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Unemployment Insurance Advisory Council Meeting Minutes

Monday, July 16, 2007 - 9:30 a.m.

GEF-1, Room B205
201 East Washington Avenue
Madison, WI

Members Present

Management: James Buchen, Ed Lump, Dan Peterson, Earl Gustafson

Labor: Phil Neuenfeldt, Dennis Penkalski, Red Platz

Chair: Daniel LaRocque

Department staff present: Dick Tillema, Tracey Schwalbe, JoAnn Hium, Carla Breber, Tom McHugh, John Zwickey, Christopher O’Brien, David Heuer, Robin Gallagher

Others present:  John Metcalf (Wisconsin Manufacturers & Commerce)

MINUTES

Mr. LaRocque calls the meeting to order at 9:50 a.m.

1. Opening Remarks – Hal Bergan

Mr. LaRocque indicates that Mr. Bergan had another commitment at the Legislature and is not able to attend the meeting.

Mr. LaRocque updates the Advisory Council on a recent decision in one of the cases involving the attendance issue. The issue before the Waukesha County Circuit Court was whether or not the attendance provision passed in 2005 was to have an effect on the misconduct standard. LIRC had found the new standard in some way changed the misconduct standard. The department’s position was that the new statute did not affect the misconduct standard. The court reversed the LIRC decision on that point and the court decision was favorable to the department’s position. This still could be appealed by LIRC or the claimant. There are still three cases before the Dane County Circuit Court on this issue.

Question (Buchen): Does this decision have precedential value?

Mr. LaRocque indicates that this decision is binding on the LIRC for this case. Ordinarily circuit court decisions are not precedential, but LIRC may have a policy to follow circuit court decisions uniformly.

2. Minutes of June 13, 2007 and June 26, 2007

Motion (Lump), seconded (Neuenfeldt), to approve the Minutes of the June 13 and June 26, 2007, meetings. Minutes are approved unanimously.

3. Schedule of future meetings.

The next meeting will be July 30th, 2007, at 1:00 p.m. at the Wisconsin Manufacturers and Commerce building.

7. Deferral of first quarter contributions – brief report.

Mr. LaRocque notes that the department will defer this item to another meeting.

4. Closed session by the labor members and/or the management members of the Council pursuant to Wis. Stat. 19.85(1)(ee) to discuss the unemployment reserve fund and proposals for changes to the unemployment insurance statute and rules.

Motion (Buchen), seconded (Penkalski), is passed unanimously to go into closed session to discuss the unemployment reserve fund and 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 10:00 a.m.

Open session resumes at 11:10 a.m.

6. Discussion of proposals for changes to the unemployment insurance statute and rules.

Mr. Neuenfeldt presents the labor proposals:

1. Raise the weekly rate to the COLA level of last year, which was 2.6% from 05/01/06 to 06/01/07, and then index to COLA the following year.
   
   Labor recognizes the problems facing the trust fund from a financial point of view. For this proposal, though there is a financial crisis, labor thinks it is reasonable to look at a cost of living increase in the weekly rate. Philosophically labor has two points of view on this. First, people who are unemployed face hardships and expenses and the financial problems of the program should not be solved on their backs. Second, the problems facing the fund financially are because we have not looked at how we change the ways we raise money over the years. The tax rates have been a very good deal for a long time. This proposal is to have a very modest increase in the weekly rate based on the cost of living so that people are held even.
    
2. Raise the wage base from $10,500 to $13,500, which is the amount of Wisconsin’s Minimum Wage rate.
   
   This is labor’s suggestion to raise revenue for the trust fund. It is based on the minimum wage. There is no one in the state making less than that. It is a base rate that is easy to talk about. Labor understands that this would help to get the program out of the hole even with the cost of living rate increase. Labor is not looking to make radical changes, but to keep things at the cost of living increases and to find a way to raise revenue that is sufficient and reasonable.
   
   Question (Buchen): Is the first proposal for a two-year benefit increase or is it a proposal to index to the cost of living?
   
   Mr. Neuenfeldt indicates that the proposal is for two years.

Mr. Buchen presents the management proposals:

1. Establish a One Week Waiting Period for Benefit Eligibility
   
   Management recognizes there is work to do to solve the solvency problem with the trust fund and thinks the one-week waiting period is an important part of that. It does not create a huge hardship for people and management thinks Wisconsin should do what most states do and have a one-week waiting period for benefit eligibility.
    
2. Family Benefits Eligibility Parity – Establish Parent/Child Equity by permitting both parents and children of employers to collect full benefits
   
   This has to do with the inequity between how parents and children of employers are treated for purposes of collecting benefits. We talked about this at earlier meetings. If an adult child is laid off by a business owned by its parent, they can collect benefits. If a parent is laid off by a business owned by a child, they are limited. Management thinks they should be treated the same.
   
