Unemployment Insurance Advisory Council Meeting Minutes

Wednesday, January 27, 2010 – 9:30 A.M.

Offices of the State of Wisconsin Investment Board
Room 226 (Board Room)
121 East Wilson Street
Madison, Wisconsin

Members Present

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

Labor: Phil Neuenfeldt, Patty Yunk, Sally Feistel, and Anthony Rainey.

Chair: Daniel LaRocque

Department staff present: Hal Bergan, Andy Reid, Tom McHugh, Pam James, Tracey Schwalbe, Lutfi Shahrani, Ben Peirce, Amy Banicki, Carla Breber, Jason Schunck, Dick Tillema, Robin Gallagher, Chris O’Brien.

Others present: Bob Andersen (Legal Action of Wisconsin), John Metcalf (WMC), Michael Metz (WI Independent Businesses), Tom Fonfara (DeWitt Ross), Jane Pawasarat (Department of Administration), Jenna Weidner (Department of Administration), John R. Eide (United Food & Commercial Workers), Dan Habighorst (Patrick Cudahy), Dean Kelley (Counsel for Patrick Cudahy), James Boullion (Associated General Contractors of Wisconsin), Brad Boycks (Wisconsin Builders Association), John Mielke (ABC of Wisconsin), Mark Bender (Forest County Potawatomi), Annie Early (Forest County Potawatomi Community), Larry Smith (UC Management Services), Steve Walter (Wisconsin Eye).

MINUTES

Meeting called to order at 9:45 a.m.

1. Opening Remarks – Hal Bergan

Mr. Bergan indicates that the department is currently dealing with a high level of activity. Last week the department issued about 250,000 checks, 56% of which were for regular UI benefits and the balance were checks for the six federal extension programs we are operating. The first couple of weeks are usually the busiest weeks of the year. We have additional staff in place to help facilitate claims.

In November, Congress passed benefit extensions. They added two tiers of EUC08 benefits, Tiers 3 and 4. Tier 3 added up to 13 weeks of benefits and Tier 4 added up to 6 weeks of benefits. At the time the law passed, Wisconsin met the trigger for Tier 4. Shortly thereafter, we fell below the trigger and Tier 4 turned off as of January 9, 2010. The maximum eligibility for benefits in Wisconsin is now 93 weeks rather than 99 weeks. The triggering off was based on the November total unemployment rate (TUR) seasonally adjusted. In December, the TUR spiked back up. The TUR in Wisconsin is now 8.4%. We are close to triggering back on to Tier 4. It could happen in early March [April]. Once a program turns off, it must be off for 13 weeks. We will be off for 13 weeks starting January 9.

Question (Buchen): What is the TUR trigger for Tier 4?

Mr. Bergan responds that it is a TUR of 8.5%. Wisconsin’s rate is fluctuating right around the trigger.

Question (Gustafson): If someone is receiving a tier of EUC08 benefits and the state triggers off that tier, do the EUC08 benefits stop for them?

Mr. Bergan responds that once a claimant’s eligibility is determined for a tier of EUC08, a claimant would continue to receive that tier of benefits even if the state triggered off that tier.

The federal extensions involved extending the EUC08 deadlines and adding Tiers 3 and 4, the extra $25 in Federal Additional Compensation (FAC), and the federal funding of Extended Benefits (EB). These are all set to sunset now at the end of February. A jobs bill passed the House that would move the deadline back to June 30, 2010. The status of the House jobs bill is in doubt. As we approach the expiration date, we need to notify claimants that the benefits are ending.

The loan balance as of this morning was $1.056 billion. That will continue to go up steadily. It goes up fastest at this time of year because we have no revenue until the end of April and we are at a time when benefit payments are high. The legislative clock is ticking in terms of our ability to address solvency this year. There are hard choices, but they are not going to get any easier. The last legislative floor period is in April. We have a UI bill pending, which passed the Assembly.

Comment (Gustafson): What was the cause of the increase in the TUR for December?

Mr. Bergan indicates that he is not certain, but it was part of a nationwide trend. The TUR is in some ways the most useful number because it is the total unemployment rate adjusted to take into account seasonal changes.

9. Increase in limit on voluntary contributions

Mr. LaRocque hands out a document to the Council with confidential background information about the Patrick Cudahy employer account.

