Unemployment Insurance Advisory Council Meeting Minutes

Thursday, February 26, 2009 – 9:30 A.M..

Dane County Job Center Ballroom
1819 Aberg Avenue
Madison, Wisconsin

Members Present

Management: James Buchen, Dan Petersen, Susan Haine, Ed Lump, and Earl Gustafson

Labor: Dennis Penkalski, Sally Feistel, Patty Yunk

Chair: Daniel LaRocque

Department staff present: Secretary Roberta Gassman, JoAnna Richard, Hal Bergan, Andrea Reid, Tom McHugh, Troy Sterr, John Zwickey, Lutfi Shahrani, Ben Peirce, Amy Banicki, Carla Breber, Tracey Schwalbe, Dick Tillema, Mary Pronschinske, Jeff Becker, Christopher O’Brien.

Others present: Michael Metz (WI Independent Businesses), Bob Andersen (Legal Action of Wisconsin), John Metcalf (WI Manufacturers and Commerce), Larry Smith (UC Management Services), Mary Beth George (State Assembly Labor Committee, Rep. Sinicki), Sharmane Mills (Wisconsin Public Radio).

MINUTES

Mr. LaRocque calls the meeting to order at 9:40 a.m.

1. Brief Remarks – DWD Secretary Roberta Gassman and Hal Bergan

Secretary Gassman indicates she wants to touch base with the Council on the big picture of unemployment issues, given the serious national concern over the issue. The Division has been doing extraordinary work to deal with customer service issues. Wisconsin has been seeing increases in claims, like other states. Compared to one year ago, we are looking at increases of 60-65-70% over where we were. The staff has been working on many improvements. New staff has been added and trained and we are seeing some good news. People are being able to get through and there are fewer dropped calls. The challenges have not left us, but we are making progress reengineering the process of how people apply through the internet. Fewer people will get the prompt that they have to call the department so this relieves pressure on the call system where people have experienced delays.

Today the Department will be releasing the new unemployment rate which will show a significant jump from December to January. The October unemployment rate was 4.4%. November was 5.3%. What we had seen in January was that it had gone to 5.8% in December. That was a significant jump. We will be releasing the January unemployment rate today which is 7.6%. From 5.8% to 7.6% is a very big jump. What we saw with calls in January was a 100% increase in claims over the same period last year. Given the national estimates of what economists are saying, it looks like it might get worse before it gets better. This seems to be our first wave of seeing a higher rate before we see things get better. She wants the Council to know this before it is in the press as there will be a lot of media interest in this.

The new Recovery Act provides for significant capacity to deal with unemployment issues. We are waiting to hear from DOL on some additional pieces of information that will guide us in how we go forward. One significant provision is that for states that are in the position of having to borrow from the federal government, for the period of 2009 and 2010, the federal government will not be charging interest. Our estimate of what this is worth versus what would have been a tax against employers is $40 million. The extension of emergency benefits by the federal government is worth about $500 million to our economy. The 100% full funding of extended benefits by the federal government is estimated to be at least $10 million, but likely tens of millions. For the $25 increase in weekly benefits the Governor last week signed the agreement for Wisconsin to participate in this; that will add to our economy about $173 million. The legislation also includes $9 million for UI administration, which is also needed.

The other piece of UI legislation in the Recovery Act deals with optional law changes. There has been some press about this, but the reports have been based on national outfits that are not close to the ground on what we know in Wisconsin. We do not have all of the details yet from the DOL. UI Modernization involves special Reed Act distributions to the states to try to advance coverage for people on UI. The total amount of incentive payments available to Wisconsin is $134 million. This breaks down into two parts. Wisconsin is eligible for the first part because Wisconsin took action in the past on adopting an alternative base period. Almost half the states have an alternative base period. Wisconsin can get 1/3 of the incentive payments ($44 million) because we have the alternative base period. The second 2/3 ($89 million) is paid to states that affirmatively take action on two of four different options regarding eligibility for unemployment. These deal with part-time work, compelling family reasons for quitting such as domestic abuse, extended approved training benefits, and dependents’ allowances. Some of these are not entirely new to Wisconsin; some, such as dependents’ allowances, have not been on the radar screen in Wisconsin.

The funds potentially coming to Wisconsin are significant. Given what we have dealt with already in Wisconsin, and what is going on in Wisconsin and our country, it makes sense to go in the direction of adopting the law changes needed to bring the additional incentive payments to Wisconsin. The Council will be looking at this and considering it. She looks forward to the Council’s recommendations. A very preliminary analysis suggests that this could be very beneficial to our state. We are awaiting guidance from DOL.

