GEF-1, Room B205
201 East Washington Avenue
Management: James Buchen, Ed Lump, Dan Petersen, Earl Gustafson
Labor: Phil Neuenfeldt, Dennis Penkalski, Red Platz, Patricia Yunk
Chair: Daniel LaRocque
Secretary's Office: Secretary Roberta Gassman, Deputy Secretary JoAnna Richard
Department staff present: Hal Bergan, Bob Whitaker, Dick Tillema, John Zwickey, Christopher O’Brien, Lutfi Shahrani, JoAnn Hium, Ben Peirce, Bill Brueggeman, David Heuer, Andrea Reid, Brian Bradley, Thomas McHugh, Robin Gallagher, Ron Danowski (Division Administrator, Division of Employment & Training), Brian Solomon (Bureau of Job Service)
Others present: Representative Mark Honadel, Jason Vick (Rep. Honadel’s office), John Metcalf (Wisconsin Manufacturers & Commerce), Larry Smith (UC Management Services), Bob Andersen (Legal Action of Wisconsin), Kerry E. Fox (Kimberly Clark)
Mr. LaRocque calls the meeting to order at 9:37 a.m.
Mr. LaRocque introduces the Secretary of the Department of Workforce Development, Roberta Gassman, JoAnna Richard, Deputy Secretary, Ron Danowski, Division Administrator of Employment & Training, and Brian Solomon, Bureau of Job Service.
Secretary Gassman presents a proposal she would like the Council to consider in its deliberations. Federal dollars for the employment training system have become tighter, as we have seen a greater interest in technology. Before call centers, we had over 1200 people operating in Job Service working with people who had become unemployed to help connect them to skills and work. We now have approximately 200 people in the Job Service providing direct services to people when they become unemployed. In 2004, we aggressively went after a federal demonstration grant because we believed that by having staff working closely together between Job Service and UI, we could quickly intervene with people who had just become unemployed, work with them aggressively on their job search activities, help them reconnect to work, and save money because they would be on benefits a shorter period of time. The demonstration was conducted in Milwaukee and Oshkosh and went very well. It was studied nationally by a neutral research think tank and the results determined that the people in those areas who became unemployed and went on UI were drawing benefits for 1 to 2 weeks less on average because of getting this aggressive reconnection to the labor force and help in connecting to employers for their next job. This was a savings per person of $289 in the pilot.
Our federal money continues to decline and stay flat with the Job Service staffing. We now have around 200 people working in Job Service. Some of these people are doing reemployment services. We believe that we could continue to see increased savings of fund dollars if we have unemployed people be unemployed less. We are now not able to provide these aggressive services because of staff compared to the broad range of people who become unemployed. We will get you a paper on this. We request the Council’s support to make available approximately $1.5 million to enable us to hire and fund staff in Job Service so we can increase the level of unemployed people to whom we can give active, directed reemployment services. We would be boosting the job search efforts unemployed people would be making. It would allow us to have more direct, energetic, aggressive, face-to-face contact with the unemployed individual. Based on our demonstration, we believe this would be very worthwhile. With the grant we would be touching only a small percentage of those who become unemployed in the state, but we feel that this would be taking us in the right direction to protect the trust fund by allowing benefits to be drawn for a shorter amount of time. We can answer questions as to how we have done the estimating of what the investment would generate in savings in the fund and how it would have a cost-neutral effect in terms of the fund by drawing fewer benefits. It would be a win-win for the employers and the fund, and those of us trying to get unemployed people back to work more quickly.
Secretary Gassman thanks the Council for the work they do and the time they give to the UI program. The request is something she hopes the Council will consider in their deliberations. Secretary Gassman leaves the meeting for a scheduled speaking engagement.
Deputy Secretary JoAnna Richard clarifies that the monies requested are the Reed Act funds that are part of the trust fund. Reed Act funds can be used for employment training programs such as Job Service and reemployment services. The reemployment services in this proposal would be more aggressive than they used to be. After someone files for benefits electronically, there would be intensive profiling by Job Service to contact individuals and help them get back into the labor force. We are excited about having this reconnection with Job Service and UI and hope that the Council considers the proposal.
Question (Peterson): Is the plan to continue the two offices that were started originally or is there a plan for expansion?
Ms. Richard indicates that the program would be expanded closer to where the call centers are. Milwaukee, Appleton, Eau Claire and Madison are targeted. The Madison area can serve Rock County where we know we have high unemployment, and the Eau Claire office could serve a broader region as well. We would have a better connection to the call centers which is important to share data on profiling.
Question (Gustafson): Do we have a paper on this?
Mr. Bergan indicates that there is an in-depth paper on this that he will get to the Council members.
Question (Peterson): How much was the original grant?
Brian Solomon responds that the original grant from the Department of Labor was about $600,000 over a two year period to do the demonstration piece in Oshkosh.
Question (Platz): The Secretary said there was a savings of $289 per person. What was the total savings amount?