Dan Habighorst, Vice President of Human Resources for Patrick Cudahy, introduces himself, John Eide, local union president, and the company’s legal counsel Dean Kelly. Mr. Habighorst presents an issue on behalf of Patrick Cudahy. He confirms that Patrick Cudahy does not wish to waive confidentiality of the circumstances of its unemployment information contained in the presentation and materials provided to the Council for review [and such information is redacted where indicated by “----”in these Minutes]. He acknowledges materials are provided to the Council members at the meeting [in accordance with a statutory exception to confidentiality limitations]. Patrick Cudahy is a 121-year old meat processing company. It makes bacon, sausages, hams, and some cooking oils. Prior to July, Patrick Cudahy had about ---- employees and few layoffs in the company. They had a taxable payroll going into 2010 of about ---- for UI purposes. For a number of years they have exercised the option to make voluntary payments to limit their UI contribution rate level.

On July 5, 2009, some individuals launched a military flair that landed on the roof of their building. It burned 400,000 square feet of the building over 5 days. Patrick Cudahy had to completely shut down operations and lay off over ---- people. They were able to reestablish the utilities and get about ----% of their workers back to work almost immediately. They did have about ---- fewer jobs at that time. Some workers left the company and some were called back to work. They now have about ---- people who have not returned to work. Patrick Cudahy incurred over $---- reduction in their reserve account. The loss to the buildings and business was substantial. They are not able to rebuild or reestablish the burned out parts of the building; that may take another year or two. They are operating at less production and with ----% fewer employees. They are down to about ---- employees, some working shorter weeks. Patrick Cudahy’s concern is that it will take a number of years at higher UI tax rates to reestablish their UI account to where it was before the fire. Their plea to the Council is to find a way to help them to repay the $---- lost to their reserve account quickly, rather than over several years. They would like the option to put the money back in the fund. The voluntary contribution law would need to be amended to allow them to do this and that is what they are asking the Council to do.

John Eide (United Food & Commercial Workers) adds that Patrick Cudahy has been a growing company and a good company. It has good labor relations.

Comment (Haine): She recognizes that Patrick Cudahy is a well respected company with a good reputation in Wisconsin.

Question (Gustafson): Does Patrick Cudahy have manufacturing plants outside of Wisconsin?

Mr. Habighorst responds that Patrick Cudahy is part of Smithfield Foods which has many plants throughout the United States. They personally are responsible for two other plants, one in Iowa that makes microwave bacon, and a second, smaller plant in New Jersey that makes sausages for the Latino market on the East Coast and in Central America. In this fire, they lost their entire boiled ham operation. This involved about ---- employees. There were about ---- employees due to the loss of certain lines. They hope to get those pieces of the business back.

Question (Neuenfeldt): Would this change be a problem for the department, and what would the barriers be? Is there any reason we would not want to do this?

Mr. LaRocque responds that Patrick Cudahy presents an extreme case. The question would be where to draw the line by applying criteria in catastrophic cases.

Comment (Buchen): He is surprised the Council has not had to deal with this before. The insurance company will cover the cost of the benefits, but not the tax impact. Other companies must have faced losses that are caused through no fault of their own, and not based on economic conditions. These would be situations where calamities have caused the need for the layoffs. The voluntary contribution concept seems to be the logical place to deal with this. There are limits there, and there are good reasons for those limits, but it would be possible to create an exception to the limits for circumstances that are caused by a calamity and that results in physical damage that causes the layoff. We could allow the costs associated with paying those claims as a result of the calamity to be a voluntary contribution.

Question (Lump): He agrees with Mr. Buchen. Why are there limits on voluntary contributions?

Mr. McHugh indicates that the limit on voluntary contributions was established in the 1980s so that an employer could only go down one tax bracket with a voluntary contribution as opposed to multiple brackets for fiscal reasons. The fiscal estimate indicated a $9 million savings to the fund with the limit.

Question (Haine): Is there an example from the past where a similar exception was made, such as the cheese fire in Madison?

Mr. LaRocque indicates that the current law does not allow the department to make any exceptions to the limit on voluntary contributions.

Comment (Buchen): We can establish a set of circumstances that involve physical damage to a business that causes the layoff. The department will still have to investigate and see what the facts are. These are fairly clear circumstances that would be easy to determine.

