Unemployment Insurance Advisory Council Meeting Minutes

Thursday, March 4, 2010

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

Members Present

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

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

Chair: Daniel LaRocque

Department staff present: Hal Bergan, Carla Breber, Jason Schunk, Tom McHugh, Lutfi Shahrani, Dick Tillema, Tracey Schwalbe.

Others present: John Metcalf (WMC), Bob Andersen (Legal Action of Wisconsin), Tom Fonfarra (DeWitt Ross), George Emert (Martin Schreiber & Assoc.), James Tenuta (Oneida Nation), Ken Walsh (Martin Schreiber & Assoc.), Mike Metz (Wisconsin Independent Businesses).

MINUTES

09:50 a.m.

1. Opening Remarks – Hal Bergan

Mr. Bergan indicates that there is a new federal extension of benefits for 30 days. In practical terms, we have had to do some scrambling behind the scenes on programming, but there will be no interruption of benefits. Had it taken another week to pass the extension, some people would have been disadvantaged. We expect that there will be an extension for the rest of the year for all of the extension programs. This is important for people who need the benefits and also for fiscal reasons because there is a continuation of the federal funding of benefits. High extended benefits or High EB goes away without federal fiscal support, but EB stays and employers will be charged for 50% of the benefits if the federal fiscal support ends.

Initial claims in 2010 compared to 2009, are down 33%. This does not track with the unemployment numbers. Mr. Bergan spoke with the administrator in Minnesota. They are also seeing a significant drop in initial claims driven by something other than the unemployment rate. It may be that people are falling off the benefit stream. They may have no qualifying wages and cannot qualify for a new benefit year. That is the best guess we can make.

Comment (Buchen): A year ago there were more layoffs. Now employers may not be hiring back, but they are not laying off.

Mr. Bergan indicates that in terms of our own estimates, this is an unprecedented period in terms of having this many people on benefits for this long. It may require some adjustments in our own modeling to take that into account. It is possible that benefit projections for 2010 may be lower than we predicted because of these things. If you look at our forecasts, it is possible that the amount of benefits in 2010 will be lower. As you decide what to do next and what might be part of a legislative proposal, consider the FUTA tax increases. In our forecasts, we show the FUTA tax increases for 2012, but the incidence of the taxes for employers is 2011. They have to reflect their FUTA charges in their quarterly tax payments. The instructions for employers this year already alert employers to the possibility of a surtax.

Question (Buchen): That occurs on an annualized basis for 2011, correct?

Mr. Bergan responds affirmatively. It is for the 2011 tax year and would apply to an employer’s wages in the first quarter of 2011. That is worth bearing in mind.

The department has started thinking about the assessment that will be needed in 2011 to repay interest. Interest will be payable in 2011. The first day we have liability for interest is January 1, 2011. The first interest payment is due September 30, 2011. The department needs to estimate the amount of interest that will be due on September 30. In 2011, this will be for 9 months. Our best guess is that this will be about $80 million. We will have to do that assessment in the middle of 2011. The assessment falls on both taxable and reimbursable employers. The following year in 2012, the interest would be for 12 months and would be more in the range of $100 million.

Question (Buchen): This is a flat tax. What does $80 million work out to?

Mr. Bergan responds that in general it will be about .43% based on taxable wages.

Question (Petersen): Is this a quarterly tax or a one time tax?

Mr. Bergan responds that it is payable one time by the employers to the state, and payable one time by the state to the federal government.

4. D09-23 Amend extended benefit trigger

Comment (Buchen): This item has been on the agenda. It is a technical change. Labor wanted to get a legal opinion.

Bob Andersen (Legal Action of Wisconsin): To refresh their memory, this is not required by federal law. It would make it consistent with what was originally intended. It will cost some claimants benefits.

Mr. LaRocque indicates that it can cost some claimants benefits in some very limited circumstances. He supplies the Council with a two-page handout summarizing the proposal.

Comment (Neuenfeldt): The question came up that this could have a negative impact on some people on unemployment. This raised the question how many will be negatively affected and how much will it be. We cannot agree to something if we do not know how negative the effect will be.

Mr. LaRocque indicates that the proposal is to make the law accomplish what the Council intended to do last spring when it passed the statute to tie the length of the period of extended benefits to the period of 100% federal funding. When the 100% federal funding ceases, the trigger would come out of the law and we would be on or off EB depending on where we are with the other triggers. It does not answer the question what difference it will make to which claimants, but that is the purpose of the proposal to make the law consistent with the Council’s intent.

Comment (Haine): I see this as trying to make the law consistent with what we have already done. She is ok with this and understands the reason for the proposal

2. Minutes of the Meeting February 10, 2010

Motion (Yunk), seconded (Petersen), to approve the minutes of the meeting February 10, 2010, approved unanimously.

Mr. Lump indicates that it is Susan Haine’s birthday (everyone sings)

3. Reserve Fund Solvency

Mr. Bergan indicates there is nothing further to present on this at this time.

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

Comment (Neuenfeldt): Someone wanted to address his caucus on this. It is not just the mystery shopper issue. The committee worked on the definition of employee and it seems like we were not supporting the people who worked on this. We were inclined to support the package that was presented by the committee.