Ms. Richard indicates that the department extrapolated up for this proposal and estimates that we will save $1.7 million if we invested $1.5 million, for a net of $200,000. This was calculated being as cautious and conservative as possible. We think the savings will be greater because this is more intense than the demonstration. We wanted to give the numbers that we could count on. Mr. Solomon indicates that the department estimates about $385,000 total savings from the demonstration grant. Some of the dollars went to set up IT systems to help UI and Job Service to make the IT systems communicate with each other better. The entire grant did not go to services.
Mr. Bergan indicates that that infrastructure is in place now and would not need to be repeated.
Comment (Neuenfeldt): The presentation that some members of the Council missed was a proposal based on a pilot project to spend some of the Reed Act funds to help Job Service. The pilot project showed a financial savings and part of the rationale is the more we reinvest money to help people become reemployed, the more we will save the fund. In addition to the dollar savings is that when someone is laid off it is a traumatic time and it is helpful for them to have someone they can work with on a personal level to help them through that. Many times those people not only help them find a job but help them find other ways to keep their lives together by referring them to community resources. I see it as not only a dollar investment, but also a human impact. We have been supportive of this in the past.
Comment (Buchen): Given the general fund condition, we are going to have to raise taxes as it is to cover the existing obligations of the fund. If we take something out of it for something else, we will have to raise taxes more to cover that hole.
Comment (Neuenfeldt): It raises taxes less because there is a positive return on the investment.
Ms. Richard adds that they have been working with Tim Sullivan and the Governor’s Council for Workforce Investment to try to do more of a business services model. As we do profiling, we find the skilled workers and can try to train them from one skilled place to another where there are job openings. This is the type of knowledge transfer that we will be able to make. The more we work with them in Job Service, the more we know where that talent lies. That is the key to quickly reemploying someone and getting them back in the workforce. It is beneficial for the business side to find that talented worker and not have to wait as long to fill the position. Mr. Solomon indicates that this proposal builds on this by adding in more assessments than we have done in the past. It assesses not only the skills of the individual, it is an enhancement of the review for eligibility for UI. We built in time for UI staff to review the claim to make sure it is valid and to follow that person through the employment process to make sure they are staying on track to get them back to work quicker. We have added an incentive through looking at the UI eligibility piece with a much tighter focus.
Question (Neuenfeldt): Will this officially become a department proposal?
Mr. Bergan indicates that it is. Mr. LaRocque indicates that a paper on this will be distributed.
Mr. LaRocque acknowledges Representative Mark Honadel who chairs the Assembly Committee on Labor and Industry
Mr. Bergan would like to encourage the Council members to revisit some of the department proposals. If we have agreement on some of these, we can get some of the work underway on the drafting process. Most of those could be consensus items.
Motion (Neuenfeldt), seconded (Peterson), to approve the Minutes of the July 30, 2007, meeting. Minutes are approved unanimously.
Mr. Bergan presents the proposal. This is a version of the administrative assessment that has been in place for a while. When the department made the proposal last time to remove the sunset, the sense was that the sunset was desired. The department is amending its proposal to continue the assessment with a sunset for two more legislative cycles, or 4 years. Mr. Bergan distributes a list of pending IT proposals that is responsive to the request last time to get a sense of what the department would be buying with this. These are conservative figures that must be compared with the amount that is generated every year by the administrative assessment. At the end of the four years, the Council would have a chance to review how that money was spent, what projects we did, the value of those projects, etc. Essentially, the administrative assessment is required for the UI program to continue to make progress on the IT systems. Most of the maintenance expense is covered through the federal grant, but to continue to improve the systems, we need the administrative assessment.
Comment (Buchen): Could we use Reed Act money for that?
Mr. Bergan indicates that it is not the same pot of money. There is a requirement that the funds must be appropriated. The advantage of the administrative assessment is that you have an independent funding stream and you know how much it is. We are trying to respond more directly to what we know will be available in terms of funding. For us this is the preferred alternative rather than dipping into the Reed Act funds. The administrative assessment will not cover all of these proposed projects, such as the change from IDMS to DB2; some of them would require federal funding.
Comment (Gustafson): The handout and the material in the meeting packet show that the cost of the pending IT projects totals close to $13 million. The administrative assessment generates $2.3 to $2.4 million per year. The department will need to prioritize the projects.
Mr. Bergan indicates that this is correct and the projects would be over a number of years. For instance with numbers 2 and 3, these are for fact-finding and are the beginning costs. Once we have some functionality there we would make decisions about adding more functionality. The proposal is to continue the administrative assessment for four more years and come back and review it with a report on what those expenditures were.