Secretary Gassman thanks the Council for the time and service. She will be very interested in the Council’s deliberations on this and what they come up with.

Question (Gustafson): Are the dollars mentioned all Wisconsin-specific?

Secretary Gassman responds that they are.

Question (Penkalski): Is there a timeframe when the money will be coming into Wisconsin?

Secretary Gassman responds that the $25 additional weekly compensation is already authorized because the Governor has signed the agreement. As of this week, we are authorized to provide these payments. It will take us some time to get the mechanics and IT programming changes in effect to issue the checks. We want to do this as soon as possible. They will get money for all of the weeks for which they are eligible once we are able to issue the checks. The other pieces allow a little more time. We want to be thoughtful and smart about the changes, and we are awaiting guidance from DOL.

Question (Buchen): The $25 is federally funded and does not come from employer accounts, correct?

Secretary Gassman responds that this is correct.

Question (Lump): Is there a timeframe that the Council has to act on this?

Mr. LaRocque indicates that for the UI Modernization provisions, there is a deadline of just before October 1, 2011 to apply for the funds. States have to apply for the funds. The DOL has 30 days to respond. If they approve it, they issue the money in 7 days.

2. Minutes of Meeting of January 29, 2009

Motion (Yunk), seconded (Petersen), to approve the Minutes of the January 29, 2009. Minutes are approved unanimously.

3. Summary of programs for extended benefits: Federal-State Extended Benefits; Emergency Unemployment Compensation Act of 2008; American Recovery and Reinvestment Act; Wisconsin Supplemental and Extended Benefits.

Mr. LaRocque directs the Council to the 9-page outline in the meeting materials, which describes the recent federal law changes and outlines the benefit extension programs. Over the years there have been many programs that extend benefits beyond the regular state program. In 1970 a federal law was adopted to allow benefits beyond the regular state program. We call it extended benefits or “EB.” This is the old program that prescribed that the federal government would pay 50% and the states would pay 50%. What has changed with the Recovery Act is that the federal government will pick up the 50% of the state’s share for 2009. The EB program turned “on” and began a benefit period this week because our unemployment rate reached the trigger level. When you hear about EB, we are talking about the 1970 program for Extended Benefits. There is a state statute to implement the program that is required by federal law. The state law needs some technical improvement. Also, there are some policy choices that will need to be made regarding the law.

Since 1970 there have been various amendments to the EB program for special emergency benefit programs. The amendments are mostly of historical interest at this point.

At the state level, there was a permanent, state-funded extended benefit program adopted in 1983 called “Wisconsin Supplemental Benefits” or “WSB.” That program has been turned off in favor of the federal programs that are federally funded.

Emergency Unemployment Compensation Act (EUC or EUC08) was passed in 2008. It was federally enacted in June and amended in November. In Wisconsin now a claimant goes into EUC after exhausting regular benefits. Regular benefits are up to 26 weeks. When regular benefits are exhausted, an eligible claimant then receives EUC for up to 33 additional weeks. The claimant is then eligible for EB, the 1970 program that triggered on this week, which provides up to an additional 13 weeks of benefits. All of these programs are “on” now in Wisconsin. Generally claimants are eligible for up to 72 weeks of total benefits; some claimants are eligible for less depending on their circumstances.

Question (Haine): Is WSB turned on?

Mr. LaRocque indicates that WSB is not turned on. WSB is state-created and state-funded. It was turned off to take advantage of the federally-funded benefits [available under EUC and EB]. WSB would provide for up to 8 weeks of state-funded benefits. If that program were on, the federal benefits would come to a claimant after exhaustion of WSB [although, had WSB not been turned off, federal law at that time would have caused WSB benefits to displace a larger federal benefit for some individuals].

The EB program provides 13 weeks of benefits. The federal EB has a feature that provides the states an option to provide an additional 7 weeks of benefits. It is optional -- the state may decide whether to adopt legislation to allow the 7 weeks of EB. The Recovery Act, which is in effect now, provides 100% full federal funding of EB.

Question (Lump): Does the WSB program become unsuspended at the end of the string of benefits that a claimant is entitled to?

Mr. LaRocque indicates that the Governor can turn the program on by executive order. Of course, the legislature also could do so [or fashion a different program].

Comment (Petersen): If WSB is turned on, that would continue to interfere with the federal benefits, so it is not likely that it will be turned on.