Question (Neuenfeldt): Is this something we can do on a case-by-case basis?

Mr. LaRocque indicates that the legislature cannot pass a law that would just apply only to the Patrick Cudahy situation.

Comment (Buchen): This will happen from time to time. It could be written to apply to a calamity that causes physical damage, and the damage causes the layoffs, and it applies only to those people laid off as a result of that circumstance.

Question (Neuenfeldt): Would it not also matter if everyone got recalled to work? In this situation, everyone is back. In other cases there may be no attempt to bring people back because the employer decides to move the business.

Question (Gustafson): This is an interesting case. We do not want to write legislation to benefit one company. He does not understand why there are limits on lowering the tax brackets with voluntary contributions. If everyone is made whole sooner, what are the reasons for the limits? If a company can afford it and the reserve fund is whole, why have the restriction?

Mr. McHugh indicates that the change was made to save money in the 1980s. Employers were buying down their rates.

Question (Lump): Philosophically, why should we penalize businesses that want to do this? Why would we want to reap a greater tax benefit off their calamity? He is not sure it is good public policy. We should allow employers to pay back the fund.

Comment (Gustafson): There are two questions. One is what can be done now for Patrick Cudahy, and the other is the reason for the overall policy. We can address the Patrick Cudahy situation now and address the larger question later.

Mr. LaRocque indicates that the law as written now would not allow us to do anything for them. Mr. Tillema indicates that if employers not in the situation of Patrick Cudahy would buy down their rates so that they would make no solvency contribution or a very tiny solvency contribution, a portion of the income to the fund would be eliminated. If they buy down the basic rate, their solvency rate is correspondingly smaller. If they can buy down their rate to zero or close to zero, we would have no solvency contributions coming into the fund.

Question (Gustafson): We could possibly have a disconnect between the basic and the solvency taxes in this situation, but it may be an accounting nightmare.

Comment (Buchen): This is a good line for us to pursue. We should look at a short-term fix that involves an exception in certain circumstances, and then we can figure out if we want to get rid of the limits in the long-term.

Question (Haine): Patrick Cudahy is asking that they be allowed to make a voluntary contribution to pay it back more quickly than they would be allowed to by law, correct?

Mr. Habighorst responds that this is correct.

Question (Neuenfeldt): How could the amendment include something about recalling workers? The Council has to be careful but he wants to make sure that the workforce gets recalled in Wisconsin. With global companies, if a plant burns down in one location, an employer could just send those jobs to another of their locations. He wants to make sure that the workforce gets recalled and there is not a loophole.

Comment (Buchen): The practical effects of a plant closing are not necessarily significant. If a plant is shut down and moved out, the employer’s taxable payroll is lower. The taxes are per employee. The taxes are structured so that if you have layoffs, your rates go up, but the number of employees you are paying goes down. That is part of why we do not see the upswing in taxes that we expect during an economic downtown. Their taxes may go up, but their taxable payroll is lower. If an employer shut down and had no employees, the rate would not matter. He understands Mr. Neuenfeldt’s concern, but as a practical matter, it may not matter.

Comment (Rainey): If you shut a plant down, you would not want to make a voluntary anyway. Patrick Cudahy wants to maintain the tax rate that they were at previously, and do that by making a greater voluntary contribution. The exception would be that due to a calamity an employer could make a voluntary contribution to maintain their previous tax rate, not to buy down to a lower tax rate.

Comment (Gustafson): They may not want to go back to their former rate, but at least improve their rate. We would not want a company to be able to improve their rate because of the calamity.

Mr. LaRocque indicates that it might be desirable to have some objective criteria such as that a threshold percentage of net reserve is lost. In this case, ----% of the net reserve in the employer’s account was lost. Also, the exception should be fiscally responsible and objectively clear. For instance, the exception could state that a substantial part of the operations are rendered inoperable for x number of days or weeks affecting a substantial number of employees who are not employable elsewhere by the employing unit.

Comment (Yunk): The exception has to be tied to some sort of “catastrophic” event. “Catastrophic” is a good term because it is a term that is used in other legislation. It must be something that is not within the control of a company. It cannot be a casual event.

