Unemployment Compensation—Layoff of Temporary Employee
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OLR Research Report OLR Research Report


The Connecticut General Assembly

OFFICE OF LEGISLATIVE RESEARCH




January 1, 1997 97-R-0038

TO:

FROM: Judith S. Lohman, Principal Analyst

RE: Unemployment Compensation—Layoff of Temporary Employee

You asked if an employer's unemployment compensation tax rate is adversely affected when he lays off a temporary employee, whether any states have a 90-day probation period before an employee is eligible to collect unemployment compensation, and whether any state has addressed the problem of employees who ask to be laid off in order to collect unemployment compensation.

SUMMARY

The unemployment compensation tax effect of laying off a single temporary employee depends on many factors, including whether the former employee is eligible for unemployment compensation benefits, her benefit rate (a function of the salary she earned while employed), how long she remains unemployed, how much of the benefit she receives is chargeable to the employer who laid her off, the employer's tax rate before the layoff, and the employer's size (i. e. the number of its employees). Depending on the interaction of these variables, an employer's unemployment compensation tax rate may or may not be affected.

Although no state has a 90-day probation period, all states, including Connecticut, have earnings requirements that claimants must meet before becoming eligible to collect unemployment compensation benefits. These rules require unemployment compensation claimants to have worked enough in a recent 12-month period to earn a minimum amount of wages. In most states, unless the claimant is quite highly paid, to earn the minimum, she must work at least 15 to 20 weeks in her 12-month base period (the first four of the five most recently completed calendar quarters preceding the unemployment compensation claim). No state requires that all the work be for one employer.

An employer and employee who pretend that the employee is laid off when she is not in order to allow the employee to collect unemployment benefits would appear to be guilty of unemployment compensation fraud. In Connecticut and other states, such conduct is punishable by both civil and criminal penalties.

EMPLOYER TAX RATE

Unemployment compensation taxes in Connecticut are tied to experience. The more unemployment compensation claims an employer's former employees make, the higher his tax rate, up to a maximum of 5. 4%. Whether an employer's unemployment compensation tax rate goes up after he lays off one temporary employee depends on several factors, as described below. For your further information, we also enclose a report (96-R-00865) that describes the unemployment compensation tax system in greater detail.

Employee Eligibility

Before an employer can be charged for unemployment compensation benefits, an employee must be eligible to collect them. Being laid off at the end of a temporary job is a qualifying reason for collecting benefits, as long as the former employee also meets all the other eligibility criteria. These are that she: (1) apply for benefits and register with the state Job Service; (2) be physically and mentally able to work; (3) be available for, and make reasonable efforts to find, work; and (4) have earned wages at least equal to 40 times her benefit rate during her base period. (For example, if a person's weekly unemployment benefit is $ 250, she must have earned at least $ 10,000 in wages in the first four of the five most recently completed calendar quarters. ) If the temporary employee does not meet all these criteria, she is ineligible for benefits and the employer's tax rate is unaffected by her layoff.

Benefit Rate

The effect on the employer's tax rate is partly a function of the amount of benefits a former employee receives. The higher the benefit rate, the higher the total benefits. The former employee receives 50% of her average salary in the two quarters of her base period when she earned the most, up to a maximum of $ 353 per week (if she has no dependents). The more she earned while working the higher her benefit rate will be.

Length of Unemployment

Another factor that contributes to higher total benefits is the length of time it takes the former employee to find a new job. This factor depends on the claimant's skills and employability and the overall economy of the state. In Connecticut, people can collect unemployment compensation for up to 26 weeks. In the most recent year (September 1, 1995 through August 31, 1996), the average recipient collected benefits for 16. 5 weeks.

Employer Charges

For a former employee's benefits to affect an employer's tax rate, the benefits must be charged to the employer's experience account. This means that the employer in question must have employed the former employee during her base period. Even if the employer is a base period employer, it may not be liable for the entire amount of benefits because it might share liability with other base period employers. This is particularly likely if the employee has held other temporary jobs. This sharing would reduce the effect on any one of the base period employers' tax rates since employers are charged for benefits in proportion to the share of the employee's total base period wages they contributed. In addition, before an employer can be charged at all, he must have paid the former employee wages of more than $ 500.