Mr. LaRocque indicates that WSB is not very well tailored to the circumstances we have now. The federal benefits are continuing and the state program would continue to get in the way of the opportunity for those federally-funded benefits. Another state program could be written that would be better tailored to the circumstances to help people who fall off at the end of the benefit stream. Some claimants will end their whole stream of benefits in 2009 and in some cases that will occur soon.

In the Recovery Act, the EUC, which would have been winding up fully in 2009, now has deadlines pushed further out. Instead of ending in March and August, now claimants have to enter the program by December 2009 and there is a windup in May of 2010. The $25 additional compensation and EB program start this week. The Act also relieved the states of interest accruals on federal borrowing, which is in effect through 2010.

4. UI Modernization

Mr. Bergan notes that having all of these programs in operation at the same time is an administrative challenge. One advantage is that the eligibility requirements are substantially the same, but the programs are not identical and the details provide challenges.

Mr. Bergan discusses the incentive payments. The first 1/3 payment is for having an alternate base period, which the Council understands is in effect for Wisconsin. The choices for the second 2/3 payment will need to be looked at carefully. The Council will need to gain an understanding of the four options, and what they require and what they will cost. We are not ready to release any fiscal estimates of the options yet, but we will probably do so before the next meeting. Those will be important to the Council’s consideration. Because we have not heard from DOL on certain definitions, the fiscal effects could change. DOL has 60 days to give us their guidance, but we expect to get that a lot sooner than that. When we have that, we can do a much better job of completing the fiscal analyses.

The first option dealing with part-time workers will benefit from DOL guidance. DOL will be defining “part-time” for purposes of this provision. As we get that information, we will be in a better position to analyze the effects. Wisconsin provides benefits to part-time workers. In order to be eligible for benefits, claimants need to be able and available for full-time work. That would need to be changed to allow people to search for part-time work. We had discussions on this previously in 2005. The theory of the option is that for many families the part-time work is as necessary as a full-time job is for other families. Employers for people employed in those part-time jobs are paying taxes on their wages, but they are not eligible for benefits if they are seeking to continue only part-time work. We need to get a sense of what the DOL definition is and how it compared with what we already do now. It is not likely that we meet the option, but we will need to know what changes would need to be made and what those effects would be.

The second option deals with three quit exceptions. We have some in our law already. We have exceptions relating to domestic violence and the illness of a family member. What we have to do is match up what our laws are with the language that DOL says is required. The third quit exception is one dealing with quitting to follow a spouse that has to relocate due to a change in employment and commuting is not practical. We do not have this provision in our law now and would need to add this to meet this option.

The third option is to provide extended benefits to claimants who are in approved training. This would be additional benefits after a claimant exhausts their 26 weeks of regular benefits. It requires states to provide up to 26 weeks of additional benefits during approved training. Approved training is an important topic for many people who find themselves displaced and have to not only find a new job, but recreate their professional life. Our guess is that this is one of the least expensive of the options.

The fourth option has to do with dependents’ allowances. States would be required to provide at least $15 per week per dependent, with an aggregate limit of at least $50 per week for unemployed claimants with dependents. He has made some calls to other states that have these allowances to determine administrative and program costs for these benefits.

Next time Mr. Bergan anticipates that the Council will consider how it wishes to proceed with these. It would be better to decide sooner rather than later.

Question (Penkalski): For the dependents’ allowances, would this apply to just EB or all regular benefits?

Mr. Bergan indicates that the option anticipates that states will adopt dependents’ allowances for regular state benefit programs.

Question (Buchen): For the extended benefits for approved training, how would this interact with EB and EUC?

Mr. Bergan indicates that the law change would be aimed at the longer term, but that is a question would we need to find out from DOL. This will be important for the fiscal analysis. He understands that the rules we have for approved training now apply to the federal extension programs. Mr. Shahrani indicates that state rules apply to approved training.

Comment (Haine): If we can meet these requirements by building on what we already have in place, that would be wonderful. The administrative burden and cost of the dependents’ allowances option seems like it would be difficult. It also seems like there would be potential for misreporting.

Mr. Bergan indicates that his colleagues agree that this is difficult to administer and enforce. As we get fiscal information we can rely on, this will be provided to the Council.

