WSR 13-24-068 PERMANENT RULES EMPLOYMENT SECURITY DEPARTMENT [Filed November 27, 2013, 10:02 a.m., effective December 29, 2013] Effective Date of Rule: December 29, 2013.
Purpose: To clarify that, although the statute no longer mandates coverage of corporate officers, employing units may voluntarily elect to cover them; a rule provides procedures for doing so. The rules also clarify the circumstances under which covered corporate officers are considered "unemployed" and potentially eligible for unemployment benefits.
Citation of Existing Rules Affected by this Order: Repealing WAC 192-310-150, 192-310-160, 192-310-170, and 192-310-180; and amending WAC 192-300-090, 192-300-170 and 192-310-190.
Statutory Authority for Adoption: RCW 50.12.010 and 50.12.040.
Adopted under notice filed as WSR 13-21-118 on October 22, 2013.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 3, Repealed 4.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 3, Repealed 4.
Date Adopted: November 27, 2013.
Nan Thomas
Deputy Commissioner
AMENDATORY SECTION (Amending WSR 10-23-064, filed 11/12/10, effective 12/13/10)
WAC 192-300-090 When does an employer become inactive ((or reactivated)) for purposes of unemployment insurance ((and how does this affect coverage of corporate officers))?
(1) An employer that has no employees or covered corporate officers for eight consecutive quarters ((shall)) is automatically ((be)) considered ((to be)) an inactive employer at the end of the eighth consecutive quarter. (2) An active employer may change to inactive status if the employer notifies the department that it is no longer an active employer, has no employees at that time or for the foreseeable future, and has not elected coverage under RCW 50.24.160. The employer ((shall be)) is considered inactive ((as of)) on the ((effective)) date ((of)) the ((notice unless it is a corporation that has not exempted all its paid corporate officers. If the employer is a corporation and has not exempted all its paid corporate officers, it shall continue to be considered an active employer until the end of the calendar year. If it has no employees and has not elected coverage under RCW 50.24.160, the corporation shall no longer be considered an employer as of January 1st of the following calendar year)) employer asks the department to close the account. ((Example A: Employer A (not a corporation) notifies the department that, as of June 30th, it no longer considers itself an active employer, has no employees at that time or for the foreseeable future, and has not elected coverage for otherwise exempt workers. The department will notify Employer A that it is considered inactive and Employer A will not have to file reports for the quarter ending September 30th and beyond. Example B: Employer Corporation B notifies the department that, as of June 30th, it no longer considers itself an active employer, has no employees at that time or for the foreseeable future, and has not elected coverage for otherwise exempt workers. If the corporation is dissolving or is no longer in business or has exempted all its paid corporate officers from coverage, the department will notify it that the corporation is considered inactive and that it will not have to file reports for the quarter ending September 30th and beyond. If the corporation is continuing as a corporation in which all personal services are performed by bona fide corporate officers and has not exempted all its paid corporate officers, the corporation shall continue to be considered an active employer until December 31st and must report quarterly and pay taxes on nonexempt corporate officers. As of the following January 1st, it will no longer be considered an employer. (3) A corporation in which all personal services are performed only by bona fide corporate officers, that has no employees throughout a calendar year, and that has not elected coverage for corporate officers under RCW 50.24.160 shall not be covered for corporate officers for that year regardless of whether it has notified the department that it is no longer an active employer. Example C: Employer Corporation C is an active employer with employees in year 1 and must file quarterly reports. It has not elected coverage for corporate officers, but has not exempted them either, so Employer Corporation C must cover corporate officers in year 1. Throughout year 2, Employer Corporation C no longer has any employees and all personal services are performed by bona fide corporate officers, but fails to notify the department of the change. Employer Corporation C should submit quarterly "no payroll" reports. Because there are no employees in year 2, the corporate officers are no longer considered covered. (4) An employer that had no employees and was not previously active in the calendar year and reactivates because it has employees or elects coverage under RCW 50.24.160 shall be considered an active employer as of the date it has employees or elects coverage. If the employer is a corporation, once it hires employees, it becomes an employer, so it must register and paid corporate officers become covered unless the corporation exempts them within thirty days. If the corporation does not exempt all of its paid corporate officers, the corporate officers that have not been exempted shall be reported and covered as of the date the employer became an active employer. Example D: Employer D (not a corporation) had registered in a previous year with the department, but had no employees and was in inactive status as of January 1st. It hires employees for the first time that year on April 1st, notifies the department, and is restored to active status at that time. Employer D does not need to report to the department for the first quarter of the year because it was not an active employer at that time. Employer D must report and pay taxes beginning with the quarter ending June 30th. Example E: Employer Corporation E is a corporation that had been an active employer in previous years, but had no employees and was in inactive status as of January 1st. Employer Corporation E did not previously exempt its corporate officers from coverage, nor did it elect coverage for the officers, but because it was inactive and had no employees, it does not need to report or pay taxes on the corporate officers for the first quarter of the year. Employer Corporation E hires employees for the first time that year on April 1st, notifies the department, is restored to active status at that time, and does not exempt its paid corporate officers within thirty days of April 1st. Employer Corporation E must report and pay taxes on both employees and on corporate officers beginning with the quarter ending June 30th. (5) An employer that had been in active status during the calendar year, became inactive, and then returns to active status during the same calendar year shall be considered in active status for the entire time since it first became active in that calendar year. If the employer is a corporation that has not exempted all of its paid corporate officers, the corporate officers that have not been exempted shall be reported and covered for the entire time since the corporation first became active in that calendar year. Example F: Employer F changed from active status to inactive status and back to active status within the same calendar year. Employer F will be treated as if it had been in active status for the entire time since it first became active that year.))
