Unemployment Insurance Benefits.
An unemployed individual (claimant) is eligible to receive unemployment insurance benefits (UI benefits) if the claimant: (1) worked at least 680 hours in the base year; (2) was separated from employment through no fault of the claimant's, or quit work for good cause; and (3) is able to work, is available to work, and is actively searching for suitable work. The Employment Security Department (ESD) administers Washington State's unemployment insurance program.
Charging Unemployment Insurance Benefits Paid.
Unemployment insurance benefits are charged to employers on a pro rata basis according to the amount of wages paid to the claimant by the employer in the claimant's base year compared to the wages paid by all employers. Some UI benefits, such as those paid for certain good cause quits, are charged only to the separating employer, or are not charged to any employer. Other UI benefits may be noncharged if the employer requests relief from charging.
Employer Taxes.
Most employers pay contributions to finance unemployment benefits. A contribution-paying employer's tax rate is experience-rated so the rate is determined, in part, by the benefits paid to its employees. An employer's benefit ratio is computed by dividing the total amount of benefits charged to the account of the employer by the taxable payrolls over a four-year period. Based on this benefit ratio, the employer is assigned a rate class from 1 to 40. The rate class determines the experience rate for the employer, which may range from 0 to 5.4 percent.
In addition to the experience-rated tax, employers may pay a social tax and a solvency surcharge. The social tax is calculated from a flat social cost factor that is then graduated for each employer based on their experience rate class. The flat social cost factor is generally calculated by the difference between total UI benefits paid and taxes paid, divided by the total payroll. Except for rate years 2021 through 2025, the maximum flat social cost factor is 1.22 percent. A solvency surcharge applies if there are fewer than seven months of UI benefits in the Unemployment Insurance Trust Fund.
Previously Enacted Legislation.
Engrossed Substitute Senate Bill 5061 (ESSB 5061), enacted during the 2021 Legislative Session, provided certain UI benefits and relief to claimants and employers. Benefits were not charged to the experience rating account, including the one-week waiting period waiver under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and UI benefits paid for all weeks starting with the week ending March 28, 2020, through May 30, 2020. An employer may also request that benefits paid not be charged to the employer's experience rating if the benefits paid are a result of closure or severe curtailment of operations at the employer's facility and the closure resulted from the presence of any dangerous, contagious, or infectious disease that is the subject of a public health emergency at the facility. Engrossed Substitute Senate Bill 5061 also reduced the maximum flat social tax and suspended the solvency tax for five years.
Engrossed House Bill 2965, enacted in 2020, provided $25 million to the state COVID-19 Unemployment Account for the ESD to forgive certain UI benefits for eligible employers who applied for relief. The funds were spread proportionally across the total amount of benefits requested to be forgiven by employers. The $25 million was sufficient to provide 23.75 percent of approved relief.
North American Industry Classification System Code.
The North American Industry Classification System (NAICS) was developed in cooperation with the United States, Canada, and Mexico. The NAICS uses a production-oriented conceptual framework to group establishments into industries based on the activity in which they are primarily engaged. Establishments using similar raw material inputs, similar capital equipment, and similar labor are classified in the same industry. The NAICS was introduced in 1997 and is periodically revised to reflect changes in the industrial structure of the United States and North American economy.
The following are certain three-digit NAICS codes and industry descriptions:
| 323 | Printing and Related Support Activities |
| 331 | Primary Metal Manufacturing |
| 448 | Clothing and Clothing Accessories Stores |
| 451 | Sporting Goods, Hobby, Book, and Music Stores |
| 453 | Miscellaneous Store Retailers |
| 481 | Air Transportation |
| 485 | Transit and Ground Passenger Transportation |
| 487 | Scenic and Sightseeing Transportation |
| 512 | Motion Picture and Sound Recording Industries |
| 561 | Administrative and Support Services |
| 711 | Performing Arts, Spectator Sports, and Related Industries |
| 712 | Museums, Historical Sites, and Similar Institutions |
| 713 | Amusement, Gambling, and Recreation Industries |
| 721 | Accommodation |
| 722 | Food Services and Drinking Places |
| 812 | Personal and Laundry Services |
| 814 | Private Households |
Unemployment Insurance Relief Account.
The Unemployment Insurance Relief Account (UI Relief Account) is created in the custody of the State Treasurer. Revenues to the UI Relief Account consist of appropriations and transfers by the Legislature and all other funding directed for deposit into the UI Relief Account. Only the Commissioner of the ESD (Commissioner) or the Commissioner's designee may authorize expenditures from the UI Relief Account. Expenditures from the UI Relief Account may be used only for reimbursing the Unemployment Compensation Account for forgiven benefits for certain COVID-19-impacted businesses. By July 1, 2022, the Commissioner must certify to the State Treasurer the amount of any unobligated moneys in the UI Relief Account that were appropriated by the Legislature from the State General Fund during the 2021-23 fiscal biennium. The State Treasurer must transfer the unobligated moneys back to the State General Fund.