6. Reserve Fund Solvency; Borrowing and Interest

Mr. Bergan presents a handout. As of today, there are 9 states that are borrowing (CA, MI, NC, IN, KY, NY, OH, SC, WI). With a couple of exceptions, they are the industrial states. As the year unfolds, that number may expand substantially. As of yesterday, we have borrowed $56.7 million. The borrowing is like a line of credit. Every three months we send a notice to DOL and tell them how much we will borrow. For the first period of February-March, we requested $400 million. It is possible now, that it might be on the low side. We pass that number on to DOL as a heads up. The actual borrowing goes on a day-by-day basis. We borrow what we need to cover our benefit obligations. As revenue is received, we pay it down. We are expecting that by the end of April we could pay back most of the loan. At most, it will be a few days and then we will be in a borrowing mode again. Because benefit payments vary, they stay relatively consistent. Revenues drop dramatically quarter by quarter. The largest revenues are the first quarter. Each quarter we will be borrowing progressively more.

The chart with bar graphs shows the projected balance of federal advances at month end for 2009 and 2010. We can see that the amounts we will have to borrow in 2009 by December is up over $600 million. The situation gets more difficult in 2010. We were able to do some computations of what this means for interest computations, but for now this is just to familiarize the Council with the anticipated borrowing.

On the back of the chart is a graph showing projections of federal advances out to 2013. With data that projects this far out, you need to not take it literally. This is to give a sense of what happens over time. Over time borrowing goes down. The proceeds based on experience rating for the high unemployment period and the tax changes made by the Council last year means that things get a little better, but it is still a deep hole. Among the things the Council has to consider is the strategy for getting this deficit down in a meaningful way. When we had to borrow in the 1980s, we came up with a strategy to amortize the debt over the course of several years in a way that spread the burden over some time. We would be well advised to address this topic sooner rather than later as well.

Comment (Buchen): The Council did do some things to raise more revenue in the last bill. One of the principles the Council wanted to implement with the changes to the tax tables during the last bill was the idea that there is a lag between when the higher taxes kick in and when we get into the really high schedules, after the recession is over hopefully. We would not be burdening the economy when it is least able to bear the burden. Currently, this is an unusual situation and there are other elements that did not keep pace like the wage base. But the chart shows peak numbers in the bad economic period, and then it goes down. We do not know that will happen, but if we look at the chart we would want to do revenue increases when the economy is rebounding as opposed to when the numbers are high in the worst part of the recession in 2011. It is food for thought. Absent any changes, it looks like it heads back down toward solvency eventually.

Mr. Bergan indicates that for 2013, it goes back up. We also need to keep in mind that though we are covered for interest on borrowing in 2009 and 2010, there is no guarantee that that would be expanded for 2011 or 2012. There will be significant interest costs, $50-60 million per year. Those are additional charges. What is not on the chart is the Reed Act distribution. If that is put in, it would change the amount borrowed a little bit. Even at its highest, it would only be $134 million.

Question (Buchen): The figures show the borrowing levels at the end of the months. We are borrowing as of February and do not expect to be in the black at any time, is that correct?

Mr. Bergan indicates that we are operating in a very dynamic environment. A few months ago we thought we might be in the black for a few days at the end of April. Mr. McHugh indicates that we will not go positive at all. Claims are 70% over last year in the last couple of weeks. Mr. Bergan indicates that this does not include federal benefits. They are active claims and require work to process. We are spending about $7-8 million per week in benefit extensions.

Question (Petersen): When the projections were created, did they take into account EB benefits that the state would be 50% responsible for?

Mr. Bergan indicates that the projections did not include EB. The full federal funding for EB was not in either the House or Senate versions of the bill. It showed up after the conference committee.

Question (Haine): What is the time period the federal money for benefits is in effect? When the federal funding ends, at that point does the state pick up its 50% share?

Mr. Bergan indicates that for people who enter the EB program in 2009, the federal funding continues until six months into 2010. If the EB program is on and people enter after 2009, then it would be 50/50 funding, absent some other action by Congress.

Question (Yunk): If the stimulus bill had not been adopted, what would have been the effect on the state’s reserve fund for EB? It may be a good benchmark to know this to give another picture of the benefit of the stimulus bill.

Mr. Bergan indicates that it would be a complicated but worthwhile effort to figure that out. He will try to get a ballpark estimate of this. The interest on the borrowing would be a separate assessment that would have been charged as well. The projections also do not take into account the modernization provisions or benefit extensions. Mr. LaRocque notes that the stimulus bill extends EUC and postpones EB for those who would qualify for both when both are turned on. The EB would have been 50% state funded without the full federal funding, so there is some savings to the fund. Mr. Bergan indicates that the extensions are valued at $500 million; it is a lot of money coming into the state.