Comment (Buchen): It would need to go further than that. An economic downturn can be a catastrophic event for an employer. The exception would need to reference physical damage to the facility.

Comment (Lump): The department has an idea of what the Council wants to accomplish. The department should come back with some language for the Council to review.

Comment (Gustafson): In the Patrick Cudahy situation, there were numbers of lines down and numbers of people employed. However, as an example, in the paper industry, if a pulp mill goes down, it could be only 5 to 10% of the employees, but they are done unless they can start buying market pulp somewhere else. It would not take much for that industry or others to lose a relatively small amount to shut the whole thing down.

Comment (Yunk): When you have an employer that acts responsibly, we want to respect that and assist them to continue. That is a solid basis to go forth with the exception. Larry Smith (UC Management Services) states that if the company went out of business, the tax rate would be a moot point.

Motion by Ms. Yunk, seconded by Mr. Lump, to approve the idea in concept and ask the department draft specific language for the Council to review embodying the dialogue. The exception should not be for a casual event, but for a calamity, and not a choice on the part of company (i.e., it is beyond their control), and it cannot render their rate to be lower than it was before. Motion passes 9-0-0.

Comment (Buchen): We could consider whether this should be an amendment to the bill now at the legislature.

2. Financial Statements

Mr. McHugh presents the financial statements. The December report displays year-end totals. The first page is the balance sheet. Letter A identifies the year-end total reserve fund balance is negative $1,022,995,750. In 2008 it was negative $684,575,423. The 10% write off recharged from employers to the balancing account was $407 million. If we did not do the 10% write off, the balancing account would have held its own and had a few more dollars in it. It went negative by about the amount of the write off.

The next page is receipts and disbursements. Letter A shows that total receipts were about $622.5 million versus $629.8 in 2008, despite the increase in the wage base. More money went into the solvency account because of the rate shift of .2% from reserve fund to solvency for positive balance employers and .4% for negative balance employers. The Letters B show the total loans from the federal government were $1.158 billion, $236 million of which were repaid with first quarter receipts. Letter C shows that the interest earned on the trust fund balance for a couple of months was $773,000, compared to $20.6 million in 2008. Letter D shows charges to taxable employers are up significantly to $1.6 billion compared to $868 million in 2008. Letter E shows the benefits paid that are federally funded. FAC is the $25 add-on, which was $240 million. EUC08 (all tiers) was $820 million. EB was $121 million.

Comment (Buchen): The federal programs paid out about $1.2 billion to Wisconsin claimants in 2009.

Mr. Bergan indicates that the total benefits paid out, including regular UI benefits, was over $3 billion in 2009.

Question (Neuenfeldt): Were the federal fund figures just for Wisconsin?

Mr. Bergan responds affirmatively.

Question (Haine): The limit of benefits currently is 93 weeks, correct?

Mr. Bergan responds affirmatively. Mr. McHugh indicates that the department sent out roughly 565,000 1099s for UI payments this year. This is out of about 3 million workers in the state. For November, the total civilian labor force was 3,036,000, of which 2.8 million were employed and 238,000 were unemployed.

Question (Neuenfeldt): Does this mean that 238,000 people are currently unemployed?

Mr. Bergan responds that last week about 248,000 got checks. The startling thing about these numbers is that the total work force is 3 million and we paid 565,000 checks. Some of these people got benefits for one week and some got benefits for several weeks, but that is 1 out of 5-6 people in the workforce that got a UI check in 2009, about 18-19% of the workforce.

3. Minutes of Meeting December 16, 2009

Motion by Mr. Buchen, seconded by Ms. Feistel, to approve the minutes of the meeting December 16, 2009, passes 9-0-0.

4. Proposal: Amend extended benefit trigger

Ms. Schwalbe presents proposal D09-23 to Amend the Total Unemployment Rate (TUR) Trigger for Extended Benefits (EB). This is somewhat of a technical change. This deals with the TUR trigger for extended benefits that was added in 2009 so the state could take advantage of an additional 7 weeks of “high extended benefits” or “high EB.” In order to be eligible for the additional 7 weeks of benefits, states must have this TUR trigger for EB in its law and have a TUR rate of at least 8.0%. Wisconsin did meet the 8.0% trigger in 2009.