Mr. Bergan presents the proposal. We started this conversation last time. This proposal is to continue the existing language we have to use Reed Act funds for administration. We have that power for this period and have made the decision not to exercise it. As long as our operating budget is solvent for this next fiscal year, we decline to use it. As we look ahead to the next two fiscal years, we are discouraged about the prospect of meeting all of our expenses without an additional supplement. Three or four years ago when we got our federal grant, we were at the “stop loss” and our federal grant dropped by 5% for a couple of years. We studied the federal grant process and made substantial progress. This year we are at the “stop gain” and we increased the federal grant by $2.7 million which is as much as you could increase it. Even with that increase, because of the increases in our operating costs that are beyond our control, like IT services, postage, etc., we are looking at a budget situation that leads us to believe that this is the cushion we need. We may not need to call on it, but it is important to have it available to us because we could have serious operating difficulties if we do not have flexibility. Agencies across the country are dealing with this because of the consistent underfunding of administration by the federal government.
Comment (Buchen): This invites the Council to look at the department budget which it has not done before. Maybe the department could share some aggregated figures as to what the department spent in the previous year and what they expect to spend next year.
Mr. Bergan indicates that he can do this at a detailed level to give the Council a sense of the budget without getting into all of the minutiae of what is funded out of which fund.
Mr. Zwickey indicates that the division will finish up this year with about $1.2 million. Whatever we do not spend is carried over to the next year. We can spend it through December on anything we want within the program. After December of this year, we can spend it only on automation. We transfer the funding from FY07 to FY08 to make sure we spend all of the FY07 money. We try to manage the money so we do not tap into this.
Question (Buchen): Is there any risk of the legislature spending the money for non-UI purposes?
Mr. Zwickey indicates that according to Social Security law it must be spent on administration. We get a base amount and an above base. The base for next year is $58.2 million, which is an improvement. It is the first time we have gotten a substantial increase in the last 4 years. We also get an above base depending on the workload. We are given money based on the number of initial claims that we do.
Question (Yunk): Can we count the potential Job Service’s activities as workload?
Mr. Zwickey indicates that it is the federal government that has specific definitions of workload that generally would not cover Job Service activities.
Question (Yunk): Is it possible that the reemployment program would be funded out of one of these accounts?
Mr. Bergan indicates that the reemployment proposal stands on its own and the likelihood that it will help and not hurt the trust fund. It will not help in how they count our activity.
Mr. Bergan presents the proposal. It is a simple, straightforward proposal to reflect the new reality as it relates to one of the factors in the independent contractor test. Currently, in order to be considered an independent contractor, you need to meet 7 of the 10 criteria in the law. Among the factors is having a Federal Employer Identification Number or FEIN. We find that many businesses operate without FEINs including sole proprietorships. It used to be you could get an FEIN if you were a sole proprietor, but now the federal government will not give you an FEIN if you are a sole proprietor unless you are employing someone. Because of the change in practice over the years, this factor has become an artifact and is not really a measure of whether a person is an employee or an independent contractor. We are proposing to eliminate that factor from the test, and the test would change to a test of meeting 6 of the 9 remaining factors. We are not expecting any significant fiscal effect.
Question (Lump): One of the requirements in the test is having filed self-employment income tax returns. Do you have to have an FEIN to do that? The third requirement is maintaining a separate business. Is someone who has a laptop that is the person’s office who sits at a coffee shop using the internet considered to be maintaining a separate business under this requirement?
Mr. Bergan indicates you do not need the FEIN to file the self-employment income tax returns. Mr. Shahrani indicates that the idea of a separate business is to distinguish between those who return to work for an employer with the same circumstances and are called independent contractors versus those who set themselves out to the market as operating a separate business. The person does not have to have a physical facility unless that type of business requires it. People need to distinguish themselves as a separate, independent business owner selling themselves to the market at large.
Comment (Buchen): This is a provision that I have worried about. The literal reading of it suggests that you must have an office. It implies you must have an office, though that may not be the way the department applies it. Some businesses do not have an office at all. The application of it by the department is fine.
Comment (Yunk): This depends on how you define office. An office could be a laptop.
Mr. LaRocque indicates that there is quite a bit of case law from the Labor and Industry Review Commission on this issue. The separate business criterion is one we all have difficulty applying in some circumstances such as the example. LIRC has held, for instance, that a part of the “separateness” of the business is demonstrated by having more than one client.
Comment (Buchen): It would be interesting to see if LIRC decides its cases on this requirement with a literal interpretation of the statute, or whether they look at the totality of the circumstances.
Comment (Gustafson): I would be curious whether the law recognizes a virtual office or not.
Mr. Bergan states that the reason the proposal is offered as it is, is to reflect the new IRS rules. To get into a broader question of those other requirements would take a lot of time and it involves a lot of people. We need to stay true to the tradition we have with the presumption in favor of employment. There are people who are trying to avoid their obligations and doing so in a way that compromises the interests of those who are meeting their obligations. The idea of updating these definitions has merit, but it is a subject full of complexity and difficulty.
Comment (Penkalski): This proposal actually weakens the statute. Now you have to qualify for 70% of the factors. By reducing it to 6 out of 9, you would have to qualify for 66%. We spent a lot of time on this in the past.
Mr. LaRocque indicates that the proposal attempts to take out one of the factors that does not really add any value to the analysis. It is a tripwire that an employer can fail on. This does reduce the percentage that must be met, but it is also purifying the test.