Question (Petersen): Is the unemployment rate based on the number of people collecting benefits? Do the claimants on EB count into the insured rate? Does this make the IUR higher because of EB?

Mr. Bergan indicates that there is a “total unemployment rate” and an “insured unemployment rate” or IUR. The IUR is what has triggered Wisconsin onto the EB. Mr. Peirce indicates that the numerator in the IUR equation is the current week’s number of weekly claim certifications filed for regular benefit claims, not including benefit extensions. The denominator is the covered employment figure we get quarterly from the Bureau of Labor Statistics.

6. UI Treasurer’s Financial Statements

Mr. McHugh, the new Director of the UI Bureau of Tax & Accounting, presents the Financial Statements for the month ended January 31, 2009.

7. Customer service issues; administration and systems

Mr. Shahrani presents a handout on the status of UI operations. We are facing a historically high UI claims workload. The workload began to pick up in July 2008 with the first federal extension and has not subsided since. There is an expectation for the unemployment rate in Wisconsin to reach 8% in 2009 and it could be higher by the end of the year. The increased workload is a result of increased claims due to the economic slowdown, federal benefit extensions, and the stimulus bill. Every time one of these programs goes into effect, we have many people calling to ask questions and applying. Our initial claims call load has subsided somewhat in the last two weeks. Aside from Mondays and maybe Tuesday mornings, we have been able to have ample capacity for people to call and get into the system. In December and January, we were maxed out on our capacity to handle claims. There were long waits. Claimants would find other ways to get through to the department to ask questions. We took the questions from wherever and handled them. We find that the claimants have been patient, despite the frustrating process and long waits, and the anxiety of people out of work. Our staff has been patient and explaining the reasons for delays.

For the EB program, it will take a few weeks before we implement the mechanics and systems changes. Call volumes exceeded 200,000 attempts per week. This may be 50-70,000 people, with many attempting several times. We are able to handle 30-35,000 calls per week for claims and inquiries. Since November, we were authorized to add positions. Thanks to Hal, Roberta Gassman, and JoAnna Richard for expediting that process. We got help immediately in December with expedited training. We added LTEs in adjudication that are former UI employees who had retired and we could put them to work right away. We added project positions in claims and adjudication. They are currently in training. In adjudication we plan to expedite the training to make them work on less complicated issues to streamline the training. We will give them additional training later in the year. Adjudicators remain challenged by the volume, the complexity of the process and the time it takes to apply the law. Some claimants may wait up to 5 weeks for the adjudication.

We also streamlined processes. We reassigned staff to handle claimant calls, inquiries, complaints, and adjudication. We are working on technology to streamline the process. We are putting in systems, especially in initial claims, to allow the claimants to put in initial claims without first talking to a claims specialist. We are moving some of that work to a secondary process.

Question (Lump): For the third bullet point on the handout, you state that initial claims calls have subsided. What does that mean if claims are still up?

Mr. Shahrani indicates that in December and January, many claimants would come through the phone line and not be able to get in. They would call again and again. We hired more people to handle claims so people get through and do not need to call again. Mr. Bergan also states that there is a normal seasonal element to this. We had dramatic spike at the end of the year. Now we are seeing a seasonal decline. Mr. Shahrani indicates that we still have claims much greater than in 2008, but if you compare the claims this month to December and January, we went from 35,000 per week to 23,000 per week which is a significant drop. The second chart shows the number of claims in each week in 2009 versus 2008.

Question (Yunk): For the chart listing the number of claims, are these cumulative numbers?

Mr. Shahrani responds that they are.

Question (Haine): When you state that you received 200,000 calls per week but could only handle 30-35,000, what happens to the other callers?

Mr. Shahrani indicates that these are the repeat callers. The excess keeps coming back creating multiple calls. The 200,000 figure is raw attempts at calling the department.

Question (Gustafson): Do you keep records of irate or abusive customers or unhappy exchanges? Do you have a sense of that, given our society’s propensity for grocery line rage or road rage?

