labor lawAdivision of labor law center

Hey, what do you know? The state of New York has got SUTA Dumping on its mind. As I explained a bit earlier, it was actually the federal government that got all of the states thinking about ways to prevent this form of unemployment insurance tax evasion. In fact, it was our current president, President George Bush, who signed the SUTA Dumping Prevention Act of 2004.

It was actually legislation last year in New York that brought the Empire State up to snuff with this presidential directive. The new laws in the state effectively prohibit all forms of SUTA dumping, and makes it so that any employers or their tax and financial advisers who participate in SUTA dumping to be tracked and punished.

As we know, SUTA dumping can occur when employer set up fraudulent companies in order to write off, essentially, employees and lower their unemployment insurance tax rates. However, SUTA dumping can occur any time that the whole experience based tax rating system is abused in order to give employers a better experience rating and thus lower tax rates.

In New York, a penalty can could be as much as 10 percent of the employer’s taxable wages in the last full year, or up to $10,000—whichever is the higher figure. When it comes to tax or financial advisors who are willingly advising their clients to participate in SUTA dumping, the penalty for them is that they can face a penalty of as much as $10,000. What’s more, violators of the New York anti-SUTA dumping law could expect to be charged with a Class E felony. That is not a misdemeanor. That’s felonies were talking about, folks.

And as New York State Department of Labor folks like to say, they have ways of detecting SUTA dumping. They also encourage others to report suspected SUTA dumping to their Unemployment Insurance Fraud Control Unit.

When it comes to the unemployment system in the territory of Puerto Rico, we’re talking some stand out factoids when it comes to the other unemployment benefit systems that we have seen across the United States.

For instance, did you know that in Puerto Rico, the range of qualifying wages for the maximum total potential benefit is the lowest—at $6080. The range of qualifying wages for the maximum total potential is the figure that comes out of the maximum weekly benefit amount that workers can earn from being on unemployment insurance in a week multiplied by the maximum potential number of weeks that the worker can remain on unemployment benefits before the Puerto Rico unemployment insurance system stops the payments.

That makes sense when you consider that in Puerto Rico in 2000, to take a recent year with reliable figures, the maximum weekly benefits that workers could receive when they are unemployed is the lowest of all of the U.S.-based systems—at $133. Puerto Rico though allows these payments to be made out for one of the longest periods of time, which is 26 weeks in total. There are 51 unemployment benefits systems that allow this duration period before they cut off benefits, including Puerto Rico, Washington DC, and the Virgin Islands.

Now because Puerto Rico has such a low weekly allowance level, does that mean employers should take a lesser approach to dealing with the unemployment insurance system? Should they follow the rules of the Puerto Rico unemployment system any less closely than they would in another state. That is not for me to answer. I am not an employer in Puerto Rico, not do I like to pass judgment here at my blog. I will say what I always say—it doesn’t hurt an employer to at least be organized!

Here is an interesting question that we haven’t looked at yet. We took a look so far in this blog at how states deal with employers who are nonprofit companies, agricultural companies, small companies, and new companies when it comes to charging on unemployment insurance. We have also looked at how states deal with companies that are large employers and have employees in multiple states spread across this great land of ours.

But have we looked at an employer that no longer is an operating business, whether because they closed shop, went bankrupt, or just retired and quit? Well, we have considered one similar situation: when a company is bought out by another company. In that case, the new buying company assumes the unemployment insurance tax liability and experience rating for the old bought company.

But let’s say a company just goes out of business. No one else buys them or acquires them. The company just fades into the long list of companies that were has beens, the long list of failed and closed businesses. What happens to their unemployment insurance liability in this case? Is it nil and void? Does the state pick up the tab for some of those former employees of this company? For all of the former employees?

Well, at least in the state of New York, a so called “closed” unemployment insurance tax account can still receive notices that it is being charged by former employees who are claiming unemployment insurance benefits against it. And even in this case, if you are the former employer, it is your job to still review these benefits charges and make sure they are correct and justified.

If down the road you can actually rehire the employees you had to let go, you are encouraged by the state of New York to do so by contacting the former employees directly.

According to New York Unemployment Insurance posters, Unemployment Insurance is temporary income for eligible workers who become unemployed through no fault of their own and who are ready, willing, able to work and have sufficient work and wages in covered employment. In New York State, the money for unemployment insurance benefits comes from taxes paid by employers. No deductions are ever made from a worker’s paycheck for unemployment insurance and employees are made aware of this provision by reading New York Unemployment Insurance posters. It is the Department of Labor that determines whether an unemployed worker qualifies for unemployment.

Due to increased manipulation of the UI system by employers, the SUTA Dumping Prevention Act of 2004 was signed by President Bush in August of 2004. In order for New York to conform to the requirements of this act, legislation effective January 1, 2006, was recently enacted that prohibits the practice of SUTA dumping. Employers and financial advisors engage in SUTA dumping when they attempt to manipulate state experience rating systems in order to obtain a lower tax rate than their unemployment experience would otherwise allow.

SUTA dumping is present when a business attempts to transfer to another employer, where there is at least 10 percent common ownership, management, or control of the two employers, some or all of its workforce, payroll, or both, in order to reduce unemployment liabilities by obtaining a lower rate of contributions. SUTA dumping also occurs when a person who is not liable for contributions at the time he or she acquires a business of an employer is found to have acquired the business solely or primarily for the purpose of obtaining a lower rate.

A penalty is assessed if a violation of the statute is determined to have occurred. The penalty will be 10 percent of the employer’s taxable wages in the last completed payroll year, or $10,000, whichever is greater. An individual who knowingly advises another individual to violate or attempt to violate the statute is subject to a civil penalty of $10,000. In addition to these penalties, any violation of the statute constitutes a Class E felony punishable by imprisonment.

It is mandatory to post the labor information regarding unemployment insurance found on the New York Unemployment Insurance posters.

Like many states, New York state offers unemployment insurance benefits for eligible workers who become employed through no fault of their own. The benefits come from taxes that are paid by the employer, not from the workers themselves. Eligible parties must be ready, willing and able to work, and must be approved by the Department of Labor.

People who are not covered by unemployment insurance include some agricultural laborers, illegal aliens, baby-sitters under age 18, caretakers and performers employed at a place of religious worship, casual laborers, domestic employees, immediate children under 21 or spouse of a sole proprietor, golf caddies, some government employees, railroad workers who are covered under the Federal Railroad Unemployment Insurance act,.

I noticed that seasonal workers as well as part time workers generally are covered under New York’s Unemployment Insurance Law. Most college students are also covered. The coverage for these three groups of employees may not be generally known to the public; it’s important that any worker who becomes unemployed check with the Department of Labor to see if they actually qualify for temporary benefits.

One interesting recent change to the Unemployment Tax took effect on January 1, 2006. Called the SUTA Dumping Prevention Act, the Act prohibits businesses from manipulating the tax rating system. A business may do this by attempting to transfer its workforce (or part of its workforce) in order to reduce their unemployment liability. It’s also considered SUTA dumping if a person acquires a business only to obtain a lower UI rate.

The penalty for SUTA dumping is the greater of ten percent of the employer’s taxable wages or $10,000. The New York State Department of Labor’s Unemployment Insurance Fraud Control Unit is responsible for investigating such actions. Reports that are made to them are completely confidential.