When we drafted the TUR trigger language in the spring of 2009, we used DOL model language for states to use if they wanted to adopt the TUR trigger during the same time period that EB benefits were paid 100% by the federal government. The draft language from DOL provided that the TUR trigger for EB would end “3” weeks prior to the last week in which the federal sharing was authorized for EB. After the legislation was drafted, DOL came out with revised model language that indicated a state’s law should provide that the TUR trigger should end “4” weeks prior to the last week of the federal funding. The change to 4 weeks was based on the timing of the TUR trigger versus an insured unemployment rate (IUR) trigger. Because the TUR is calculated based on a three-month average unemployment rate, the trigger becomes effective based on the publication date of the trigger. The publication date is one week later than with the IUR trigger. The proposal is to change the “3 weeks” in the statute to “4 weeks” to be consistent with the model language guidance provided by DOL and the original intent of the legislation to have the TUR trigger in effect during the period of 100% federal funding of EB.

This came to light because it was possible that the “3 weeks” language could have had an unintended effect at the end of 2009. At the end of 2009, the state would have triggered off EB but for the TUR trigger. The state’s IUR went below the 5% IUR trigger and the only thing keeping Wisconsin on EB for a few weeks was the TUR trigger. Had that TUR trigger been in place for an extra week after the full federal funding expired at the end of December 2009 as it was then scheduled to do, and if that TUR trigger was the only trigger keeping Wisconsin on EB at the time, then there would have been one extra week of EB paid after the full federal funding ended for which employers would have had to pay 50% of the benefits. That was not the intent of the law when it was passed.

Question (Yunk): For the person who is unemployed, what impact does this have?

Ms. Schwalbe responds that the intent was to end the TUR trigger with the full federal funding. That was scheduled to end in December. At the time it was possible that this TUR would have kept EB on for one extra week. Some claimants would have received one extra week of benefits
than was intended when the law was passed, and employers would have been charged 50% for those benefits. Right now, Wisconsin is above the 5% IUR trigger. Unless Wisconsin is below the 5% trigger, the TUR does not really matter.

Question (Yunk): With 4 weeks instead of 3 weeks, people would have gotten one extra week of benefits and employers would have paid an additional amount, correct?

Ms. Schwalbe responds that some claimants could have gotten an extra week of benefits with the current law at the end of December 2009. It is not necessarily the case that the triggers would be in the same situation in 2010 when the 100% federal funding is now scheduled to end.

Question (Haine): The extra benefits would not have been intended by the law, correct?

Ms. Schwalbe responds affirmatively. The proposal is to correct the law to the original intent when it was passed.

Question (Buchen): What is the current deadline for the 100% federal funding? At that time will we continue to be on EB?

Ms. Schwalbe responds that the deadline for the 100% federal funding of EB is currently February 28, 2010. We will continue to be on EB if we continue to meet one of the triggers. If the full federal funding ends, we would no longer have the TUR trigger. Mr. Bergan indicates that if the 100% federal funding goes away, EB could stay on but High EB would go away because High EB is contingent on full federal funding, but regular EB is not. We could still be on regular EB by virtue of the IUR trigger, which is now well above 5% and will likely continue to be. It is likely that the full federal funding will be extended. The duration is likely to be through June and then Congress will have to revisit it again.

Question (Haine): How is this affected by the House bill?

Mr. Bergan indicates that the House bill is under the broad heading of a jobs bill and is partisan. There is reason to wonder about the fate of House version. It is on the radar for the Senate. It is likely they will continue benefits for the long-term unemployed after February 28. Last week Congress passed a bill to lift the debt ceiling.

Comment (Neuenfeldt): Labor would like to get a legal opinion on the trigger issue.

5. D09-22 Harmonize approved training and extended training

Lutfi Shahrani, Bureau of Benefits Director, introduces Jason Schunk. Mr. Schunk came to UI as an adjudicator in 2002. He progressed through the Unemployment Benefit Specialist 1, 2, and 3. In 2007, he joined the central office as an unemployment benefit analyst in the disputed claims section. Last November he was promoted to supervisor of the section.

Mr. Schunk presents the approved training and extended training proposal. This is an important proposal. There are some changes that must be done for conformity purposes and also some things the department would like to do to streamline and harmonize approved training and extended training. The proposal was presented to the Council previously.