Mr. Shahrani indicates that he has a sense of that. He considers himself the gauge because when there is rage involved, it comes to him as complaints against his staff. There were weeks in December and January where he received 30-40 calls a day saying they could not get through. He had one that said the staff seemed to be short with them. He visited the benefit centers and gauged the staff. We need to be understanding and patient. If they are a little emotional or excited we have to put that in perspective and understand it. He will not say that 100% were satisfied, or that we did not hear tears or yelling, but even with the delays, it did not filter through to complaints to him. We were not able to complete all the claims in the week the claimants attempted to call. We decided that if someone told us they wanted to make a claim for a week but were not able to get through, we would take the claim. We consider it good cause for backdating the claim. That eased a lot of customer concern because they were not losing benefits. We are still doing that because we are not at rate where we are confident that no one was cut off or could not get through. He received more compliments than complaints about his staff and the effort, patience and work that they are doing. This is from people who are waiting 2-4 weeks and understand they are not the only ones in line.

Comment (Haine): Commends the department for its extraordinary efforts to keep up with the claims.

Comment (Larry Smith, UC Management Services): Compliments Mr. Shahrani and his staff. Adjudicators have been very courteous and cooperative.

Mr. LaRocque offers Council members the opportunity to take a tour of the benefit center operations and the adjudication process. It could be arranged in Milwaukee or Madison. Council members should let him know if they would like him to set this up.

8. Task Force on Misclassification of Workers – brief report

Mr. Bergan reports that the Task Force on Misclassification of Workers was set up last fall. The Task Force is meant to be a complement to the work being done by the Council on the definition of employee. The task force is aimed at widespread noncompliance and misclassification, primarily in the construction industry, although the Teamsters are represented as well. Mr. Bergan hands out a list of the task force members. When a worker is misclassified as an independent contractor, the employer does not pay UI taxes, WC insurance, and does not withhold other taxes. It is a very substantial and growing problem. People who should be treated as employees are denied the protections of the laws for employees. Sometimes they are totally off the books and sometimes they are treated as independent contractors. Other states are doing things like this, and we are taking advantage of what other states have done on this. Some of the most impassioned comments we have heard have come from contractors who find it impossible to compete with people who are not playing by the rules. We have met about 8 times and are a month or so away from making some recommendations.

There is a rule being proposed at the Department of Commerce that will require registration of contractors. People would be forced to identify themselves as independent contractors, so we would have some baseline information about them, including SSNs, that would facilitate interdepartmental cooperation and enforcement. There is also a lot to be accomplished in general with data sharing to increase enforcement. There may be some type of ongoing task force that would involve investigators from DOR, workers compensation and UI and their job would be to deal with the misclassification problem. For UI, we have 30 auditors and by far most of their time is spent on who is an employee, and many of those are in construction. We have had a lot of input by contractors, Wisconsin builders who attend the meetings.

Question (Buchen): Is the Commerce rule dealing just with construction?

Mr. Bergan responds that it is. Commerce handles registration of many construction-type trades, such as plumbers and electricians. This would be a complement to that work that they already do with other specialized licenses. He will let the Council know when the task force has a final proposal.

Question (Yunk): Is there contractor registration legislation?

Mr. Bergan responds that the Commerce department is working on an administrative rule. Last year there was a legislative proposal SB228 that dealt with this.

Question (Haine): Is it true under workers compensation law that if you use an independent contractor and cannot produce a certificate that shows that he or she has coverage, that you then become responsible. Did that come up at the task force?

Comment (Buchen): That used to be the law and changed some time ago. An independent contractor does not need to have workers compensation if they are an individual. The law used to have something called “contractor-over” where if you were found to be an employee, the contractor above you was responsible for the claim. It only came up when there was a claim. We got rid of that when we instituted instead a very stepped up enforcement. If a person was injured and found to be the employee of an employer who did not have workers compensation, the employer was assessed steep fines. The fines went to a fund to pay uninsured claims. That has worked well. There were some big claims, but it is still solvent. It has not solved the misclassification issue.

Mr. Bergan indicates that workers compensation turns out to be a strong lever to accomplish this. It is not currently in the law, but it is something the task force is looking at whether it should be in the law and how workers compensation can help with enforcement. Jim Macejkovic (Executive Vice-President, Building Service Inc.), who is on the task force, has pointed out that if you are a reputable contractor, you do these things for your own protection automatically. When it is absent, it is a marker that something might be wrong. It is not a legal requirement.

Comment (Petersen): The workers compensation law allows that the individual owner does not need to be covered for workers compensation, and also other family members.