Question (Gustafson): Is a 3% change statistically significant?
Mr. Tillema states that he did not find a fiscal effect on this particular criterion. The 6 out of 9 is not going to change any decisions in terms of whether the person is an employee or not. I would have to look at a huge number of cases to find those in which this particular change to the criterion made a difference on the tax side.
Mr. Bergan indicates that this is the 75th anniversary of the program. Over time, things change and you need to reflect on the reality of the program. People need to perceive the program as rational and well put together and not arbitrary. This criterion is broadly perceived as arbitrary. We want our program to be credible, and that is the reason for this proposal.
Question (Platz): If you are looking at definitions, why not look at the definition of an office at the same time?
Mr. LaRocque indicates that this criterion is more obvious as needing change.
Comment (Yunk): Why deal with this at all, given the more serious issues at hand?
Comment (Buchen): This is an area with a lot of activity and dispute. The FEIN is only applicable if you have employees and they will not give you one otherwise. There are independent contractors who are independent people with no employees. Why have a criterion if you cannot get it if you are an independent contractor. An independent contractor can be a sole proprietor and cannot get an FEIN from the IRS.
Comment (Lump): I am not suggesting we change this today, but I do think the workplace is changing enough that we need to look at this. I realize that a lot of time and effort went into this test in the past, but the workplace is changing rapidly. We have more people operating out of their own home. It is something that down the road is going to be presenting problems.
Question (Peterson): What is the biggest issue here? Is it employers not paying taxes or employees trying to collect benefits when no taxes were paid, they change their mind and decide they do not want to be an independent contractor any more?
Mr. Bergan responds that this issue often comes up when someone claims benefits. Otherwise, we do not have too many of these. When someone claims benefits, the controversy is joined and you have an active application of the test.
Comment (Peterson): The people we had in here talking on this issue were from the employer side and they were assessed additional taxes for people they thought were independent contractors.
Comment (Neuenfeldt): On our end, where it comes up is that a lot of people do not know that they are independent contractors until they apply for unemployment benefits.
Mr. LaRocque indicates that the department gets quite a few customer calls from employers who are found to be employers. Their employees are not close to the 7 of 10, but the employer looks at the test and asks what sense it makes to have a requirement for an FEIN. The test becomes hard to defend right away. We have the discussion and I can defend the test as a whole. I personally am strongly in favor of the test as a whole, but criterion number 1 stands out as one that is not working to distinguish who, as a policy matter, should be receiving benefits and who should not. This is all the test is supposed to do; it is not necessarily “the correct” definition of employee or independent contractor, but it attempts to separate on a policy basis who belongs in the program and who does not. We just do not think the first criterion is helping in any way. Whether it is 6 of 9 or 7 of 10 or some other ratio, it is hard to defend the test to the customer when the first element does not make any sense.
Comment (Peterson): I agree with what you are saying that the FEIN has changed. Ten years ago you could get three FEINs for the same entity. You just filled out the form and sent it in. Now it is getting harder and harder to get it. I think it makes sense to take it out of the test.
Mr. LaRocque states that we are concerned with noncompliance. This issue of who makes 6 or 7 is a lot less common a phenomenon in our experience than you might think. Taking this one out is not going to cause a swing. As Dick Tillema said, even trying to find the cases where this criterion would make a difference in the particular case is a real challenge. It probably will not have a fiscal effect, but it will purify the test, make the test easier to defend and will do some good for the program that is not possible to measure in dollars.
Mr. LaRocque indicates that this came up earlier this year in a meeting. The department received a contact from the office of Representative Gary Hebl who raised the issue of a small employer who considered himself to be disadvantaged by our threshold for the deferral of first quarter contributions. Because he was a small employer, he had a tax bill of about $1,400 in his first quarter, whereas in the past year he had had something substantially less. He was concerned that our $5,000 threshold for deferral of first quarter contributions was too high a threshold and suggested to the Council that we lower the threshold. The department has not made a proposal on this but, as promised, we are here to give you information on policy choices that we see, ranging from continuing the status quo to eliminating the deferral altogether.
Brian Bradley of the Bureau of Tax and Accounting presents information on the department’s history with regard to the deferral. Using 2007 as an example, we had 385 employers actually defer part of their first quarter payment. There are 9,700 employers that had a first quarter liability of $5,000 or greater. Those are the ones that under the current law are eligible. Those 385 employers deferred $7.2 million in total first quarter tax liability of $17.6 million. The interest lost to the Reserve Fund is barely significant and is estimated at $191,000. Some of the employers who defer do pay early to make sure the money is in their account balance as of July 31st for experience rating purposes for 2008. We had 123 of the 385 employers pay all three installments by July 31st. There were 49 employers who lost their deferral because they did not pay their second quarter installment payment. Some of those employers elected the deferral unintentionally. We do not require employers to file an election, they just have to underpay the first quarter liability. We send notices out to them and tell them that it appears that they elected the exclusion and remind them that they have to make installment payments in order to qualify for the deferral. Some employers forget by the time of the second quarter liability. We also looked at a sample of the remaining 213 employers that did make the installment payments to see if whether they were paying attention to the fact that the deferral had an effect on their 2008 rate. We looked at 60 accounts and determined that for 22 accounts, had they paid their first quarter liability in full by July 31st, it would have reduced their rates for 2008. For whatever reason, these employers may not have been looking at the effect that the deferral has on their rates.
