Wisconsin Manufacturers & Commerce
501 East Washington Avenue
Management: James Buchen, Ed Lump, Dan Petersen, Earl Gustafson
Labor: Phil Neuenfeldt, Dennis Penkalski, Red Platz, Patricia Yunk
Chair: Daniel LaRocque
Department staff present: Hal Bergan, Bob Whitaker, Tracey Schwalbe, Dick Tillema, John Zwickey, Christopher O’Brien, Robin Gallagher, Lutfi Shahrani, JoAnn Hium, Carla Breber, Bill Brueggeman, David Heuer, Randy Hardin, Andrea Reid, Brian Bradley, Troy Sterr
Others present: Jeff Palkowski (Rep. Honadel’s office), John Metcalf (Wisconsin Manufacturers & Commerce), Larry Smith (UC Management Services), Bob Andersen (Legal Action of Wisconsin), Michael Metz (WI Independent Business), Kerry E. Fox (Kimberly-Clark)
Mr. LaRocque calls the meeting to order at 10:02 a.m.
This is the 75th Anniversary of Wisconsin’s Unemployment Insurance program. Council members are invited to celebrate at a program at GEF-1 on Thursday, October 4th, at 9:30 a.m. We have done similar programs at other offices in the state. There will be remarks by the Secretary and we will have displays of some historical UI materials. It is interesting to look back at the origins of the program and recognize that our program is not only the basis for the federal program but virtually all of the state programs in the country. In the early history there was a great deal of focus on the reserve fund and how that was a linchpin for the program; back then the maximum tax rate was 2%, but there was no taxable wage base because all wages were taxed. Looking at our history is a useful reminder about the importance of our business.
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 (Yunk), seconded (Buchen), to approve the Minutes of the September 10, 2007, meeting. Minutes are approved unanimously.
Mr. LaRocque indicates that at the last meeting the UIAC passed the part of this proposal dealing with the removal of the sunset of the employer fault provision. There were some questions about the remainder of the proposal, which was to strengthen the admissibility of department records in hearings on employer fault for failure to provide correct and complete information. The department is interested in seeing that these documents are more readily admitted into evidence when this issue comes up at hearings so that the full intent of the law is achieved. The question was raised by Bob Andersen (Legal Action of Wisconsin) whether the proposal dealing with admissibility of records was overbroad. We have redrafted the proposal to limit the admissibility of these records to the issue of whether the employer failed to provide correct and complete information, so that the records do not come into evidence for other purposes, such as the eligibility issue. That was not the department’s intent. We redrafted the language as D07-08A. In further discussions with Bob Andersen yesterday, we further honed the language, which is what was handed out today as Department Law Change proposal D07-08B. The late drafting was to assure that the definition of “department record” was sufficiently narrow in the drafting. “Department record” does not include claimant statements; it does include correspondence between the department and the employer. Bob Andersen indicates that it has been drafted to his satisfaction.
Comment (Buchen): There is a corollary to this that deals with claimant statements in the sense that they make statements to the adjudicator that are contradicted by the testimony at the hearing. It seems that we should allow those statements to be admitted as an exception to hearsay as well. It could be used to impeach a witness. The administrative law judge would be able to use it to determine credibility. It seems like this would be the place to put it if we are creating an exception to hearsay.
Mr. LaRocque responds that the rules of evidence account for that and are generally applied by administrative law judges consistent with that. I have heard some concern that maybe this is not happening. It should be happening. In the administrative rules, we soften the rules of evidence.
Comment (Buchen): That is to make it easier not harder to introduce evidence. I have heard, too, that sometimes an administrative law judge will not admit the adjudicator’s record.
Mr. LaRocque indicates that the claimant’s statement would not be admitted on the eligibility issue because the hearing at the appeal tribunal is de novo (a new hearing). It is hearsay and hearsay rules are enforced to a considerable degree at hearings. This is the reason we are here with this proposal. We are getting some strict enforcement with administrative law judges that we cannot get a record admitted for this limited purpose.
Comment (Buchen): The records should be admitted to the extent they speak to the credibility of the witness.
Mr. LaRocque indicates that the way to do that is to get the claimants to admit they made the statements. If they deny making the statements, you have no proof that the statements were even made. We are not equipped to bring department witnesses to deal with those issues.
Larry Smith (UC Management Services): It has been our experience over the last 5 years or so that the administrative law judges have really come down on the side of not allowing that issue into the hearing, not just the statement itself, but even asking the claimant about what was said in the statement. This issue is just not allowed on the table. I think it is about 75% of the administrative law judges that view this very strictly.
