W2 Issues/Concerns


Check out our weekly blog posts and see the latest news and discussions happening in the HR world of business.

In the News: New reporting requirements for unemployment compensation

If your business routinely ignores requests by unemployment compensation (UC) agencies to provide more information on the benefits provided to a departing employee, you could find yourself in a bit of hot water under a new law.

The Unemployment Insurance Integrity Act was signed by President Obama as part of the Trade Adjustment Assistance Extension Act of 2011 and is now a subsection of the Federal Unemployment Tax Act. The measure is designed to strengthen the “integrity” of the UC system by ensuring that individuals who shouldn’t qualify for UC don’t receive it simply because their former employers didn’t respond to requests for information on an employee’s benefits claims.

In many cases, businesses decide not to contest a departing employee’s request for unemployment compensation (UC) under the terms of an employer separation agreement (to obtain some form of legal release, for example). In other instances, businesses simply ignore requests from UC agencies to provide information about a former employee’s departure.

Either way, these “non-responses,” aren’t going to cut it anymore. Under the law, which was implemented on October 21, 2013, states are now required to punish employers that show a “pattern” of not responding “adequately” or in a “timely” fashion to UC agency information requests regarding unemployment claims. However, it is up to each individual state to determine what amounts to “timely” or “accurate” responses to UC info requests, so the requirements vary from state to state.

Punishments states have implemented for non-compliance include steep civil penalties, criminal penalties, charging employers’ unemployment insurance accounts for benefits paid out to claimants who are eventually disqualified for benefits, and hurting employers’ experience ratings, which results in unemployment insurance tax rate increases.

Legal experts suggest that in order to protect yourself, employers who want to continue to use separation agreements in which they agree not to contest a departing employee’s UC eligibility should include language stating that they will respond “truthfully and completely” to any UC agency information request. In doing so, employers will be able to both comply with their state’s requirements to provide UC eligibility information in a timely and accurate manner and still not violate their agreements not to contest individuals’ claims for UC.

In addition, the legal experts recommend that businesses appoint an individual/group of individuals who will be responsible for completing UC claims, document the information communicated to a departing employee, and consult with legal counsel about agreements not to contest UC eligibility since these agreements may face increased scrutiny.

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