House Bill 2105 was signed by Kansas Governor Sam Brownback on April 16, 2013. This bill is an effort to restore solvency to the Kansas Unemployment Trust Fund by a combination of measures which will increase employer UI taxes, reduce UI benefit payments, particularly when the unemployment rate is low, and provide the Kansas Department of Labor with more tools for investigating and cracking down on unemployment fraud. Following is a summary of the more significant provisions.
Contributions Paid by Employers
(1) The bill increases the taxable wage base, starting in calendar year 2015, from the current $8,000 to $12,000, and in calendar year 2016, from $12,000 to $14,000. The impact of these wage base increases is mitigated by certain decreases in tax rates, as follows:
(A) Effective January 1, 2014, the contribution rate for new non-construction employers decreases from 4.00 percent of wages paid to 2.70 percent, provided the employer files all reports and pays all contributions by January 31.
(B) Effective January 1, 2015, all experience-rated employers with zero or positive reserve account balances are eligible to receive a rate discount of 25% if all reports are filed and all contributions are made by January 31. This discount does not apply if other discounts provided by current law are in effect or if the Unemployment Insurance Trust Fund is not sufficiently solvent (when the average high cost multiple – a measure of the fund’s solvency – is less than 1.0).
(C) Also effective January 1, 2015, the bill reduces surcharge rates assessed to employers with negative reserve account balances.
(2) The bill includes federally-mandated penalties on employers or their agents who respond inadequately to UI claims. If an employer exhibits a “pattern of failure” in responding to requests for information relating to claims for benefits, the employer’s tax account may not be relieved from charges for erroneous benefit payments resulting from such claims. An employer shall not be considered to have a pattern of failure if the number of such failures during the prior year is fewer than two, or less than 2% of such requests, whichever is greater.
(3) The deadline for the Department of Labor to notify employers of their UI contribution rates for the subsequent rate year is November 30. Previously, no deadline was specified in statute. Our records indicate that the 2013 tax rate notices were mailed on November 26.
Eligibility for Unemployment Insurance Benefits
(1) The bill creates a tiered system for determining the maximum potential weeks of benefits, starting in 2014, based on the rate of unemployment in Kansas. A person will be eligible for a maximum of 16 weeks of benefits if the unemployment rate for Kansas is less than 4.5 percent. If the unemployment rate is equal to or greater than 4.5 percent but less than 6.0 percent, a person is eligible for a maximum of 20 weeks of benefits. If the unemployment rate is equal to or greater than 6.0 percent, a person is eligible for a maximum of 26 weeks of benefits. Under previous law, persons were eligible for a maximum of 26 weeks of benefits regardless of the unemployment rate.
(2) The bill repeals the alternative means for calculating an individual’s wage base period, due to the expiration of federal funding under the American Recovery and Reinvestment Act (ARRA) of 2009. The alternative base period allowed an additional pool of individuals to qualify for UI benefits.
(3) When calculating the weekly benefit payable, the bill provides that vacation pay and holiday pay that is attributable to a week for which UI benefits are claimed will be treated as wages, thereby reducing or eliminating eligibility for benefits for that week. Previously, holiday pay was not identified as wages and vacation pay was considered wages only when attributable to a week while work was temporarily interrupted.
(4) If an individual receives severance or other termination pay, the person’s weekly UI benefit is reduced by the amount of such pay, adjusted to a weekly amount, until the total severance amount is exhausted. This applies even when the severance or termination pay is paid in a lump sum.
(5) Under prior law, an individual who resigned was generally disqualified for UI benefits unless the person quit with good cause attributable to the work or the employer. This bill includes provisions generally favorable to employers, limiting and clarifying when benefits may be paid following a quit. The bill defines “good cause” to mean a cause of such gravity that a reasonable, non-supersensitive person, exercising ordinary common sense, would leave employment. Good cause also requires a showing of good faith of the individual leaving work.
(6) Twelve exceptions in the law prevent a person from being disqualified for benefits upon quitting. This bill adds language to the seventh exception, pertaining to harassment, specifying that the harassment must be significant enough that it would impel the average worker to give up employment. The bill also clarifies the tenth exception, pertaining to violation of the work agreement by the employer, requiring the violation to be substantial, and specifying that demotion based on performance does not constitute a violation of a work agreement.
(7) The definition of “misconduct” is revised to include violation of a company rule if the employee knew or had reason to know the rule, the rule was lawful and reasonably related to the job, and the rule was fairly and consistently enforced. Misconduct also includes tardiness and leaving work early without prior permission.
(8) The definition of “gross misconduct” is revised to include theft, fraud, intentional damage to property, intentional infliction of personal injury, or conduct that results in a felony. Misconduct, under KSA 44-706 (b), disqualifies an individual from UI benefits until the person is reemployed and has earnings equal to three times the weekly UI benefit amount. Gross misconduct disqualifies the individual until the person is reemployed and has earnings equal to eight times the weekly UI benefit amount.
(9) Under existing law, an employee’s discharge for misconduct is grounds for disqualification of UI benefits. The bill also includes an employee’s suspension for misconduct as grounds for disqualification for the duration of the separation from employment.
(10) The bill reorganizes the existing provisions pertaining to alcohol and drug use on the job and includes four substantive changes:
● The reason for testing changes from probable cause on the part of the employer to reasonable suspicion;
● Alcohol or drug use is reclassified from misconduct to gross misconduct;
● An individual tampering with a chemical test is conclusive evidence of gross misconduct; and
● An alternative definition for “positive breath test” includes reference to test levels listed in 49 C.F.R. 40, if applicable.
(11) If a person makes a false statement or misrepresentation, the bill lengthens the disqualification period from one year to five years.
Administration of the Unemployment Insurance System
The bill adds an exception to the time limit for appeal, allowing the referee or the Board of Review to waive or extend the time limit of 16 days if an appeal was impossible because of excusable neglect.
The Department may collect for overpayments by passing federal offset costs on to claimants who have an overpayment gained through fraud. A penalty equal to 25 percent of any benefits unlawfully received shall be charged. The Secretary may hire special investigators with law enforcement capabilities to investigate UI fraud, tax evasion, and identity theft. According to Lana Gordon, Secretary of Labor, Kansas law will now be one of the toughest on unemployment fraud in the country.
A separate piece of legislation Senate Bill 149, also signed by Governor Brownback on April 16, authorizes drug testing of recipients of both welfare and unemployment benefits if there is reasonable suspicion of drug use.
The bill repeals the disqualification for receiving UI benefits if the person fails a pre-employment drug screening. In its place, UI applicants or recipients must submit to controlled substance screening tests. If test results are positive, the person must complete both a substance abuse treatment program and a job skills program. Subject to applicable federal law, a person who fails or refuses to complete either program is ineligible for UI benefits. Upon completion of both programs, the person may be subject to further periodic drug testing. After a second positive test, a person loses UI benefits for 12 months or until another substance abuse treatment program and a job skills program are completed, whichever occurs later. After a third positive test, and subject to applicable federal law, a person is no longer eligible for UI benefits. This law takes effect on July 1, 2013.
Click on HB 2105 or SB 149 to view the full text of the bill. As always, please do not hesitate to contact us if there are any questions.
Click here for a printable version.