Mr. LaRocque responds that there are procedures for appeal on these issues. If you are introducing a record at a hearing and the administrative law judge will not admit it, you can make an offer of proof to make a record of your request to introduce the record. You can identify the document on the record at the hearing for purposes of an appeal to the Labor and Industry Review Commission. You are entitled to argue your case. The use of the records as impeachment would be appropriate. If I observed a widespread practice of denying that, the department would take an interest in the issue and perhaps bring a department appeal to address the issue. We can also educate administrative law judges at our annual conference and through regular communications. I was not aware of this problem until today; I will investigate it further. However it is beyond the scope of our proposal. We are treating the records differently in this proposal because we are evaluating the conduct of the employer as opposed to the truth of the statement on the issue of eligibility.
Bob Andersen (Legal Action of Wisconsin): Where you have an idea of conflicting statements, can’t you subpoena the adjudicator? This draft proposal basically allows admission of the document into evidence without having an adjudicator testify.
Mr. LaRocque indicates that this is true, however, it is not a practical solution for Mr. Smith’s issue for a number of reasons. The parties cannot anticipate when they would need that witness and we are not equipped to march our staff to hearings in those numbers. It would be very burdensome. One of our themes with the statutes is administrative efficiency; we try to make things more streamlined. The idea of subpoenaing department witnesses on routine matters to give testimony, particularly on things like credibility, is not very practical.
Comment (Buchen): You are saying that this is the current state of affairs. You would not be able to offer into evidence the transcript of the responses to an adjudicator for the purposes of impeaching the witness.
Mr. LaRocque indicates that you would have to ask the claimant to give foundation for the statement to say what it is. The claimant would have to admit that they made the statement. If it is an inconsistent statement that is material to the issue in the hearing, I would encourage an employer to make an offer of proof. You may need to clarify what you are trying to accomplish with that offer of proof and you need to make a record of the offer. The administrative law judges are sensitive to the fact that if you are not going to be able to do something you are at least allowed to make a record for appeal. There is a tendency in some instances to dispose of the issue readily when it is perceived that it is just an introduction of hearsay without appropriate basis.
Comment (Buchen): The problem is if the claimant denied making the statement, it will not be admitted. This makes it almost the same situation as in the proposal where some department staff person is not required to be present to testify that this was the statement they collected.
Mr. LaRocque indicates that the distinction is that this is demonstrating the conduct of the employer as opposed to the claimant who gives a statement on the disputed issue. Evaluating the truth of the statements contained in the claimant’s statement to the adjudicator is a different proposition and more difficult than evaluating if the information was correct and complete. Our questionnaires are form in nature, they go out to the employer, they come back blank or not at all, or poorly filled in, and it is self-evident in most cases whether they provided correct and complete information.
JoAnn Hium, statewide adjudication manager, states that for the most part, adjudicators are looking at a total failure to supply information in response to a telephone call or a request for written information. It is difficult for adjudicators to make a judgment as to whether the information was correct and complete. Generally the only time adjudicators will say that it is not correct and complete is if they make a rebuttal call. If we already have employer information and the employee comes up with something else, we may request additional information. If there is no response, we will consider it was not correct and complete. With third party agencies, they may tell us that their client employer is not going to provide information so we know there has been a contact. We do not look at that as a no response, but as a failure to provide correct and complete information.
Mr. Bergan indicates that it makes the distinction between the behavior and the veracity of what is actually in that statement. Mr. LaRocque indicates that most administrative law judges are taking these records and admitting them now on the basis of the rules we have now. We thought it was inappropriate to have the degree of inconsistency we have now.
Question (Buchen): I was not objecting to the proposal. I was raising another issue that was somewhat related to your proposal. Are you taking the position that what we are suggesting does not need to be corrected?
Mr. LaRocque indicates that if administrative law judges are not allowing the foundation to be established for the introduction of documents, then that can and should be corrected with our existing rules. The issue of what hearsay evidence should be allowed in an expanded concept of admissibility is a complicated one. I hear about it in various contexts, such as from nursing homes that are not able to bring in witnesses to say the employee did not deliver care. We have adopted an approach that we will enforce hearsay because in general if you can administer your cases that way, you will generally get fairer results.
Comment (Buchen): If the claimant is providing information to an adjudicator investigating a benefit claim, and then at a hearing they make statements that contradict the answers they provided previously, the statements should be allowed into evidence so a judge can decide about the veracity of what the person is saying in court. Any judge or jury is constantly trying to evaluate if someone is telling the truth; that’s their job. This is something that would help them. You are saying they would be allowed to do that if they could get the adjudicator there to attest to the fact that this was their statement. Absent that, they need the witness to state that was their statement. If they are lying at the hearing, they may lie about that as well.