Mr. Bradley indicates that based on this research, we came up with two options for the deferral. The first option is not to do anything at all. The handout explains the advantages and disadvantages of the options. The advantages of not changing the threshold from $5,000 are that it helps employers manage their cash flow, there is minimal interest lost to the reserve fund because our experience shows that only about 6% of the employers that are eligible actually defer, and there is minimal administrative cost. The disadvantages are that if all eligible employers elect to use it, there would be a loss of about $3.2 million in interest to the Reserve Fund, the threshold is arbitrary, it is inequitable because it only applies to large employers, and in some cases employers may end up with a higher tax rate if the deferred amount is not paid by July 31st.
Question (Gustafson): Is the $3.2 million net?
Mr. Bradley responds that it is not. It is based on the total tax deferred.
Mr. Bradley notes that the deferral also could have an effect on which tax table we are in. We use the June 30th cash balance in the Reserve Fund to set the tax rate schedule for the next year. These installment payments are not due until July 31st after we are at the cut off for looking at the Reserve Fund balance for rate schedule purposes. While the 6% of employers may not have a significant impact, if all of the employers who are eligible deferred this would be $175 million and that could definitely affect the rate schedule.
The second option is to lower the threshold to $1,000. The advantages are that there would be more employers eligible, minimal interest would be lost to the Reserve Fund based on the past experience of the number of employers who would participate, and there would be minimal administrative cost. Some of the disadvantages are the same as for the $5,000 threshold. These include the $3.7 million interest lost if all employers defer, the threshold is still arbitrary, and it is inequitable because small employers cannot take advantage of it.
Question (Buchen): Is that in addition to the $3.2 million for the $5,000 threshold or does it include that?
Mr. Bradley responds that it includes the $3.2 million. We are not picking up a lot of additional tax dollars by lowering that threshold, but we go from about 9,700 employers who are eligible for the deferral at $5,000 to 28,000 at the $1,000 level.
Another option is to amend the law and make all employers eligible. This takes care of the equitable disadvantage, and the additional interest lost would be insignificant. The last option is to repeal the current law and eliminate the deferral even at the $5,000 level.
Comment (Buchen): For virtually everybody, you would have to do the analysis of whether you are better off doing this or not based on the June 30th calculations of the tax rates.
Mr. Bradley indicates that this is correct. We were surprised at the number of employers that would end up with a higher tax rate.
Mr. LaRocque indicates that proposed DWD 128 is a rule that the UIAC approved on January 17. We are informing you of the status. Since the last time you saw this rule, we submitted it and obtained comments from the Legislative Council. We have handed out a one-page summary on the top of the proposed rule. The edits to the rule are relatively minor. The Legislative Council has shown us how to eliminate any risk of incorrect interpretations. We are not changing the intent or the substance. We are eliminating a little risk that something unintended might occur if we did not make the change, such as inserting the word “suitable” in front of the word “work” to reinforce the notion that in those instances we are dealing with the concept of suitable work, a defined term. There are some clarifications also that are minor.
Question (Yunk): The Legislative Council suggested the agency to clarify restrictions. I did not find places in the rule where you were addressing all of the concerns. I do not see which suggestions you addressed and which you chose not to address.
Mr. LaRocque indicates that the department did not always agree with what the Legislative Council suggested for changes. JoAnn Hium indicates that for 128.01(3)(b). Our original submittal ended with the nature of the restrictions; we added “caused by the claimant’s physical or psychological condition.” Mr. LaRocque indicates that we thought this was implied all along, but we made the change to clarify this.
Comment (Buchen): The Legislative Council is not policy oriented. Whatever they suggest should have no policy implications.
Mr. LaRocque indicates that the Legislative Council can show us a flaw in our thinking as to how something is worded. These changes did not raise any concerns that our intent was being achieved or not.
Motion (Buchen), seconded (Platz) to approve DWD 128 in the revised form. Motion passes unanimously.
Mr. LaRocque indicates that the materials include a one-page summary of the changes and the proposed rule language. We have in our statute and in our rules now substantial protections for unemployment insurance information. We are already positioned with protections. The UI statute is an exception to the open records law. The statute is general, but it does state that we protect information in our records from public disclosure. Where it is in the interest of the unemployment insurance program, we can disclose information and that is the basis on which we set up the rule in DWD 149.
In October 2006, the Department of Labor put into effect a rule that requires all states to adopt certain confidentiality and nondisclosure provisions. The purpose of this is to bring many states up that had not established good rules on confidentiality. Wisconsin was further along than other states. We found the federal rule fairly nonintrusive and easy to adapt to.