AMENDATORY SECTION (Amending WSR 07-23-127, filed 11/21/07, effective 1/1/09)
WAC 192-300-170 Requirements for election of unemployment insurance coverage.
The department applies RCW 50.04.165 and 50.24.160 to establish the election of coverage for unemployment insurance by employers where personal services are not considered employment under the law: (1) RCW 50.24.160 allows any ((business)) employing unit to request unemployment insurance coverage for personal services that are not covered as employment: (a) The request must be in writing to the department; (b) The department must approve the request for election of coverage in writing; and (c) The request must be signed by someone legally authorized to bind the business. (2) RCW 50.04.165 allows a corporation to elect to cover the personal services of all or none of its corporate officers for unemployment insurance purposes. (a) A corporation must submit a written request for voluntary election coverage signed by a person authorized to legally bind the corporation. (i) When establishing voluntary coverage for an existing account, the written request will be considered timely if received within thirty days before the end of the quarter in which the change is made. (ii) When establishing voluntary coverage for a new account, the written request will be considered timely if received within thirty days from the end of the quarter the employer is requesting coverage to begin. (b) "Corporate officer" is defined in RCW 23A.08.470; (c) Personal services provided by corporate officers appointed under RCW 23B.08.400, other than those covered by chapters 50.44 and 50.50 RCW, are not considered services in employment unless the corporation elects coverage of all its corporate officers under RCW 50.24.160. (d) All services performed by corporate officers are exempt until the date the election of coverage is approved. (3) All changes in elected coverage remain in effect for at least two calendar years. The business may terminate coverage only at the end of a calendar year. To terminate coverage, the employer must send a written request to the department by January 15th. (((3))) (4) The department reserves the right to disapprove a request for coverage because: (a) The applicant is not liable for federal unemployment taxes (FUTA); (b) The occupation or industry is seasonal; or (c) Other reasons apply. (((4))) (5) The department reserves the right to cancel unemployment insurance coverage for a voluntary election employer because: (a) Of nonpayment of unemployment insurance taxes or failure to file an unemployment insurance tax and wage report; (b) Of misrepresentation of facts; (c) Coverage is not used for involuntary unemployment as outlined in RCW 50.01.010; or (d) Other reasons apply.
AMENDATORY SECTION (Amending WSR 10-23-064, filed 11/12/10, effective 12/13/10)
WAC 192-310-190 When is a corporate officer with at least ten percent ownership considered unemployed?
(1) This section applies ((to)) if your claim for benefits is based on wages from a corporation that are twenty-five percent or more of your total covered base year wages and you are an officer of that corporation who: (a) ((A corporate officer who)) Owns ten percent or more of the outstanding stock or shares of the corporation; or (b) ((A corporate officer who is)) Has a family member ((of another)) who is also a corporate officer who owns ten percent or more of the outstanding stock or shares of the corporation. For purposes of this section, a "family member" is a person related by blood or marriage or domestic partnership as parent, stepparent, grandparent, spouse or domestic partner, child, brother, sister, stepchild, adopted child, or grandchild. (((c) Percentage ownership of the corporation may be measured by the percentage owned of outstanding stock or shares of the corporation.)) (2) At any time during the benefit year of your claim, you are a corporate officer ((whose claim for benefits is based on any wages with that corporation is not considered unemployed in any week during the individual's term of office,)) under subsection (1) of this section even if you are not paid wages ((are not being paid at the)) during that time. ((The corporate officer is)) (3) You are considered unemployed and potentially eligible for benefits ((if)) for weeks after: (a) The corporation dissolves; or ((if the officer)) (b) You permanently resign((s)) or ((is)) are permanently removed as a corporate officer under the articles of incorporation or bylaws. (((3))) For purposes of this section, "permanently" means for a period of indefinite duration, but expected to extend at least through the claimant's benefit year end date. ((If at any time during the benefit year the claimant resumes his or her position as an officer with the corporation, all benefits paid during that benefit year will be considered an overpayment and the claimant will be liable for repayment.)) (4) You will be ineligible for benefits and liable for repayment of all benefits paid during that benefit year if you take a position as a corporate officer as defined under subsection (1) of this section at any time during your claim. (5) For purposes of this section, the department will consider a corporation dissolved when the corporation has provided the department with at least two of the following documents: (a) A business licensing service change form requesting closure of the corporate account; (b) A department of revenue clearance certificate; (c) Articles of dissolution of a Washington profit corporation filed with the secretary of state; or (d) A court order dissolving the corporation. (6) A corporation must provide notice to the department in a format approved by the department when the ownership percentage of a corporate officer increases to become ten percent or more or decreases to become less than ten percent. The notice is due by the time the next quarterly tax and wage report is due from the corporation.
REPEALER
The following sections of the Washington Administrative Code are repealed:
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