Forgiven Benefits Noncharged and Paid from the Unemployment Insurance Relief Account.
The ESD must determine the amount of the forgiven benefits for approved category 1, 2, 3 and 4 employers that are being reimbursed by the UI Relief Account instead of being charged to the employer's experience rating account by December 1, 2021. The ESD must transfer an amount equal to the forgiven benefits from the UI Relief Account to the Unemployment Compensation Account.
Category 1 Employers' Forgiven Benefits.
An approved category 1 employer means a contribution-paying employer:
Forgiven benefits for category 1 employers are the approved benefits for an individual employer multiplied by the forgiveness ratio, which is computed by dividing $100 million of the total amount of money in the UI Relief Account by the total approved benefits. Approved benefits are the benefits paid to employees of an approved category 1 employer during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a two rate-class increase. The forgiveness ratio cannot be more than one.
Category 2 Employers' Forgiven Benefits.
An approved category 2 employer means a contribution-paying employer:
Forgiven benefits for category 2 employers are the approved benefits for an individual employer multiplied by the forgiveness ratio, which is computed by dividing the sum total of: (1) the difference between the available benefits for category 1 and the total approved benefits for approved category 1 employees; and (2) $175 million of the total amount of money in the UI Relief Account, by the total approved benefits. Approved benefits are the benefits paid to employees of an approved category 2 employer during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a two rate-class increase. The forgiveness ratio cannot be more than one.
Category 3 Employers' Forgiven Benefits.
An approved category 3 employer means a contribution-paying employer:
Forgiven benefits for category 3 employers are the approved benefits for an individual employer multiplied by the forgiveness ratio, which is computed by dividing the sum total of: (1) the difference between the available benefits for category 2 and the total approved benefits for approved category 2 employees; and (2) $75 million of the total amount of money in the UI Relief Account, by the total approved benefits. Approved benefits are the benefits paid to employees of an approved category 3 employer during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a four rate-class increase. The forgiveness ratio cannot be more than one.
Category 4 Employers' Forgiven Benefits.
An approved category 4 employer means a contribution-paying employer:
Forgiven benefits for category 4 employers are the approved benefits for an individual employer multiplied by the forgiveness ratio, which is computed by dividing the sum total of: (1) the difference between the available benefits for category 3 and the total approved benefits for approved category 3 employees; and (2) $150 million of the total amount of money in the UI Relief Account, by the total approved benefits. Approved benefits are the benefits paid to employees of an approved category 4 employer during the fiscal year ending June 30, 2021, not to exceed an amount that would reduce the employer's rate class increase to no more than a four rate-class increase. The forgiveness ratio cannot be more than one.
Miscellaneous.
Approved benefits do not include benefits not charged to the employer's experience rating. The ESD must adopt such rules as are necessary to carry out the forgiven benefits unemployment insurance relief. This relief expires July 30, 2022.
The amended bill creates four categories of employers eligible for forgiven benefits, rather than two. These categories:
The amended bill changes the deadline for the calculation of forgiven benefits from November 1, 2021, to December 20, 2021, for all categories. It removes the disqualification of employers delinquent in payments due to the ESD. It also assumes total available funding of at least $500 million, and requires the ESD to provide annual outreach and assistance to employers delinquent in payments.
(In support) Although the Legislature previously provided other significant rate relief, businesses are still experiencing large tax increases, and more relief such as this is needed. The bill will help those small businesses that were deemed nonessential, forced to lay off employees, and have continued to face operating restrictions. Certain sectors, such as hospitality, have had disproportionate impacts, and are still paying more in unemployment insurance taxes while struggling to survive. This bill provides relief to those significantly and disproportionately impacted. While this is a good start, the extent of the rate increase issue is estimated to be closer to $2 billion, so the amount of money assumed for this bill is not sufficient to address the actual issue. An across-the-board commitment is sought to continue to address this issue. This bill does create some winners and losers, and fiscal relief provided should be both broad and fair. This approach is supported because the relative positions of businesses within the adjusted categories are still maintained. Further relief should be explored in the next legislative session as well.
(Opposed) None.
(Other) It can take years for a business to recover from the impacts of a period of bad experience rates. This version of the bill is an improvement on the Senate version. Although not enough money is provided, this is a good start. The Point Roberts store has experienced uniquely adverse impacts for a grocery store, is not covered by other support efforts, and should not be left out of this relief. Women- and minority-owned businesses should also be given particular consideration to ensure fairness. Brewers, distillers, and wineries have experienced similar impacts as the rest of the hospitality industry, but they are left out of categories 1 and 2 of the bill. This industry is essential to Washington's recovery and should be specifically included in these categories. A new section is requested to require the ESD to create a working group to examine the actual impact on small businesses, explore additional improvements to ensure equity and fairness in relief, and make recommendations for the next legislative session.