In the summary, we have highlighted the most significant elements. Some things are dictated by the federal rule, such as the definition of what is meant by “public domain” information. We have an option whether to include appeals records. It has been our law and practice to leave those open to the public; we intend to continue that with this proposal. One change that is significant is that we are committing to redact social security numbers from the appeal records. We do that now when they go to anyone other than the parties. We are putting in systems to redact routinely on records that are mailed to claimants to minimize the risk of it falling into the wrong hands. We may redact social security numbers on documents mailed to employers; it would be good policy because employers already have the numbers on their own records. The changes are motivated by an interest in reducing the risk of identity theft.
Question (Buchen): Did we have a discussion about social security numbers on LIRC decisions? Is that what generated all this? Or was that at the workers compensation council?
Mr. LaRocque indicates that the issue has come up in customer discussions. Mr. Bergan indicates that the workers compensation council is addressing this as well.
The proposed rule will allow the department to disclose public domain information. It will allow us to release other UI records where they have been scanned to prevent disclosure of identifying information, and other records pursuant to this chapter. The rule contains elaborate restrictions for certain purposes to certain target recipients. As you look through the edited copy, you can see where we are adding and subtracting from our existing rule.
The DOL now requires us to give notice to claimants and employers that confidential information may be used for other governmental purposes. We already do that in some form in our handbooks. In the rule we have clarified that an elected official acts as an agent of a constituent, so we can release the information without a written authorization or data sharing agreement in every case. The rule will regulate the release of UI records to an authorized private sector third party (not an agent). DOL has dictated some fairly restrictive language that we can only give information to certain kinds of third parties. We now have some fairly restrictive language where there was none before. We are adding to the list of government agencies to which we must disclose records, for example with the IRS for UI tax administration, the U.S. Citizen and Immigration Services, and the U.S. Department of Health and Human Services for purposes of the National Directory of New Hires, and the government agency administering the Temporary Assistance to Needy Families program.
We also have added some optional disclosures. Section 149.06(1)(o) for disclosures to public officials is a catch-all to give us the option to disclose to another government agency where we approve of the purpose and it is in the interest of the UI program. Another optional disclosure is to an agency that has authority to obtain information by subpoena, such as the Department of Justice in setting up an imposter case. There is an optional disclosure to third parties who are not agents of the employer or employee on a case by case basis if it is in the interest of the UI program to do so. Finally, we have a provision to allow disclosure to the Advisory Council when reasonably necessary in the course of their duties. We read that into the rule before, but this makes it clear.
Recipients of UI records have certain obligations that we enforce through this rule, not to redisclose confidential information. The federal rule requires the list of things that agents and third parties are required to do to protect the information from risk of disclosure. We have record sharing agreements with other governmental agencies where we exchange information on a routine basis. Those agreements limit the uses to which those records can be put. The DOL has now said that those agreements need to have particular provisions. We also have provisions for costs and copying. Where the disclosure is going outside the UI system to an agency that is not doing UI business, we are required to recover our costs.
Question (Buchen): You are changing tapes to compact disks, etc. Do you want to use another term of art that will adapt to changes in technology?
Mr. LaRocque indicates that this deals with the department’s technology. It is a good point. This reference deals with the specific cost of a compact disk.
Comment (Larry Smith, UC Management Services): Relating to the portion that is internal and deals with the department appeals process. We use the last four digits of the social security number as a tracking mechanism and it works well. That may work for the department and it still could be identifiable to agents.
Mr. Bergan indicates that the department has been changing virtually all of the benefit documents over the course of the last several weeks to do it this way, and we are doing so on the tax side.
Question (Buchen): Is this rule for approval today?
Mr. LaRocque indicates that the rule has not been heard publicly, so this is the earliest stage.
Question (Yunk): Asks that Larry Smith identify himself for the record.
Larry identifies himself as the owner of UC Management Services, a small agent company that represents different types of employers around the state on their claims and hearings.
Question (Yunk): On page 5 where you talk about disclosures, for example to banks, is there any means testing that the department will do to identify if it will benefit the individual? Will this set up another layer for the appeals process?
Mr. LaRocque indicates that if a bank is asking for the record and they cannot establish that they should get the record under this standard, we would turn to the claimant and say if you want the bank to have the record, the claimant can give it to them. I do not anticipate a lot of administration with this at all. Ben Peirce indicates that the department gets requests like this all the time, but very few are questionable.
Question (Yunk): On page 7 for third parties who are not agents, could you give an example?
Mr. LaRocque indicates that an example would be a financial institution.
Comment (Platz): Would this apply to third party contractor, such as IT personnel, in setting up EnABLES or SUITES?
Mr. Peirce responds that actual data is not used, only examples that illustrate what might occur.
Comment (Buchen): Some years ago we had the problem of people getting data like this for marketing purposes, not in this Council. It may have been on the workers compensation side. There was a big debate at the time because some legislators were very committed about full disclosure and others who wanted to limit disclosure.