9. Committee to Review UI Definition of “Employee” – Brief Report

Mr. LaRocque indicates that Committee to Review UI Definition of “Employee” is the committee appointed by the Council. It includes Ed Lump, Dennis Penkalski and Dan LaRocque. The committee met on February 11. The committee discussed the scope of their assignment and committee members concern about misclassification of employees is and employers’ interests in how the department administers the law. The committee wants to get a clear focus on what the concerns may be with the definition of employee. There are in fact several exceptions to the definition of employee in the UI statute. There is concern about individuals whose services appear to be provided in a very independent way, such as independent writers and computer consultants. There are concerns about workers in home care and other domestic services. The committee is searching for the guiding principles first and then the language that would enforce them. It will receive input from the small business community, labor and employee advocates. The next meeting will be Thursday, March 19, at 9:30 at GEF-1. If any Council members have input, please provide it to Dennis Penkalski or Ed Lump.

10. Department proposals for law change:

D09-10 Amend Exception to Quit Disqualification for Full-Time Work

With 80% Liable Employer: Reduce from 35 to 32 Hours

Ms. Schwalbe presents the proposal. This is a proposal the department presented last year and is the department’s attempt to get a consistent definition of “full-time” in the statutory provisions that refer to part-time and full-time. Last year, the department presented a combined proposal with all of the provisions that refer to an amount of hours that represent full-time. This year, we are making two smaller proposals for changes to certain provisions. Neither of the two proposals has any significant fiscal effect on the fund. We really want these changes for administration and training, and a better understanding by the people who use the program.

This proposal is for a partial benefit payment situation. A claimant is not eligible for a partial benefit check if they are working at least 35 hours for an employer who paid 80% of their base period wages. The idea is that if the employer is paying the claimant wages right now, they would not also be able to claim against that employer’s UI account if they are working full-time for that employer. The proposal is to make that 35 hour provision consistent with the full-time definition that is in the rules at 32 hours. If the claimant is working 32 hours for an employer, and that employer paid 80% of their base period wages, they would not be eligible for a partial benefit check.

D09-12 Amend Exceptions to Quit Disqualifications: Change Thresholds to 32 Hours

Ms. Schwalbe presents the proposal. This proposal deals with two quit exceptions where the reference to hours in the sections uses a 30-hour cut off for full-time. The department wants to see the definition be consistent at 32 hours.

One quit exception deals with when an claimant is working a regular full-time job, and picks up a part-time. When the person loses the full-time job and quits the part-time job, there is no disqualification for the quit if the person quit the part-time job because it was not economically feasible to continue the part-time work. The example is someone who works a full-time job in a distant city and picks up a part-time job in that city. If the person loses the full-time job, it may not make any economic sense to keep the part-time job in the distant city. We would like that definition to be consistent with the 32 hour definition of full-time.

The other quit exception is when a claimant is working two different jobs and at least one is full-time, and the claimant quits the part-time job before getting notice of termination from the full-time job. The example is if the person quits a part-time bartending job and then a week later gets a notice terminating his or her regular, full-time job. The person did not know about the termination of the full-time job when quitting the part-time job. There would be no quit disqualification. We want to make those hours consistent with the 32 hour definition of full-time.

The provision the department proposed last year that had a fiscal effect for changing to 32 hours is not one of the proposals by the department this year.

Question (Yunk): Does the federal stimulus bill deal with this part-time issue?

Ms. Schwalbe responds that the federal UI modernization provisions of the stimulus bill include an optional law that would require states to allow claimants to search for part-time work. It does not deal with quit exceptions. There may be some additional definitions that would be required if that provision is one that moves forward.

D09-16 Amend Special Assessment For Interest to Allow Unused Balance To Revert to Reserve Fund

Mr. Sterr presents the proposal. Federal law prohibits the use of trust fund dollars to pay interest on federal loans that are used to pay benefits. Interest needs to be paid from an alternative funding source. Chapter 108 gives the department the authority to collect a special assessment to pay the interest back to the federal government. If there are unused amounts in the special assessment, the current law provides that those funds can be used for administration. We are proposing that the unused funds would go into the balancing account. The assessment really is a tax on employers, so it makes sense that any unused amount be returned to the trust fund. This would not come into play for a couple of years. The first special assessment we would make would be in the year 2011.

D09-02 Establish Firm Deadline for Voluntary Contributions

Mr. Sterr presents the proposal. The current law requires that voluntary contributions must be received by November 30. We also have a grace period built into the law. If we receive the payment within 3 days or if the postmark is November 30, we will accept the voluntary contribution as a timely payment. We propose to modify the due date to be November 30, and eliminate the grace period and the requirement to look at the postmark for the payments that come in. One reason to do this is to be consistent with what we did in Act 59. For regular quarterly payments, we eliminated the grace period and the need to keep envelopes for postmarks. We receive over 3,000 voluntary contribution payments. The effective date for the proposal is 2010 because at that time we will have the ability to accept payments electronically.

