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Dismissive Injustice And The PEO Industry

Jeffrey Martin, G&A Partners’ unemployment insurance manager, talks about how the enforcement of the Unemployment Insurance Integrity Act will impact both employers and the PEO industry in the latest issue of PEO Insider.

No doubt you have seen—perhaps too late—those automated cameras at intersections that record any driver rash enough to run a red light.

The resulting citations are so impersonal and so dismissive of circumstance and context. They allow you no chance to explain, no chance to interact with a human. Sometimes, when my imagination gets the better of me, I picture those cameras going rogue. Instead of flagging careless drivers for tickets, they target pick-up trucks or Subaru station wagons, under the assumption that the former are reckless and the latter are sanctimonious.

Should those cameras ever pursue some random vendetta, the owners of those vehicles could only hope that someone in charge would fix the apparatus and remedy the wrong.

Many of the nation’s employers are waiting for such a fix and such a remedy. Their beef grows out of the Unemployment Insurance Integrity Act (the UI Act), passed by Congress in 2011 as part of the Trade Adjustment Assistance Extension Act (TAAEA). The UI Act aims to address UI overpayments to claimants. To the chagrin of employers, the act calls on states to pass laws to punish employers that fail to respond adequately to initial claims requests issued by the state agencies handling UI claims.

The idea behind this is that employers, fearing fines or punishment, will provide better documentation related to unemployment claims. In the past, after all, employers often failed to provide adequate information during initial processes. They presented adequate information only once a decision had been made and they felt compelled to appeal it. By that point, the unemployment claims had been paid, and if the appeal resulted in a reversal of the original decision, the state found itself having to expend considerable resources to get the money back.

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Today, all 50 states have passed the laws required by the UI Act, and many have issued the accompanying regulations and enforcement procedures. Here is where the story gets interesting and where employers find themselves desperate for an escape clause: The UI Integrity Act has a mechanism that will impact all employers—a fact that should make every PEO take note. This mechanism automatically denies the abatement of charging associated with a UI case in which a hearing officer reverses a pro-claimant decision.

What does this mean? When a claimant loses an appealed case, he or she won’t be eligible for future benefits. So far, so good. However, if the reversal is due to the employer’s failure to respond adequately at the time of the initial hearing, the claimant will not need to repay the benefits already allocated from the employer’s SUTA account. In other words, employers will lose despite having won the appeal.

While this may seem shocking, all PEOs need to accept the reality that this provision of the UI Integrity Act will be enforced in every state.

This news is especially alarming for employers in Texas, where regulations associated with the UI Act have sent many of them in search of extra-strength antacids.

The Texas Workforce Commission (TWC) has decided that in any case in which the employer is appealing a UI decision that favored a claimant, the hearing officer will be charged with deciding if the employer responded adequately to the initial claim. He or she will be tasked with doing so even in the absence of context. He or she may be completely ignorant of the considerations balanced by the deputy who rendered the original decision. Keep in mind that that deputy may well have decided that the employer’s response was perfectly adequate.

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The big problem with this new procedure is that it strips due process from the appeal. An initial response may suddenly—and perhaps arbitrarily—be deemed inadequate, all without input from the employer or from the original decision-maker. This scrutiny seems every bit as draconian as the citation issued, via photo radar, to the driver of the pick-up truck. I call this “dismissive injustice,” with the TWC effectively assuming that all employers are probably guilty of inadequate responses.

How will this affect the PEO industry? If the Texas approach spreads to other states, PEOs will have to accept the inherent—and willful—unfairness in the new system. What’s more, it appears that states are trying to discourage appeals, so PEOs will need to approach the appeals process with some trepidation. It won’t be easy, and it may not be fair. In addition, it may invite a level of scrutiny that will be difficult to accommodate, straining staff, systems, and budgets. To avoid all this, PEOs will need to improve the processes by which they respond to initial UI information requests.

The best PEOs will be able to work this injustice to their advantage. Yes, the system is broken. Yes, it targets employers unfairly—just as the rogue radar camera goes after those impertinent Subarus. But, the PEO that can help the bewildered employer negotiate this new territory will be rewarded—with renewed contracts, renewed confidence from its clients, and new business.

This article originally appeared in the April 2015 edition of PEO Insider, a publication of the National Association of Professional Employer Organizations (NAPEO). To view the original article, click here.

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