks of benefits based on work for the corporation.
Meeting continued even though there was no quorum. Breber asked to digress in order to answer a previously asked questions regarding the non-charging of benefits paid to someone who quits an ‘unsuitable’ job to enter or continue in approved training (TAA or EDWAA). Breber indicated that the provision is federally mandated and the definition of ‘unsuitable’ work is contained in the Federal Register. Discussion ensued to possibly give a non-charge to the employer when the employee quits suitable work to enter or continue approved training.
Agenda Item 8 b. Remove Sunset in Current Employee/Independent Contractor Definition
Smith explained this provision. Prior to 1996, the test to determine whether an individual was an employee or an independent contractor was two-fold. The individual had to be free from the direction and control of the employing unit and must be in an independently established trade or business in which they were customarily engaged. In 1996, the law was change to create a new test.
There were problems with that test, particularly the requirement that the individual have a FEIN from the Federal IRS or that the person has filed business or self-employment taxes with the Federal IRS in the prior year. In the 1999 bill cycle, a further change was made to the test starting in 2000. The same 10 factors were retained but they were combined into a list of ten to be considered among and given the same weight as all other factors. In order to be considered as an independent contractor, the individual must meet at least 7 of ten factors listed in the law. In addition, there was a sunset provision in that "7 of 10" test to end and to revert to the prior test as of 2004. We are asking today for the Council’s support to continue the "7 of 10" test as it has been working well for those involved, both the Department and the employers.
Frigo asked if the Council would vote on the LLC proposal and the removal of the sunset provision from the independent contractor statute section. (there was a quorum at this time). Motion was made to approve the LLC proposal, motion was seconded; vote was unanimous among the voting members present. Motion was made to approve the removal of the sunset provision form the independent contractor law. Motion was seconded. Vote was unanimous of the voting members present.
Agenda Item 8 c. Payment of Lien Satisfaction Fees Cumulatively
Konrath explained this proposal as a technical change. UI pays counties individually on warrants, which can generate up to 72 bills a day to these Clerks of Court. We want to consolidate these payments in a move toward efficiency and automation. We would interface with the Consolidated Court Automation Programs (CCAP) which would benefit both the department and the courts. All the courts contacted (15 to 20%) were highly in favor in our switching to this automated system. It saves both administrative time and money for all involved.
Agenda Item 8 e. Collection Remedy for Imposter Overpayments and Penalties
Smith explained that in the 1999 bill cycle the law did create an overpayment liability to people who falsely claimed benefits under the identity of another and administrative penalties which could be assessed against such individuals. However, it did not create an enforcement provision for the collections of those liabilities and penalties. We would like the Council’s approval to create such enforcement provisions against these imposters. Discussion ensued regarding the various ways the department can and does now collect such overpayments and penalties.
Frigo pointed out some technical changes included under the budget bill that affect Chapter 108. They were included in the packets.
Next two meetings in June were confirmed and meeting was adjourned.
END OF MEETING