In the original proposal, the department suggested that the term “high demand”, currently in the extended training provisions of the statute, be inserted in the approved training provisions of the statute. The department had been planning to use lists of the titles of high demand occupations. The department has now gained experience with the use of the lists. The major change to the proposal since it was presented to the Council in 2009 is that we do not want to import the concept or term “high demand” into the approved training provisions.

The table on the proposal update page shows the fiscal effect of the change with the update. Overall, there is still a savings of $2 million over the budgeted cost. The next page is a breakout overview of the proposal. First there are some changes that are required for conformity purposes due to some changes to the Trade Act. These need to be added. There is also some statutory language that was left out the last time the statute was updated that needs to be in the statute. The department has applied these protections to the Trade Act program, but we need to put the language back into the statute. Under clarifying extended training benefits, the DOL had asked the department to clarify these points in our statutory language. One is that all WIA training be considered training for extended training benefit purposes and the other is that claimants may be eligible for up to 26 weeks of extended training benefits while enrolled in the training. Third, the proposal has some provisions to expand and harmonize the approved training and extended training provisions. We did not want to have people starting on approved training and then have to stop the UI benefits and possibly not complete their training. The department would like to make these even so it is a seamless transition for the person involved. These are to eliminate the cutoff date for department administered training, remove the extended training requirement that the claimant must be separated from employment in a declining occupation or involuntarily separated from employment as a result of a permanent reduction in operations, provide that all programs funded under WIA are approved training, and noncharge benefits paid to claimants in approved training. The fourth piece of the proposal is to speed investigations. Currently, under the statutes, a person has to be determined not able and available for work in order for the department to look at approved training. This change would mean the department could determine that someone is in approved training and not have to do a complete able and available investigation. The outcome is the same. Mr. Shahrani indicates that the able and available question may remain relevant after they complete the training if they continue to claim UI. At that time, the department would take up that issue.

Question (Buchen): You are proposing to remove the requirement that someone has to separate from a declining occupation. The person would still have to be involuntarily separated and could not quit, correct?

Mr. Schunk indicates that the department is proposing to take out both pieces from the extended training provisions. That is not in the approved training law.

Comment (Neuenfeldt): They would either be eligible for UI benefits or not. This deals with if someone is eligible for UI how to continue UI benefits while in training.

Question (Buchen): Can someone quit employment and go into training and receive benefits?

Mr. Shahrani indicates that under current law, if someone is in approved training, the requirement to be able and available for full-time work is waived and the work search is waived. Other issues remain relevant to a claim. If someone quits employment, they may be disqualified from benefits. There are exceptions under the certain federal programs, however. If someone quits unsuitable work to enter training or leaves a job to go back to training and it is covered under the Trade Act, for instance, then the quit disqualification is waived while they are in the training. Mr. Bergan indicates that that is not changing with this proposal.

Question (Buchen): Is the big thing with the proposal that the department is moving away from high demand jobs?

Mr. Schunk indicates that the department is not going to use the list of occupations to define “high demand” jobs. If someone is in approved training and the training meets the statutory requirements, then that is what dictates that jobs are being created and will be considered “high demand” jobs.

Mr. LaRocque indicates that the statute already provides that department will define “high demand” jobs, for purposes of extended training benefit entitlements. So the department already has the latitude to define that term. The statute also defines “approved training.” We are showing you that we will treat the statutory provision that now defines “approved training” as the definition of “high demand” – instead of using the list to determine whether each occupation is “high demand.”. We believe the terms and concepts of “approved training” and “high demand” substantially overlap. The proposition is that in order for the training to be in the approved category, it is typically within what we would think of as “high demand”, so we would like not to have to engage in all the work to determine whether each occupation being trained is one that is on the list of sufficiently growing job categories.

Larry Smith (UC Management Services): He would like to clarify an issue. Is it true that if someone quits employment, during the quit disqualification they can be in approved training and get benefits?

Mr. Shahrani indicates that it generally is not true except if the person is in training under the Trade Act or WIA. For those programs, if the claimant quits suitable work, we delay the suspension while the person is in training. Generally, however, if you are denied for a quit, it does not matter that you entered approved training. You will not get benefits. The disqualification still applies, except that under certain federal programs you either delay the suspension while they are in training and it is re-imposed when they go back to regular benefits.