Mr. LaRocque states that it is not fair to say that they will not admit making the earlier statement. They may say that it is a fair transcription of the statement. In some cases it may be true that the adjudicator did not get the story right. Adjudicators are under pressure to make notes and summarize statements. It is not under oath. We created the de novo hearing that allows parties to make their full cases without the baggage of a summary. We can blur the distinction between the de novo hearing and the process that precedes it if we do that.
Motion (Neuenfeldt), seconded (Buchen), to approve D07-08B. Motion passes unanimously.
Mr. LaRocque indicates that D07-02A is an outgrowth of the discussion at the last meeting. This is to standardize “full-time” at 32 hours. At the last meeting, there was some objection to the part of the proposal that related to §108.05(3)(c). We were asked and agreed to provide an alternative proposal which removes the change to §108.05(3)(c). There was also a question raised regarding who is affected by that section, which would reduce the disqualification for work from 40 to 32 hours.
Lutfi Shahrani, Director of the Bureau of Benefits, refers to the summary from Dick Tillema regarding the impact of going from 40 hours to 32, titled “Benefits Affected If Claimants Not Partially Unemployed When Working 32 Hours a Week.” The impact is very minimal on most claimants whose base period work is as a low wage earner and who would continue to be low wage earners during the benefit year. If they earn more in the benefit year, they will be disqualified if they made less during the base period. Anyone whose weekly benefit rate is $150 or less will not qualify for a benefit if they reach 32 hours of work even at or near minimum wage. If the weekly benefit rate is $51, and a person earns $100, they do not qualify for a benefit. It does not take many hours to earn $100 even at minimum wage.
The foremost purpose of the law proposal is to simplify the law and reduce the confusion for our constituents. Having multiple definitions of full-time in the law causes our staff to struggle to make the correct decisions and confuses claimants and employers.
Mr. Shahrani stated that this part of the proposal that will change 40 to 32 hours will impact very few claimants, those who are “rich” in the base period, making high wages, but only if their work during the benefit year is at a much lesser pay rate. Those whose base period earnings are sufficient to qualify them for a benefit rate of $355 per week are now allowed to earn up to $470 per week ($11.75 per hour) during the benefit year before they are disqualified. If they are earning at least $14.50 per hour, their earnings will be too great at 32 hours to qualify for benefits even under current law. There is a maximum earnings amount. Thus, if the person continues to work for the same employer but has lost some hours, more than likely they will be cut off at 32 hours and will not be impacted by this proposed change.
In Dick Tillema’s analysis, he states that even of those claimants who may qualify for a benefit, there are those who will choose not to work for lower wages and will continue to collect the full benefit amount. As you decide on the proposal, consider that in 2006, we adopted in DWD 100 the definition of “full-time” as 32 hours. We also need to look at the trust fund and balancing the interest of the parties. We are interested in a standardized application of “full-time” in our law.
Mr. LaRocque clarifies that D07-02A is the alternative the department drafted since the last meeting. The alternative removes the change to §108.05(3)(c) and leaves intact [corrected 10/25/07] the rest of D07-02. There are two proposals from which to choose.
Comment (Buchen): Making all of the provisions consistent has a balance and the effect of reducing benefits for some people and increasing benefits for some people. The alternative proposal eliminates the provision that reduces benefits for people. It minimizes the benefit of uniformity from an administrative standpoint and people trying to understand the system. We think the original proposal is a good idea.
Comment (Neuenfeldt): We have some confusion with the proposals. We would like to discuss this in caucus.
Mr. LaRocque indicates that this proposal was discussed but not voted on at the last meeting. There was a discussion about the balance in the proposal. In response to the concerns expressed at the last meeting, we have drafted D07-03A. In this proposal, the purple-colored language in the D07-03A reflects the changes to D07-03. It softens the penalty for the claimant on the third tier and adds penalties for the employer who aids and abets a claimant in committing an act of concealment.
Comment (Neuenfeldt): We would like to discuss this in caucus.
Comment (Lump): I think this is a good compromise.
Mr. LaRocque indicates that this proposal was approved at the last meeting. The Department proposal D07-07 was approved by the Council but with some limitations. We talked with Ed Lump at length on this last week and came to an understanding as to what exactly was intended by what was passed at the last meeting. Consistent with our discussion with Mr. Lump, we summarized what parts of the proposal were approved and which were not. A one-page document labeled “D07-07 09/28/07 Summary Electronic Reporting & Payment Requirements” is before the Council and discussed.
Question (Penkalski): Was anything changed on the proposal?