Question (Gustafson): What volume of payments were late?

Mr. Sterr indicates that he is not sure.

Question (Haine): Anything to make things more efficient makes sense. Are these just the payments to lower tax rates?

Mr. Sterr responds that this is correct.

Question (Buchen): Does anyone know why we enacted the grace period in the first place?

Comment (Petersen): Responds that it was likely just language to address legal issue of what would be timely. He has had problems with the postal service delivering items timely. They can miscode bar codes. There is some reason for the grace period, but we can make it consistent with the other law.

D09-03 Incorporate Requirement That Professional Employer Organizations (PEOs)

Register With Department of Regulation And Licensing

Mr. Sterr presents the proposal. Under current law, there are 7 or 8 conditions that have to be met to be considered a PEO under Chapter 108. We are proposing that we add an additional requirement that the entity be licensed with the Department of Regulation and Licensing as a PEO. As of July, any new PEO must be registered before they can do business in the state. Any existing PEO also has to register within 180 days after July 1. We want to incorporate this provision into our law. One of the provisions that has to be met for Registration and Licensing is that the PEO has to demonstrate that they have working capital of at least $100,000 and that they have audited financial statements. The benefit for us is that the PEO also demonstrates that they have money on hand to pay their liabilities such as UI taxes.

Question (Haine): Because the law was just passed regulating PEOs, why is it necessary to also put it in the UI law?

Mr. Sterr indicates that we want consistency. Also, if we do not do it, we will have PEOs who are considered PEOs under the UI law and who are not registered with Regulation and Licensing.

11. Department proposal to revise DWD 129, Benefit Claiming Procedures

Ms. Schwalbe presents the proposal. The rule sets out the procedures for filing an initial claim, how claimants file continuing weekly certifications, and if they stop filing weekly claims, how they set up and resume a claim. When someone files an initial claim, they can go back 7 days and file for the prior week. Once they are in a claim series, they can go back 14 days or the prior two weeks to file weekly claims certifications. If a claimant breaks the claim series and does not file timely weekly claims certifications for any reason, and want to again file within their benefit year, they must resume the claim. When someone resumes a claim, they can go back 7 days and file for the prior week, just like an initial claim. The department is not proposing to change any of the process. We are proposing to change the language because it has currently been interpreted by administrative law judges in ways that were not intended and to allow claims when people did not file timely claims. This is just a clarification. This is the current language that administrative law judges have found confusing:

“DWD 129.01(2) (c) If a weekly certification is not filed for a benefit week as described in par. (b), the claim shall become inactive as of the first week after the last week in which a timely weekly certification may have been filed under par. (b) 1. to 4.

(3) RESUMING A CLAIM. After a claim becomes inactive under sub. (2) (c), a claimant may resume the claim during the current benefit year only by complying with the notice provisions of sub. (1) for initiating a claim, except if the claimant attempts to file an untimely certification for any week prior to the week the claim became inactive, notice of the claimant’s intent to resume the claim shall be made in the week the claim became inactive or within 7 days after the close of that week.”

We are proposing to simplify this and replace it with the following: “A claimant may not file a weekly certification for any week unless a timely weekly certification for the immediately preceding week was filed or timely initial claim was filed for the week.” We then also provide two examples that we think will be a helpful tool in interpreting the rule language. We are not proposing how anything is changed. We just want to clarify the language.

The other amendment for the rule is to add authorization for the department to issue debit cards. It is not authorized now, and the department is considering this, so as long as we are looking at amending the DWD 129, we are proposing to add authorization to issue debit cards. Other agencies are using debit cards and DWD has been looking at it as a possibility. There are some potential problems with debit cards, especially with unused funds. Once they are paid into an account, they are not in the trust fund. If the person does not use the funds, they are abandoned and go to the state’s general revenues to be used for the school fund. We are concerned about this, but it is a possibility that down the road the department would want to issue debit cards as an option.

12. Department proposal to revise DWD 128, Able to Work and Available for Work

Mr. LaRocque indicates that this was presented in detail at the last meeting and is on the agenda today for action by the Council. He is communicating with Bob Andersen regarding the rule.

The next Council meeting will be Thursday, March 26, 2009, at 9:30 a.m., at the Dane County Job Center Ballroom.

Meeting is adjourned at 12:15 p.m.