Question (Haine): If a person quits a job and decides to get training, the quit would continue to disqualify them, except for training under the federal programs when the person’s ineligibility would be suspended and the person could receive benefits?

Mr. Shahrani responds that this is correct and the proposal does not change this.

Question (Lump): Is that a matter of a federal conformity requirement?

Mr. Shahrani responds affirmatively.

Question (Haine): We are trying to harmonize with both the federal government requirements and inconsistencies within our own laws?

Mr. LaRocque responds that the term “harmonize” is intended to describe what we are proposing to do to create a match between, or harmonize, approved training and extended training. They are two separate 26-week entitlements. We are proposing to put them on a more similar footing. Within this proposal, we also are proposing to make changes that are required for conformity.

Mr. Shahrani indicates that the harmonizing piece is the middle section of the overview page. We are saying we will not import the concept of “high demand” into regular approved training. We will leave it as is and leave the criteria as it has been applied. For extended training, we will leave the term “high demand” but will not use the list of jobs. For example, if you base the list on a percentage increase of growth in the occupation in the next 10 years, for a given occupation with 25 jobs, an increase of 5 jobs over ten years will be a substantial increase, but it is not many jobs. Other fields may not expand at a high percentage, but there could be thousands of jobs. As we did the analysis, we thought that these occupations may need people to be trained to sustain those jobs at a lower growth rate than very few jobs that have a high percentage growth rate but few jobs. We wanted to define “high demand” by saying that the types of approved training indicate expected demand for that job. This will eliminate confusion and disruption in training for claimants.

Comment (Neuenfeldt): He understands the need not to disrupt payments. Labor still wants to talk about the proposal. They want to talk to the people who do the training to make sure we are not handcuffing people or undermining how the training would work out. Mr. Shahrani directs the Council to the third bullet point under expanding and harmonizing approved training and extended training. We are proposing to expand approved training. Mr. Bergan indicates that the list of jobs was provided to the Council because they requested it. The department is not intending to use it.

Question (Lump): This is fine. We have seen this before. What happens if we do not adopt the changes required for conformity?

Mr. LaRocque indicates that parts of the statute have been out of conformity for some time without consequence to Wisconsin. The DOL may not notice or care if we are out of conformity. We try hard to keep our statutes in conformity. Parts of this could be excerpted out and passed separately, but we thought it made more sense to present this as one proposal rather than piecemeal. Ms. Schwalbe indicates that the enforcement tool that DOL has is to eliminate the offset credit for FUTA for all employers in the state if the law is not in conformity with federal law requirements. Mr. LaRocque adds that more significant issues of disagreement with DOL regarding conformity have not gone beyond assertions. The determination of conformity would be made in hearing ultimately, which is a rare event. We are administering the provisions in a manner that recognizes what the federal requirements are, rather than by the deficient language in our statute. Mr. Bergan indicates that since we have been in touch with DOL regarding the changes.

8. Assurance requirement for tribal government employers

Mr. LaRocque indicates that this is on the agenda so the Council may take action.

Comment (Buchen): He is not sure he wants to approve this proposal. Some tribes are on the brink of insolvency. The argument that was presented that this does not happen is not necessarily accurate.

Comment (Neuenfeldt): He was not aware of the insolvency issue.

Comment (Haine): She did consulting with some tribes previously. Some tribes distributed their gaming money and some invested it in infrastructure. For a tribe that distributed its gaming money, the recession may have affected them more negatively.

Comment (Petersen): The proposal was to eliminate the bonding requirement and be treated like any other government.

Comment (Buchen): These are primarily gaming enterprises with employees. Other governments are not in the same situation.

Comment (Haine): Tribes are also sovereign governments.

Comment (Bergan): In this case, they are asking to be treated like a county or other local government.

Comment (Buchen): Management is not interested in acting on the tribal issue today.

7. Council Committee recommendation to improve definition of “employee”

Mr. LaRocque indicates that this is on the agenda so the Council may take action.

Comment (Lump): We may need more discussion in caucus on this. There was a general agreement but there are still some issues out there. There are still issues about mystery shoppers, health care workers, and writers.