Comment (Buchen): We could change the broad definition test that the committee came up with. He does not want to repeal the exemptions for loggers and truckers.

Comment (Penkalski): We have enough exemptions out there now. We are running a huge deficit. It is not a gray issue to exempt these people. It is very clear that they are employees. Mystery shoppers are employees. We already said we would take the loggers and truckers out because that is already in the law. With the deficit we have, we should not be making more exemptions.

Comment (Buchen): Some of these things are logically and historically treated as independent contractors. No one is clambering to get unemployment benefits if they are mystery shoppers. They do not fit our general definition. They are being paid nothing. We are the only state trying to call them employees.

Comment (Penkalski): They come to the attention of the department because the people are claiming benefits.

Comment (Lump): In terms of the work of the working group, we have broad agreement on the changes to the employee definition test. We also agreed on the home health care for immediate family. We settled the issue that was raised by some freelance writers. The only thing hanging out there is mystery shoppers. He does not want to see the whole thing go down the tubes over this mystery shopper issue.

Comment (Haine): From a human resources perspective, a mystery shopper gets a list of places to go and goes at their own time. They complete their work and send in a report. What is critical is there is not someone who tells them when they need to do this. They do meet some criteria for independent contractor criteria on the face of it. She would really like to see this approved.

Mr. LaRocque indicates that the committee did not resolve the issue at the committee level, but just said the Council should review it. The question is whether it has to be passed today. A lot of work went into the committee work. We have recommended an improved employee definition test which covers all private employers except truckers and loggers.

Question (Feistel): If a mystery shopper gets in a car accident, are they covered under workers compensation?

Comment (Buchen): It would depend on whether workers compensation considers them an employee.

Mr. LaRocque indicates that he is not sure. Workers compensation has a 9-point test and they must meet all 9 to be independent contractors. In our experience, these workers do not really come close to meeting the test. The issue is whether we take them out of employment even though they are usually found to be employees.

Comment (Penkalski): The department reviewed the proposal for the exclusion and wrote a letter that they are employees. It is not a gray area.

Mr. LaRocque suggests that the Council could agree to review the exclusion, as it has agreed to do with the truckers and loggers.

Comment (Lump): He suggests that we pass the overall recommendation of the committee and guarantee a further review of the mystery shopper issue to get additional information and come back to that issue as with loggers and truckers. We would give it serious further review in the next bill cycle. They made a good case but we are not ready to come to a decision on this issue.

Comment (Petersen): That would leave loggers and truckers under existing law.

Comment (Yunk): The mystery shoppers would stay employees until we further review it.

6. Assurance requirement for tribal government employers

Comment (Neuenfeldt): He does not have a problem with this.

7. Amend limit on voluntary contributions

Mr. LaRocque indicates that this was the Patrick Cudahy request. He indicates that the Council has received a slight rewrite to add the word primary to the concept of fault.

Question (Penkalski): May employers make these voluntary payments any other time than November?

Mr. LaRocque indicates that if they do, they are held as a general credit against an employer’s obligations. Ms. Schwalbe indicates that voluntary contributions are applied in November and if an employer pays outside November, the department holds the payment until it will be applied in November.

Motion (Yunk), second (Buchen), to approve the voluntary contribution proposal as written; approved 10-0-0.

8.Review AB487 and SB366 and finalize legislative proposal

Comment (Neuenfeldt): We had a previous bill and he suggests we put that together with the items approved now. There was one issue that got into a political buzz saw and he would like to fix that. He would like a summary of what was in the first bill.

Comment (Buchen): The one issue became a lightening rod because people did not understand what it was. It was not an issue as far as he is concerned. One answer would be to take the sunrise provision out.

Comment (Neuenfeldt): The furlough issue is a growing issue.

Comment (Buchen): We made a decision to put a uniform definition of “full-time” in the statute. In some instances it benefits Labor and in some instances it benefits Management. It was a balanced proposal. Taking out the 35 hour provision upsets the balance of that agreement. This process requires compromise. We had a nice balance on this piece. We went along with the sunrise to deal with the political problem Labor had. To say we take this out, upsets the whole balance and is not fair. We had an agreement on this. We sometimes forget about some of the things that go on, but to forget that this was a balance and just fix Labor’s piece does not work. It had symmetry. We took a hit and got to some place where we had some administrative consistency.

Comment (Haine): She wants to see administrative consistency.

Motion to meet in closed session

Motion (Buchen), seconded (Neuenfeldt), 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 and rules, including those proposals on the agenda. Motion passes 10-0-0. Closed sessions by the management and labor members of the council, respectively, begin at 10:32 a.m.

Meeting resumes at 11:22 a.m.

Motion (Buchen), second (Neuenfeldt),

Motion approved 9-0-0. (Lump absent).

9. Future meetings and public hearings

Mr. LaRocque indicates that he will get a copy of the bill to Council when it is drafted. If there is no issue, we will not have a meeting or may have a teleconference. There is only a floor period for two weeks in April.

Comment (Gustafson): For a general description of the proposals in the bill that was drafted last fall, we have the summary of proposals approved to date.

Comment (Buchen): As far as public hearings go, he thinks the Council does not need to do those before fall.

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