Registration and Reporting.
The Employment Security Department (ESD) administers the state's unemployment benefits program. Employers must register with the ESD and file tax reports every quarter. The reports must contain: the name of all employees covered by unemployment insurance, their Social Security numbers, their wages, and the number of hours worked in the quarter.
Benefit Determinations for Unreported Hours.
When employers fail to report the number of hours worked, that number is computed based on the amount of remuneration paid and the state minimum hourly wage rate. Claimants may be determined to be eligible for benefits based on computed hours. A claimant may request a redetermination or reconsideration of payable benefits within a year of their initial benefit determination.
Audits.
The ESD conducts audits to determine whether employer-reported wages and hours are accurate. Employers may request a voluntary audit of their records and reporting. Voluntary audits may result in payment due, but not penalties for the late payment or assignment of a delinquent tax rate. Voluntary audits may also result in a refund of taxes overpaid.
Penalties and Collections.
An employer that knowingly fails to register with the ESD is subject to a penalty of the greater of $1,000 per quarter, or two times the taxes due per quarter, unless the employer can prove it had good cause to believe it was not required to register.
An employer that fails to file a timely report is subject to a $25 penalty per violation. An employer that files an incomplete report is issued a warning letter for the first violation. For subsequent violations, the penalties range from $75 to $250. An employer that knowingly misrepresents the amount of its payroll is liable for up to 10 times the difference between contributions paid and the amount due, and for the audit and collection costs.
An action for collection of employer contributions and penalties owed must be commenced within three years.
An employer is subject to a penalty for failure to register regardless of whether the employer knowingly did so. The penalty may be waived for good cause if the failure was not due to the employer's fault, rather than if the employer can prove it had good cause to believe it was not required to register.
An employer is automatically deemed to having knowingly misrepresented the amount of its payroll when there is a repeat failure to report employees under certain conditions.
An employer is subject to additional penalties for discoveries of unreported wages as follows:
The period for commencing a collections action is tolled during a nonvoluntary audit.
The substitute bill specifies that all of the conditions regarding a repeat failure to report employees must be met for the failure to be automatically considered a knowing misrepresentation of payroll.
(In support) Many drivers are experiencing severe financial hardship due to not receiving unemployment insurance benefits because the companies have not provided necessary information for their claims to the ESD. These claimants have provided all their information from their end, and are navigating a complex system with many obstacles, including limited English proficiency. This is an equity issue. It is important to incentivize employers to report correctly and on time. The unemployment insurance system only works when employers properly report hours and do their part. The ESD has discretion to determine if a worker is eligible for unemployment insurance regardless of the specific employer-employee relationship, but when companies do not comply with data requests, workers are left out to dry. The issue of companies misclassifying workers to save money and win bids is becoming more apparent during the COVID-19 pandemic.
(Opposed) The removal of the "knowingly" standard shifts legitimate disputes into a system of intimidation, where employers can be penalized even when they did not know they were doing something wrong. Independent contractors are responsible for submitting their own data to the ESD. The waiver of the statute of limitations would allow the ESD to take even longer on audits, which can already take years. Penalties and interest should also be tolled during any time the statute of limitations is tolled. Employers do not have the assistance needed from the ESD to ensure they are filing correctly. The system is currently overstressed, audits are already stringent, and this is not the right time to make these changes. The vast majority of companies are well intentioned, and the existing enforcement regime is already weighted against employers. The presumptive language in the bill creates a disproportionate burden on employers of all sizes and strips them of any due process. This will create fear and uncertainty.