Question (Haine): Was any action taken on carving out occupations that would not be covered?

Mr. LaRocque indicates that the committee recommended that home care workers be excluded from employment where they are providing the home care services to their family members. That is in the committee report. The committee recommended that the Council review mystery
shoppers and writers.

Comment (Lump): For the writers, the proponent of a review seemed pleased with the changes made to the definition and thought they could work within the system rather than be excluded. The only issue hanging out there is the mystery shoppers.

6. Proposal: Office of Worker Classification Compliance

Mr. LaRocque indicates that this is on the agenda so the Council may take action.

Comment (Buchen): This is an interesting issue and an interesting policy proposal. He does not see it as an unemployment issue per se. He has not yet seen agreement among all interested groups. He does not want to put something in a UI bill that affects other groups without their
agreement. He is concerned that there is a lack of agreement among groups representing contractors.

Mr. LaRocque questions whether the Council would approve it as it relates to unemployment issues and let the other approval processes take place.

Comment (Petersen): There is general support from construction employers, but the law we looked at has a lot of unanswered questions. He would like to see some discussion on that. There was some discussion about a revision.

Mr. Bergan indicates that some of the revision has been done. There was a question as to when a stop work order would be appealable. We explained that it could be appealed immediately on site. We now have a draft that does that and that issue has been remedied. It was an easy tune-up.

Comment (Buchen): His perspective as an innocent bystander is that the Council needs to hear from the contractor groups to say that this is ok with them. There is nothing for employers and it has only a tangential relationship to UI. He understands the broad concept but the devil is in the details. If the details can be worked out and everyone is happy, he would be ok with putting it in a UI bill.

Comment (Neuenfeldt): He thought the contractors were ok with this at the task force.

Mr. Bergan indicates that contractor groups were present at the task force meetings. Input was solicited from them and the proposal changed because of that input. Their participation was unofficial but the process was transparent. This proposal tracks the recommendations of the proposal of the task force, notwithstanding the fact that there were a lot of recommendations to make this broader and tougher. The final report stuck with the recommendations. When the report was final, he did not hear any objections from those groups.

James Bullion (Associated General Contractors of WI) indicates that contractor groups did have representatives at the meetings in the outer ring. They were invited to the table a couple of times and did answer questions. They did have some concerns with proposed stop work orders. He would be glad to sit down with labor groups and the department to work on some specifics. He agrees with the general concept to stop cheating on workers compensation, etc., but he wants to see it done in a manner that does not hurt the contractors that are doing it right by shutting down a contractor on a job that affects 3 or 4 other contractors.

Question (Haine): Would this office reside in UI and apply only to the construction industry?

Mr. LaRocque responds that it would reside in the Department of Workforce Development and be limited to the construction industry. When the department would find on a site some evidence that a contractor is not complying with employment laws (workers compensation, unemployment
insurance, wage and hour, recordkeeping, identification of workers for these purposes), that information would be brought back to the department and might result in a UI audit. The investigation authorized by this bill would provide the department the opportunity to identify potential violators of the UI law.

10. Unemployment Reserve Fund solvency

Question (Yunk): What does it mean on the last page of the solvency documents that Wisconsin is the only state using rate limiters per DOL

Mr. Began indicates that in Wisconsin we have a limit that your tax rate can rise only 1% in a year if you are a positive balance ER, and 2% if you are a negative balance employer, regardless of your actual experience.

Comment (Buchen): The limiters are in the law because the tax rate is a ratio between the employer’s taxable payroll and what is in their account. Their rates will continue to go up every year by 1%. They are limited in how much it can go up each year but their obligation does not go away; it’s a timing thing. The theory is that when you get in periods of high unemployment, it is a tough time for the people unemployed and also for the employers. It is not a good time to hit them with higher taxes. The limit pushes the increase further out over time.

Motion to meet in closed session

Motion by Mr. Buchen, seconded by Ms. Yunk, to go into closed session pursuant to section 19.85(1)(ee) of the Wisconsin Statutes, for purposes of discussing changes to chapter 108 of the statutes, including the unemployment reserve fund solvency issues and other issues. Motion passes 9-0-0. Closed sessions by the management and labor members of the council, respectively, begin at 11:40 a.m.

Meeting adjourned when caucuses ended.