Employer Tax Rate

An employee's benefits cannot affect an employer's tax rate if the employer's rate is already at the maximum experience rate of 5. 4%.

Employer Size

A single claim chargeable to a small employer has a bigger effect on the employer's experience tax rate than the same claim does on a large employer's rate. This is because the rate is figured by dividing the amount of benefits the former worker receives by the employer's total taxable wages for the preceding three years. The larger the total taxable wages (i. e. the more employees the employer has), the less effect any one unemployment compensation claim will have. (See our report 94-R-0613, enclosed, for a full explanation of this big versus small employer impact).

PROBATION PERIOD

No state has a provision in its unemployment compensation law under which an employee is ineligible to collect unemployment compensation if she is employed for fewer than 90 days. But every state, including Connecticut, has minimum earnings qualifications for unemployment compensation claimants that serve the same function. Some states impose a minimum number of weeks or hours of work. Others, like Connecticut, require the claimant to have earned a specific multiple of his unemployment benefit in wages. Unless a person is quite highly paid, these minimums generally require a claimant to have worked at least 90 days (though not necessarily just for one employer) per year to be eligible for unemployment compensation benefits.

Depending on the employee's normal rate of pay, the earnings requirements imposed by states usually mean a claimant must work at least 15 to 20 weeks in a single year before he can qualify for unemployment benefits, if one assumes that unemployment compensation benefits are roughly 50% of the employee's regular pay. But for highly paid employees, caps on weekly unemployment compensation benefits often mean that benefits received do not approach 50% of their regular pay. In such cases, in states like Connecticut that have no minimum number of weeks of work, it is possible for highly paid claimants to meet the minimum wage requirement in a shorter time. In Connecticut, for example, the maximum benefit is $ 353 per week so the most anyone has to earn to qualify is $ 14,120. To earn this amount in 90 days, a person would have to be paid more than $ 1,177 per week or more than $ 61,187 per year.

Table 1 below shows the minimum earnings requirements for qualifying for unemployment compensation in the 50 states.

Table 1: Minimum Base Period Earnings Needed to

Qualify for Unemployment Compensation

State

Minimum Earnings

State

Minimum Earnings

Alabama

1 ½ x high qtr wages with wages in 2 qtrs.

Missouri

1 ½ x high qtr wages or wages in 2 qtrs and base period wages of 1 ½ x maximum taxable wage base

Alaska

$ 1,000 in wages in 2 qtrs.

Montana

1 ½ x high qtr wages and equal to or more than 7% of average weekly wage or 50% of average weekly wage

Arizona

Wages in 2 qtrs and either 1 ½ x high qtr wages or total wages of at least $ 7,000 in 2 qtrs.

Nebraska

$ 1,200 with $ 00 in each of 2 qtrs

Arkansas

Wages in 2 qtrs

Nevada

1 ½ x high qtr wages or wages in at least 3 of 4 base period qtrs

California

$ 1,300 in high qtr or $ 900 in high qtr and 1. 25 x high qtr in base period

New Hampshire

$ 2,800 with $ 1,200 in each of 2 qtrs

Colorado

40 x weekly benefit

New Jersey

20 weeks of work with weekly wages of 20% of state average weekly wage, or 20 weeks of work with wages of 20 x state minimum hourly wage, or 12 x state average weekly wage, or 1,000 x state minimum hourly wage, or 700 hours of farm labor

Connecticut

40 x weekly benefit

New Mexico

1 1/4 x high qtr wages

Delaware

36 x weekly benefit

New York

20 weeks with wage equal to minimum average weekly wage of $ 80 or 15 weeks with wage equal to minimum average weekly wage of $ 80 in last 52 weeks and total of 40 weeks in last 104 weeks