Mr. LaRocque indicates that nothing was changed. We are just clarifying our understanding what was passed. The Summary displays what was passed and what was rejected by the action of the Council at the September 10 Meeting. Mr. LaRocque indicates that unless we get any other direction or further action from the Council, the Department will proceed with the Summary as our direction on this proposal.
Mr. Bergan discusses the table labeled, “Budget to Actual Funds by Division by Object Rollup as of Accounting Period: 200712 State Fiscal Year 2007.” This is an accounting of our expenditures for the fiscal year concluded on June 30, 2007. It gives a good idea in broad categories how our money is expended. The total budgeted was $72,014,408. The total expended was $68,341,899. The last two columns represent what was carried over from the prior year, or $4,891,926. Spending was 93.3% of what was projected. As we have had in the past several years, we had some carryover. In terms of our informal projections with increased overhead and internal costs, postage, etc., we are predicting that at the end of fiscal year 2008, we will not have a carryover. There are limitations on what our federal grant will be. The proposal before you asks that, if needed, we have the ability to use Reed Acts funds for UI administration up to $1 million in each year of the biennium. We may not need to use the funds, depending on federal funding, but they are hard to predict. We would like to have this option available. On the more positive side, as a more general trend, we can try to limit expenditures and intend to manage the budget with care. We will use this as a last resort. We are not happy about the precedent of using Reed Act funds for this purpose, and we would try to avoid it, but there could be circumstances that would leave us with no other alternative and we would like that option. Compared to other states, we have done a very good job of managing within our federal grant and existing revenue sources. We are not, as some states are, subsidizing our budget out of general revenues.
Question (Buchen): Does your budget have to be a chapter 20 appropriation in order to spend the money? Without a budget, can you spend more than what is in the appropriation?
Mr. Bergan responds that in order to spend the Reed Act funds, there must be an appropriation under chapter 20, but it can be done in our bill not the state budget bill.
Question (Buchen): You operate under an appropriation in chapter 20. When we talk about allowing the use of Reed Act funds, how is that treated in your budget? Does the Governor’s budget have increases in appropriations for UI?
Mr. Zwickey indicates that the state budget figures are not carried forward. We expect the funding to be about the same in the state budget. If the state does not pass a budget, we can go to Joint Finance and ask for an increase in funding. Mr. Bergan indicates that if we are operating in a “no budget” situation, the impacts on our program are very modest because we are federally funded. For other programs in the department and other programs statewide, it is catastrophic.
Comment (Buchen): My concern was that you get a chapter 20 appropriation limiting how much you can spend and I wanted to know how the Reed Act funds fit with that.
Mr. Zwickey indicates that if we think we will get more federal revenue, we can tell the Department of Administration how much we think we will get and they will increase our authority.
Question (Penkalski): Who would have the discretion to spend the $1 million?
Mr. Bergan indicates that he would, but he would not spend it without coming back to the UIAC and explaining the reasons that compel doing so.
Questions (Platz): For how long are you asking us to give authority to spend the Reed Act funds? Before you spend any of that money you will come back to the Council? Why can the Council not just act when you need to spend it?
Mr. Bergan indicates that the proposal is to spend up to $1 million in each year for fiscal years 2008 and 2009. He will come back to the UIAC before spending it. In order to use the money it has to be appropriated, so we need to have it in our bill approved by the legislature. We had an authorization last time, but because we did not need to, we did not use it.
Motion (Neuenfeldt), seconded (Buchen), to approve D07-10. Motion passes unanimously.
Mr. LaRocque indicates that this is in response to a request at the last meeting for more information on the pilot project. Mr. Bergan directs the Council to the handout titled, “Evaluation of the Wisconsin Reemployment Connections Demonstration Project.” Attention is directed to page v. referring to the assessment of effects of the project. This is the executive summary of a report from Berkeley Policy Associates that was the third party assessor of the pilot.
They found that the pilot did not increase the number of people who returned to work. It did increase the average quarterly earnings of participants. The people in the pilot were on UI benefits for about 4 days less than those who did not have intense services. In terms of benefits paid, the people with more intensive services received less in benefits. The amount saved for the trust fund was about $385,000. For this pilot, the expenditures were about $600,000, but much of the expenditures went into developing the systems and software for the program. We will not have to repeat those costs.
With the proposal, we will provide not only more intensive services, but also more review by our personnel of people’s eligibility and encouragement to seek more work. We are persuaded that with that combination it will be a more cost effective proposal than the pilot. This is timely because if you look at the job market in Wisconsin, there continue to be a lot of unfilled jobs. We want to make the more aggressive effort to match up our recipients to those jobs.
That is what this proposal does. From the standpoint of the trust fund, it will be more beneficial than the pilot. I encourage your support for this.