Mr. Bergan indicates that two years ago people were asking the department for wage data. We said no. Since then these companies have had enough problems with their own internal security that they have stopped asking. The companies were trying to set this up as an adjunct to credit reporting. We declined.
Comment (Gustafson): If you do redacting on a computer, it is almost fail proof, but I am still surprised how often I get information where someone has used a black magic marker to darken the social security number. After making copies, the number is still legible. I do not think I have gotten this from the UI program, but over the years I have gotten appeals materials with this situation, and I see it in many other contexts.
Mr. Bergan indicates that we are redacting using a computer strike out, which does not have that problem. We can do it quickly and inexpensively. Mr. LaRocque indicates that we are also bar coding the social security numbers on documents that have to come back to us from the parties where we need the numbers to validate whose it is.
Motion (Buchen), seconded by (Neuenfeldt), to approve the proposed rule changes to confidentiality and nondisclosure. Motion passes unanimously
Mr. LaRocque provides a brief update of the lawsuits involving the attendance cases. We received the Dane County Circuit Court decision that supported the department’s position on the attendance provision. The court reversed LIRC on the three cases, finding misconduct in two cases and remanding the third case back to LIRC to apply the correct rule.
Question (Gustafson): Are the June 30 financials final or are there still adjustments to be made?
Mr. Bradley indicates that they are final.
Motion (Buchen), seconded (Neuenfeldt), is passed unanimously to go into closed session to discuss all proposals for changes to the unemployment insurance statute and rules pursuant to section 19.85(1)(ee) of the Wisconsin Statutes. Closed sessions by the management and labor members of the Council, respectively, begin at 11:26 a.m.
Back in open session at 1:10 p.m.
Motion (Buchen), seconded (Neuenfeldt), to approve department proposal D07-01. Motion passes unanimously.
Comment (Neuenfeldt): On D07-02 we have certain issues with some language that we think will hurt low income workers. If there could be some language change on that, we would be amenable to the proposal, but we just informed the department of what our issues are, so we do not know if we will get that proposal back.
Mr. LaRocque indicates that the concern is to remove or change the part of the proposal that would reduce from 40 hours to 32 hours the disqualification for working. There are several parts to the proposal. Mr. Bergan indicates that some people who are getting benefits now would no longer get benefits with this proposal. This is people who typically get very small, nominal amounts that are in this category, working between 32 and 40 hours. We are trying to accomplish uniformity.
Comment (Neuenfeldt): We will have to get back to you on that. Those tend to be the people who are the lowest income workers generally, so we feel that should be struck from the proposal.
Comment (Buchen): I don’t think it’s fair to say that people who are working between 32 and 40 hours are necessarily low income workers. It does not help with the concept of creating a uniform number. I thought we reduced these numbers where we had the situation where workers regularly worked full-time at 37 hours per week and then worked a lot of overtime. When they returned to working their regular full-time hours of 37 hours, they received benefits. I thought we reduced this then.
Mr. Tillema explains that was changed so that if a person is working overtime hours and goes back to regular full-time hours, the change from overtime to full-time is not unemployment. Mr. LaRocque explains that under the current law, under certain conditions, if you work more than 35 hours you are disqualified. Mr. Tillema explains that with the reduction from 40 hours to 32 hours, we are dealing with small amounts and the people are more likely to be working for low wages or less than half of the average weekly wage.
Question (Buchen): What is the fiscal effect of the proposed reduction of the 40 hour provision to 32 hours?
Mr. LaRocque indicates there is a separate fiscal analysis of the impact of the change to the 40 hour provision. The reduction of benefits is $3.7 million, with an offset of $1.8 million, for a net fiscal effect of $1.9 million. If the proposal is approved to go from 40 to 32, we would decrease benefit payments by $1.9 million.
Question (Buchen): Is the department willing to remove from the proposal the 40 hours provision? This will not be uniform.
Mr. Bergan indicates yes, if we cannot do all of them, we would do all but this one.
Question (Lump): So you would want the rest of the changes?
Mr. LaRocque indicates this is correct. There are three parts to D07-02, one of which is to reduce from 40 to 32 the disqualification for working. The suggestion now is to modify D07-02 to remove the change to that disqualification and leave the proposal otherwise the same.
Comment (Gustafson): I would like to see something in writing from the department before I vote on this.
Mr. LaRocque indicates the department will redraft this.
Comment (Neuenfeldt): On D07-03, we had a problem because the definition of fraud includes acts that could be minor and the penalties seemed extremely severe to the individual, especially when we compared it to the severity of the penalties for the employer. One way to fix it is to increase the penalties on the employer’s side, but we do not see how that accomplishes anything, so we thought it would be best not to do that one. We can talk about a modification later in the process if we want to try to fix this.
Mr. Bergan indicates that the department will look at some alternatives.
Comment (Neuenfeldt): For D07-05, we were okay with this on our end.