District of Columbia

1 ½ x high qtr wages with wages in 2 qtrs and at least $ 1,300 in one qtr

North Carolina

1 ½ x high qtr wages

Florida

20 weeks of work with wages averaging at least $ 20 per week

North Dakota

1 ½ x high qtr. with wages in 2 qtrs

Georgia

1 ½ x high qtr wages with wages in 2 qtrs or 40 x weekly benefit with wages in 2 qtrs

Ohio

20 qualifying weeks in base period with average weekly wage of 27. 5% of state average weekly wage

Hawaii

26 x weekly benefit with wages in 2 qtrs

Oklahoma

1 ½ x high qtr and 40% of taxable wages or $ 10,700

Idaho

1 1/4 x high qtr wages with wages in 2 qtrs.

Oregon

18 weeks of work

Illinois

$ 1,600 with $ 440 in a qtr outside the high qtr

Pennsylvania

16 weeks of work with weekly wages of at least $ 50, 37 x weekly benefit with 39% of wages outside high qtr

Indiana

1 1/4 x high qtr with $ 1,650 in last 2 qtrs and $ 2,750 in base period

Rhode Island

1 ½ high qtr wages or $ 5,340 in base period

Iowa

1 1/4 x high qtr wages

South Carolina

1 ½ x high quarter wages

Kansas

30 x weekly benefit with wages in 2 qtrs.

South Dakota

20 x weekly benefit amount outside the high qtr

Kentucky

1 ½ x high qtr wages with 8 x weekly benefit in last 2 qtrs and $ 70 outside high qtr

Tennessee

40 x weekly benefit with the lesser of 6 x weekly benefit or $ 900 outside high qtr

Louisiana

1 ½ x high qtr wages

Texas

37 x weekly benefit and wages in 2 qtrs

Maine

2 x annual average weekly wage in each of 2 quarters

Utah

1 ½ x high qtr wages and 8% state insured average fiscal year wage

Maryland

1 ½ x high qtr wages with wages in 2 qtrs

Vermont

$ 1,163 in a qtr and additional base period wages of at least 40% of high qtr wages

Massachusetts

30 x weekly benefit

Virginia

50 x weekly benefit with wages in 2 qtrs

Michigan

20 weeks in which claimant earned 30 x state minimum hourly wage or 14 -19 weeks of work with wage of 20 x state average weekly wage

Washington

680 hours of work

Minnesota

1 1/4 x high qtr wage with wages in two qtrs and 15 weeks of work

West Virginia

$ 2,200 with wages in 2 qtrs

Mississippi

40 x weekly benefit with wages in 2 qtrs and high qtr wage equal to 26 x minimum benefit amount

Wisconsin

30 x weekly benefit with wages outside high qtr of 7 x weekly benefit

Wyoming

1. 4 x high qtr wages; 5% of state average annual wage in high qtr and 8% in base period rounded to lower $ 50

FAKE LAYOFF

All states, including Connecticut, disqualify employees who quit their jobs without good, work-related cause. Unemployment benefits are intended only for those who are out of work through no fault of their own. An employer who lays off an employee for lack of work is making the employee eligible for unemployment compensation. It is not clear why an employer would grant an employee's request to be “laid off for the summer” if he has work for the employee. But if an employer and an employee collude in this manner and say an employee is laid off when he really isn't in order to allow the employee to collect unemployment compensation benefits, it would appear to be unemployment compensation fraud. In Connecticut and other states, such conduct is punishable by civil and criminal penalties.

Under Connecticut law, anyone who deliberately lies or withholds material facts in order to get unemployment compensation must repay any benefits fraudulently received and forfeit between two and 39 weeks of future benefits. In addition, such a person is subject to criminal penalties. If the amount of benefits he fraudulently receives is $ 500 or less, it is a Class A misdemeanor punishable by a fine of up to $ 2,000, up to one year in jail, or both. If the amount of benefits is more than $ 500, it is a Class D felony, punishable by one to five years in jail, a fine of up to $ 5,000, or both.

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