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Pursuant to Executive Order 14 (2010) and  §§ 2.2-4007.1 and 2.2-4017 of the CODE OF VIRGINIA (1950), as amended, the Virginia Employment Commission has conducted a periodic review of 16 VAC 5-10-10 through 16 VAC 5-80-40, the Regulations and General Rules Affecting Unemployment Compensation, and determined that these regulations should be continued without change, amendment or repeal, consistent with the stated objectives of applicable law, Title 60.2 of the CODE OF VIRGINIA (1950), as amended, the Virginia Unemployment Compensation Act (“Act”), as the regulations (i) are necessary for the protection of public health, safety and welfare or for the economical performance of important government functions; (ii) minimize the economic impact on small businesses in a manner consistent with the stated objectives of applicable law; and (iii) are clearly written and easily understandable.

While the Commission has carefully considered the one public comment provided, it has determined that these particular regulations should be continued without change, amendment or repeal.  The Commission reached this determination after careful consideration of the proposed comment in light of the fundamental purpose of the Virginia Unemployment Compensation Act, the agency’s statutory mandate, the rationale for the General Assembly’s addition of the “subsequent employing unit” provision to the statute, and the 2011 Integrity Act amendments to the Federal Unemployment Tax Act.  Any change in notice requirements, such as those proposed, which could have the effect of discouraging or suppressing the rate of participation by subsequent employers in the unemployment insurance (“UI”) claims adjudication process, administered under Article 5 of Chapter 6 of the Act, could result in erroneous or improper payment of UI benefits to claimants who might otherwise not qualify for such benefits.  That result would be inconsistent with the purpose of the Act and the Commission’s statutory duties.

The primary purpose of the Act is to provide temporary income replacement to otherwise eligible individuals who are unemployed through no fault of their own. Ford Motor Co. v. Unemployment Compensation Commission, 191 Va. 812, 63 S.E. 2d 28 (1951). Moreover, the General Assembly has mandated that the Commission maintain a solvent trust fund to pay benefits to those eligible individuals who are involuntarily unemployed. See, Code of Virginia, Section 60.2-113. To help ensure that benefits were paid only to individuals who were unemployed through no fault of their own, the General Assembly amended the provisions of Sections 60.2-618 and 60.2-619 to require the Commission to give notice of a claim to employers for whom a claimant worked less than 30 days prior to filing a claim and to determine a claimant’s qualification for benefits based on any separation from work from such employer, designated in the statute as a “subsequent employing unit.” The General Assembly became aware of situations under the former law where an individual was laid off from its liable employer, went to work for another employer for less than 30 days and was then discharged for an act of misconduct such as stealing. Prior to the enactment of the “subsequent employing unit” provisions the Commission had no statutory authority to address any separation from work other than from an employer for whom the claimant worked at least 30 days.

In 2011, Congress amended the provisions of the Federal Unemployment Tax Act to require all states to amend their laws in certain ways to reduce the amount of erroneous payments of unemployment compensation. One of those changes required states to adopt laws that penalized employers for failing to respond adequately or promptly to a written request for information. Under the conforming law passed by Virginia in 2013 (Senate Bill 775) an employer would be subject to penalty if it failed to promptly or adequately respond to a written request for information four times in a four year period. The penalties include a $75 assessment on the third offense and charges to their tax accounts after the fourth such incident. If the proposed change was adopted the Commission could be viewed as discouraging employers from participating in the claims process if they did not have a direct pecuniary interest in the outcome and subsequently penalize them for not providing prompt or adequate information about the claim.

Any UI benefits paid by the Commission must be recouped from employers covered by the Act by direct charges to their respective employer accounts, or indirect charges through pool cost and building fund charges. Discouraging subsequent employers, who have information on the qualification of a claimant for benefits, from participating in this process, could likely increase the risk of improper payment of UI benefits.  This would result in attendant charge(s) to the liable employer, i.e., the last 30 day/240 hour employer.  The resulting charge from such lack of participation by subsequent employers could not only increase the tax rate of the specific liable employer charged, but could also increase the tax rate across the board for all employers in the Commonwealth who pay into the Unemployment Compensation Fund (“Trust Fund”) by reducing the overall solvency of the trust fund. A tax increase, whether direct or indirect, due to an increase in improper payments would be inconsistent with the Commission’s statutory mandate and contrary to the best interests of the Commonwealth. 

Granted, the most recent public comment, with its attendant proposed notice modifications, seeks to cure the agency’s prior objection to past, similar such public comment to avoid misleading certain subsequent employers about their nonliability for direct benefit charges.   For example, dollar for dollar, reimbursable employers, mostly government entities and certain non-profit organizations, could in some circumstances, depending upon the base period [wage] calculations for certain claimants, incur a direct charge to their employer tax account, even when such employers have been joined  as a subsequent employing unit to a claim filed.  While the proposed changes to the notice provisions contained in the most recent public comment attempt to make these dollar for dollar reimbursable employers more aware of such direct charge circumstances it does not change the fact that such proposal could actually increase the tax burden or claims cost for businesses/employers covered by the Act.  While the most recent public comment has suggested some further notice revisions to better apprise dollar for dollar subsequent employers of this fact, the Commission must reiterate that the proposed notice revisions do not change the fact that they could still result in increased improper payments and an increased tax burden on employers covered by the Act.

In conclusion, the Commission has conducted its periodic review of its regulations in a manner consistent with the stated objectives of applicable law.  The Commission finds the regulations (1) are necessary for the protection of public health, safety and welfare or for the economical performance of important government functions; (ii) minimize the economic impact on small businesses in a manner consistent with the stated objectives of applicable law; and (iii) are clearly written and easily understandable.