Comment (Buchen): We would like to change the extension to two years instead of four years.
Mr. Bergan indicates that this is ok. We need to make sure we can look at it again before it expires again.
Motion (Buchen), seconded (Neuenfeldt), to approve this proposal with the sunset set at June 30, 2010. Motion passes unanimously.
Comment (Neuenfeldt): For D07-07, this was okay with us if it was okay with Ed Lump.
Comment (Buchen): We would like to take this one step at a time. Apparently it’s 50 employees, if we took it down to 25 and then revisit it next session.
Comment (Lump): I want to put a framework on this. I have spoken with a number of small business groups and they all feel pretty much the same way. It would be difficult actually moving to the 10 figure or down to 0. We can force them to do it, but it’s not something they will want to do. So we will take it one step at a time. We will get there.
Andrea Reid questions whether the smaller number could apply to new employers. She states that the department would like not to be sending out paper to employers. New employers will need to register electronically and they will be using the website anyway.
Comment (Lump): Just by the fact that they are registering on line, they may choose to report on line.
Mr. LaRocque clarifies that 25 means that employers with 25 or more employees in 2008 would be required to file their wage and contribution reports on line. Are there implications for 2009 and 2010?
Comment (Lump): We will leave it at 25 and look at it next time.
Question (Buchen): How are they doing in other states with electronic reporting?
Ms. Reid responds that most states are starting to move toward getting electronic reporting. Minnesota has 100% required. They had a lot of calls initially, but they have had very good response. They still have an IVR (telephone) system for those employers that resist filing electronically, and they have a handful of people who still use the IVR application. Their logistics in terms of the employers they have is similar to ours.
Mr. LaRocque indicates we may be back to talk about effective date issues.
Motion (Lump), seconded (Neuenfeldt). A “motion” regarding D07-07 [subject to discussion noted above] passes unanimously.
Comment (Neuenfeldt): For D07-08, there are two parts to the proposal from the department. We do not have a problem with the first part, however, there were questions on the second part regarding the hearsay provision. We think there are parts in there we do not like, so we would be willing to vote for the first part but not the second part.
Mr. LaRocque indicates that he understands the issue needs to be narrowed to only those records to be used on the issue of the employer fault for failure to provide correct and complete information, not eligibility issues or other issues. That was our intention.
Motion (Neuenfeldt), second (Buchen), to remove the sunset on the employer fault law provision. Motion passes unanimously.
Mr. LaRocque indicates that the department will come back with a redraft of the department records provision.
Comment (Buchen): On the independent contractor issue for D07-09, there are people that do not have an independent contractor relationship under the criteria we have. It does not become an enforcement issue unless someone claims benefits, so there are a lot of problems with this. I do not think this particular provision on the federal employer identification number will affect that one way or another. There are legitimate independent contractors out there who do not have an FEIN. We should think about how to get at the problem.
Comment (Neuenfeldt): We are open to more discussion on that. We are trying to get our minds around what the department was trying to get at. If the changes do not make any changes, why make the changes. It is a concept we have a tough time with. If it ain’t broke, don’t fix it. Every time we try to change this, it just gets worse.
Mr. Bergan clarifies there are two proposals regarding appropriation of Reed Act funds. The authorizations would be separate.
Comment (Buchen): On D07-11, we need some documentation on that.
Mr. Bergan hands out a paper on the department’s proposal to fund reemployment with Reed Act funds. This will be department proposal D07-11. The department will come back with budget information for the proposal to appropriate Reed Act funds for UI administration.
Comment (Buchen): We had the report on the deferral of taxes with options. We would be comfortable with option 2, taking it to $1,000 and seeing what happens, unless there is something more we need to know about this. We do not see a real reason why smaller businesses should not be able to do this, too.
Comment (Neuenfeldt): This would be less money for the fund.
Comment (Buchen): This is in the range of hundreds of thousands of dollars. If all employers took advantage of it, it would be bigger money, but not all employers do it. The amounts do not take into account how much more money we get because if they defer, they may pay more with an increased tax rate. We are getting more money out of some of them. Apparently, one-third of the employers screwed up. At the end of the day, it’s a wash. We can think about it, but that is something we would propose.
Question (Platz): On the department proposal for the reemployment services, there will be 8 centers. What was the rationale for the areas that were picked? It seems that the service would be needed in the Kenosha area.
Mr. Bergan indicates that part of the reason had to do with the limited locations where UI had sites, because some of our personnel will need to be at these locations. We will find a way to have activity in locations where we know there is higher unemployment, like Rock County. I will get you a more precise answer on that.
Question (Buchen): Can we get a report on the pilot project on that?
Mr. Bergan indicates that we will get both the original document and try to give some summary information on that.
The next meeting will be Tuesday, October 2nd, at 9:30 a.m.
Motion (Buchen), seconded (Neuenfeldt), to adjourn. Motion passes
March 25, 2013
Unemployment Insurance Division, Bureau of Legal Affairs (BOLA)