   Comment (Lump): This comes up primarily with smaller businesses.
    
3. Make Technical Corrections to the Absenteeism Section of Chapter 108 to reflect the original
   intent
   
   This proposal is to make clear that the absenteeism and misconduct provisions are separate sections and that one does not affect the other. This is the issue addressed in the lawsuit referred to previously that was decided in the department’s favor in circuit court. It may be a long time before there is a decision with precedential value on the issue and this would make it clear.
    
4. Reduce the Absenteeism/Tardiness Standard Created in 2005 from: 5 and 6 occurrences to 3 and 5 occurrences
   
   This proposal is to change the standard to go to 3 absences and 5 tardies. Management understands from the department that this has not been much of an issue with a lot of people being disqualified by this provision. Management thinks that 3 and 5 more accurately reflect what employer policies tend to be.
    
5. Benefit Disqualification: Clarify that Claimants are disqualified from collecting benefits during investigation for suspension that might result in discipline or discharge
   
   This proposal deals with the situation when claimants are suspended during an investigation for possible discipline or discharge.
    
6. Look at revenue enhancements to address Trust Fund Solvency
   
   Management is open to looking at various enhancements to the trust fund solvency. We would like to arrive at something that gets what is needed to resolve the problem.
    
7. Preclude the use of UI Trust Funds for non-benefit purposes without Council approval
   
   This proposal is to put language in the statute to prevent taking UI funds for some other purpose. Given the status of the fund, management thinks the funds should be preserved for benefits. We discussed this previously regarding the apprenticeship program.
   
   Comment (Neuenfeldt): For number 7, part of the problem is how to interpret “for benefit purposes.”
   
   Comment (Buchen): I think we can define benefits and say that these funds can be used for these purposes only. The Department of Labor may have a conformity concern.
   
   Question (Neuenfeldt): Can we get an opinion on the issue of conformity?
   
   Mr. LaRocque indicates that the department will provide an opinion on the conformity issue.

Question (Penkalski): For the next meeting can we get information on what the impacts will be of some of these proposals: for number 1, what is the dollar amount for implementation of the waiting week; for number 2, the number of cases, the amount involved and the impact on the cases involved; for number 4, the number of cases to determine if this is a huge issue.

Question (Neuenfeldt): Do we get an analysis and fiscal impact on each of the proposals?

Mr. Tillema indicates that he can provide fiscal impacts on the major ones by the next meeting on July 30th. The family benefits eligibility may not be done. Some proposals do not involve a lot of money but are hard to investigate. Mr. LaRocque indicates that there are two ways to look at the family benefits eligibility issue: either deny benefits to the child or pay benefits to the parent. Mr. Buchen indicates that the proposal is to pay benefits to the parent.

On the issue of the proposal to reduce the absenteeism/tardiness standards, Mr. LaRocque indicates that he sees practically no cases of this sort. Mr. Tillema indicates that in the first year there were 60 disqualifications. However, comparing 2001 and 2007, the number of first payments is down 21%. The number of discharge cases where we find absenteeism is up 11%, but attendance discharges are down by 11%. No call/no show cases are down by about 60%. Something has been achieved here even though we are not disqualifying many people. There are far fewer no call/no show cases. Maybe employers have made this clear because of all of the work that has been done. As a result of the educational efforts that have been done, this particular issue seems to be arising less.

Ms. Hium indicates that in investigating discharges, the department relies on self-identification by the employee and verification by the employer as to whether the separation was a discharge or lay off. The issue with attendance and (5g) is that the department can identify those people we have denied under (5g) but cannot readily identify attendance issues that we investigated that did not reach the (5g) level. That is a discharge not for misconduct or it is a discharge for misconduct for attendance reasons. We can only readily identify the (5g) cases denied. Ms. Breber indicates that some (5g) cases are reported as quits. Mr. Tillema indicates that he looked at all discharge cases, including the allowed cases.

Question (Buchen): Would they historically have reported that there was a discharge for no call/no show?

Ms. Hium indicates that they would report it as a discharge and as part of the department’s investigation we would find that out.

Ms. Breber indicates that the experience has been that a lot of the policy requirements for the (5g) discharge have not been met and that is one reason why (5g) does not apply. Also, the numbers are high because we often would find misconduct for less.

Comment (Buchen): We looked at the policy requirements and did not think they were unreasonable. More education may be needed rather than to change the policy requirements.

Question (Mr. Metcalf, WMC): Could we get the (5g) statistics in writing?

Mr. Tillema will provide the (5g) statistics.

Mr. LaRocque requests clarification of the management proposal number 5. Mr. Metcalf (WMC) indicates that this relates to a LIRC decision. Ms. Breber indicates that the issue deals with claimants who are suspended while an employer investigates whether the discipline or discharge an employee. In those cases, it is not considered a disciplinary suspension and they are entitled to benefits. Claimants are not entitled to benefits if it is a disciplinary suspension.