Mr. Bergan points out that there may be federal money available for this. We have covered our bases from an administrative perspective to meet our deadlines to submit a proposal. Whether that federal money will be available or given to us is not certain. It is a competitive grant situation for the federal dollars. We think there is enough need here that we could do both, but you should know there is another piece to the puzzle. When I discussed this with the Division of Employment and Training, I made it clear to them that our bottom line was a proposal that would have a positive effect on the reserve fund, and this proposal does.
Questions (Lump): What is the total cost of the proposal? Was the impact on the fund over the 15 months a positive effect of $385,000?
Mr. Bergan indicates that the cost of the proposal is $1.7 million. The cost of pilot was $600,000 and the positive effect was $385,000, and much of that went into doing computer programming and getting the model set. In this proposal, most of the funds will be for direct services.
Question (Lump): You think you will save more than the $1.7 million?
Mr. Bergan responds yes. Lutfi Shahrani indicates that the pilot was a demonstration. It was not an effort for reemployment. It was the federal government asking what results they might find if we did A and B. It was limited to Milwaukee and the Fox Valley. A lot of the upfront costs went into building the IT systems to link the UI program and Job Service side so we can share information. It was not continuous focused services over the 15 months. The expectation here is to have a more focused reemployment effort. The eligibility review assessment will require the claimant to come in and review the worker’s search efforts to find work and we insist that they will leave with a job referral. That was not required in the pilot. The emphasis here is different than the pilot. Looking back at historical data of eligibility reviews, one of my managers estimated that for every dollar we spend, we potentially can save the trust fund anywhere from three to five dollars, and maybe more with the program statewide. Mr. Bergan indicates that the timing is better because the labor market is more receptive now, and there is more employment out there than the circumstances under which the pilot operated.
Question (Penkalski): Do these figures show the anticipated revenue increase from returning these people to work where their wages are taxed?
Mr. Bergan indicates that this is not figured into the expected revenue. The figures just reflect the benefit savings, but this is a good point.
Question (Yunk): Are we concerned that we are going to replicate the original pilot project?
Comment (Neuenfeldt): This would be a more client-focused transition effort than what was done before. There are a few points I would like to make. I do have a background in workforce development that goes back to the early 1980s and there is not a national study that does not show that the earlier you get engaged with someone after the dislocation, the better your chances of success in getting them reemployed. It is not just this pilot program study, but you can do research and see that this is the trend and wisdom in most national studies on this topic. That is why they make these precedents in a lot of other states. Also, with the federal cutbacks, there will be limited resources to provide that service to people and employers. The most recent testimony of success with this was from Tim Sullivan who did have a job service person assigned to them to help them in terms of trying to find workers. The program was able to go into the market and act as a recruiting tool. You have to look at it from both aspects. It helps the person as they are entering into their stages of dislocation at an earlier and more precise fashion. It also helps as a liaison to the employer who is looking for a person with a specific set of skills to help coordinate with the system on that end. Earlier in my career I was the director of the Hire Center and the most successful dislocated worker models were always those that involved job service intervention up front; you could see the success in getting people reemployed quickly. The proposal is that we are investing the money that will leverage a better return for the system. For those reasons, I think it is a really smart investment. The sooner we pass this, the sooner they can get on with planning in terms of how they staff this and move it forward. It would be good to have this type of thing to deal with the skill shortage in certain parts of the state.
Comment (Buchen): This would be for people who are otherwise collecting UI benefits. I think that this may not help with the problem of, for example, the lack of welders in certain parts of the state. The department would be profiling the unemployed based on criteria to identify people who are more likely to exhaust benefits. These will more likely be the lesser skilled workers, and they are the ones at whom the more intensive efforts would be directed.
Mr. Bergan indicates that the people who exhaust have the largest draw on the fund, so it makes sense to target them. This proposal is broader than the pilot. It gives us a lot more coverage than we would have had before. We have discovered that it matters less what happens in a particular job category, but rather the employment environment that is out there. The timing is good for this. We are not in the middle of a recession. There are matches to be made. We are requiring a referral for everyone, which is a significant distinction from the pilot program. They will be sent to an employer for an interview.
Comment (Buchen): We would like to discuss this in caucus.
The next meeting will be Thursday, October 25th, at 9:30 a.m. Mr. LaRocque notes that the legislative floor period is October 23 through November 8. We would like to have our bill introduced and heard during that time and we have drafting that will need to be done by the Legislative Reference Bureau.
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 11:18 a.m.
Meeting is adjourned when caucuses end.
March 25, 2013
Unemployment Insurance Division, Bureau of Legal Affairs (BOLA)