United States: Times, They Are A-Changing: Employers No Longer Permitted To Delay Or Fail To Return NY Unemployment Insurance Requests – Penalties Now Imposed

Last Updated: November 25 2013
Article by Amy J. Traub

Last month, the New York State Department of Labor (DOL) rather quietly effected legislation that had previously been signed by Governor Andrew Cuomo on March 29, 2013, reforming New York unemployment insurance law effective October 1, 2013.  Many companies are just now beginning to receive a letter that looks this.

The reform was enacted to correct shortcomings in the previous legislation that were, at least in part, responsible for the deficiency of the state's Unemployment Insurance Trust Fund ("UITF") to handle the high number of unemployment insurance claims during the recession.  As of early 2013, the UTIF had borrowed $3.5 billion from the federal government to satisfy unemployment benefit claims.  Repayment of this loan, plus interest, accrues to New York employers through the Federal Unemployment Tax Act vis-à-vis the calculation of future contribution rates.  The new reform provisions purport to allow New York to repay the federal government by 2016, two years and $200 million in interest payments, ahead of schedule.

Among other key points, the legislation imposes a financial burden on employers whose actions result in the overpayment of unemployment benefits.  Under the previous regulation, employers who delayed or altogether failed to return the DOL's requests for information on employee separation could later appeal the payment of certain benefits and seek repayment of the contributions to their individual accounts.  This is no longer the case.

Now, an employer may not seek relief from overpayment of benefits where "the employer or its agent failed to submit information sufficient to render a correct determination [of a claim] or failed to provide a response to a request for information" unless the delay was caused by a "disaster emergency declared by the governor or president."  NYS 2607-2013, Part O, S. 18.  That is, where an employer is in possession of information that could lead to the rejection or decrease in value of a claim for benefits–which often is the case—and does not timely provide the information to the DOL, the employer is not eligible to later reclaim the payments, even if the payments should never have been made because, for example, the former employee should not have been entitled to unemployment benefits in the first place.  The DOL does provide an employer one free pass for relief from overpayment, but only if it is the first occurrence of the behavior and the employer can establish good cause for its delinquent response.

What Should New York Employers Do?

Respond in full and on time!  Gone are the days when DOL unemployment requests could be relegated to the bottom of an employer's to-do list.  Information requests from the DOL now impose financial consequences on employers.  Employers therefore need to ensure that the proper systems are in place so that requests from the DOL for information pertaining to unemployment benefits are properly and timely addressed.  The systems may come at an added cost to employers, i.e. hiring additional employees or training.  The DOL, however, is currently developing a new electronic system, the State Information Data Exchange System (SIDES), to allow employers to respond to their requests online.  SIDES will be available online later this year at www.labor.ny.gov.

Importantly, an employer is liable for overpayments which could have been prevented had they timely responded.  An employer may bring an appeal to stop the overpayments, but appeals can take two to three months to complete, and the overpayments may continue during the duration.

Moreover, failure to adequately respond to requests issued by the DOL may cost an employer more than just the cost of the overcompensation alone.  An employer's contribution rate is calculated using the amount of previous contribution minus the benefits charged to the employer's account.  Un-recompensable overpayments may be included in this calculation, and, therefore, result in long-term higher contribution payments.

Other Key Reform Points

  • Severance pay preclusion—starting in 2014, former employees who receive severance pay within 30 days of the dismissal will not be eligible for unemployment benefits if the severance pay is greater than the maximum weekly benefit.  If the severance pay is in a lump sum, it will be allocated on a weekly basis, and they will not be eligible until the severance pay is exhausted.
  • Job-seeking requirement—as mandated by federal law, benefits shall not be paid to any claimant not actively seeking employment, and the DOL plans to establish regulations to monitor claimants' work search efforts by December 2015.
  • Taxable wage limit increase—beginning on January 1, 2014, the FUTA taxable wage will increase to $10,300, with gradual increases annually up to $13,000 in 2026.
  • Maximum weekly benefit increase—in October 2014, the maximum weekly benefit will increase to $520, and then to $250 in October 2018, and then proportionally thereafter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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