Comment (Platz): If you disallow benefits, there is no incentive for the employer to finish investigating.

Comment (Neuenfeldt): Taking a step back, we are trying to get to a certain dollar amount that restores the fund. We should have an idea of what we are targeting. As you weigh various proposals and concepts, it would be a shame to come to an agreement and take the bill to the legislature only to find that we are still falling short. If we can answer that on the front end, it will make it easier.

Comment (Buchen): Reasonable minds could differ on what the amount is, and what is used as criteria.

Comment (Gustafson): We are talking about a range because it depends on where you think the economy is going.

Comment (Neuenfeldt): On one hand, you have to justify why you are asking for minimal increases, why you are not asking for more to help people. On the other hand, if you are increasing revenue you have to explain why you are increasing it that much. So we have to have some sort of agreed upon position that says this is how much the fund is in trouble, and this is how we bring it back. That is why we have the logic of doing that and why labor made the proposal based on minimum wage because that is defendable. In terms of bargaining, you want to have idea of what you are trying to accomplish in terms of trying to come to an agreement. Otherwise, we are trying to shoot in the dark.

Question (Buchen): With respect to the study on what a $1,000 increase in the taxable wage base will bring, is the dramatic variance from year to year based on an economic projection of the economy?

Mr. Tillema indicates that they will vary from year to year primarily because of the way the benefits and taxes will flow into the equation that determines the tax rate. We have a June 30th date for computing tax rates; in the first year, only six months of the additional taxes will affect that rate computation. Over time, it starts at a lower premium or less money, then it increases a bit, and then falls off as tax rates adjust. Tax rates will go down as positive balance employers have more money in their employer accounts. The estimate of increasing revenue by approximately $200 million over five years was based on holding benefits at $750 million a years, about what we have been experiencing.

Comment (Buchen): It is not clear there is a specific number.

Comment (Neuenfeldt): First, we know we are losing so much per year, so what does it take to recoup what we are losing. Second, we know we want to return the trust fund to a certain level, so what does it take to get to that level. That’s the journey from the downward trend to get back up to where the fund is solvent. Granted that is based on what we think the unemployment rate will be, which can change, but at least there is some method.

Comment (Buchen): The unemployment rate today is not at historic lows and it is not high; it is above the national average. By other measures we are doing well and we could use that as the benchmark.

Mr. LaRocque asks what the process will be next for the management proposal number 6 regarding revenue enhancements.

Comment (Neuenfeldt): We have people missing today that we would like to have involved in discussions on the proposals. To have an intelligent conversation, we need to look at the fiscal impact of these. Once the other people are here, we will need some discussion on the legal and technical aspects of numbers 3, 4, and 5. We have to figure this out like a math problem. We are on a downward trend that we want to get level and then replenish. We are going to work with proposals with numbers, not to hurt people or disrupt things, but to get us back to where we need to be. It is not an easy process but we need to have those numbers and have an idea where we want to go so we can have fruitful discussions about how we get there. At the next meeting before closed session, we would like a presentation what the fiscal analysis of it is and how it got to that, and then a discussion about what we are trying to fix and what are some of the numbers we should be targeting.

Question (Penkalski): Do we have all of the proposals from the department?

Mr. LaRocque indicates that the department has presented most of its proposals. We have an administrative assessment that will sunset and we will discuss this at another meeting. We will have binders with the list of proposals for the next meeting. Before closed session at the next meeting, we will have the fiscals on labor and management proposals that we have done, the binders, and any discussion you care to have on the dollar objectives and the solvency issue.

Comment (Buchen): We will look at the numbers in the trust fund study again with a better understanding of the figures on page 33.

Question (Gustafson): On labor proposal number 1, would this raise the bottom rate as well?

Comment (Neuenfeldt): We would be interested in seeing what the fiscal differences are.

Mr. Tillema indicates that the bottom rate is a percentage of the top rate, so it would increase automatically if the top rate increases.

Question (Buchen): If you increase the bottom rate do you leave people out of the system?

Mr. Tillema indicates yes, but this is minimal. The bottom rate is a non-issue; it neither costs a lot nor cuts very many people out.

Ms. Breber asks if management proposal number 2 is only to change the parent eligibility and not the children under age 18.

Comment (Lump): We are suggesting the parent would get full benefits.

Motion (Buchen), seconded (Neuenfeldt), to adjourn. Motion carries unanimously.

Meeting is adjourned at 11:58 a.m.

Updated August 24, 2009
Unemployment Insurance Division, Bureau of Legal Affairs (BOLA)
Content Contact: Legal Affairs Staff