Governor McCrory Signs Unemployment Insurance Reforms Into Law

Published Thursday, September 10, 2015 at 12:30 pm
McCory signs the bill into law.

McCory signs the bill into law.

Governor Pat McCrory continued his sweeping reform of North Carolina’s unemployment insurance program with the signing of Senate Bill 15 during a ceremony at the Gaston County JobLink facility in Gastonia.

“This legislation will give us the tools we need to put people back to work sooner and crack down on the fraud that has plagued the program for years,” Governor McCrory said.

In addition to providing claimants more work opportunities and more weapons to fight fraud, the legislation will also help investigators identify non-compliant employers as well as provide a trigger to suspend the State Unemployment Reserve Fund Surtax.

Fighting Fraud

To prevent identity fraud, claimants will now have to present valid photo identification to collect unemployment insurance benefits.

The bill also allows investigators to cross-reference various state databases, such as DMV records, to detect identity theft. This type of cross-reference will also help prevent a situation Assistant Secretary Dale Folwell discovered shortly after he took office when workers at the Department of Employment Security were collecting unemployment benefits.

Governor McCrory’s signature will also allow investigators to check criminal justice databases to ensure inmates aren’t applying for unemployment benefits. In 2012, three Swain County Jail inmates were collecting unemployment payments while they were locked up.

Making Sure Employers Follow the Law

The new law also allows for the garnishment of a delinquent employer’s credit card receipts. The measure will help identify employers who will misclassify employees as independent contractors to avoid paying unemployment tax. Additionally, the new law will help combat the recent trend of people setting up companies and filing for unemployment benefits for fictitious employees.

Helping People Find A Job

Most importantly, this law will help people on unemployment find a job quicker by requiring claimants to register for work through the NCWorks Online website. This will directly connect claimants with employers who have jobs to fill. Claimants will also have to make five job contacts per week to continue to receive benefits. The five contacts can be done via the Internet and on the same day. This requirement replaces the outdated two job contacts on two separate days of the week, which was confusing and disqualified people who didn’t look for work on separate days.

Trust Fund

The new law also puts in place provisions to suspend the State Reserve Surtax on employers when the Unemployment Trust Fund reaches $1 billion, which is expected to occur before the end of the year. The suspension is projected to save employers $240 million in 2016, money that can be invested in employees and business expansion.

SB 15 Fact Sheet

FRAUD PREVENTION

Employability Assessment Interviews and Photo IDs

Employability Assessment Interviews (EAI) is a mandatory, one-on-one, in-person meeting between a claimant and a workforce specialist at the local Division of Workforce Solutions (DWS) NCWorks Career Center. The EAI became a requirement for continued eligibility for benefits in March 2014. It requires the claimant to submit photo identification and documentation of their work search records for review by staff. Senate Bill 15 codifies the photo ID.

Since March 2014, DES and DWS has scheduled 149,833 interviews with unemployment recipients.

Government Data Analytics Center (GDAC)

DES has worked with GDAC since 2013 as an additional resource for identifying fraud by businesses and the general public by using business intelligence activities through cross-matching statewide databases. These cross-matches allow DES to prevent unemployment fraud by identifying people who are deceased, incarcerated or currently employed from receiving unemployment benefits.

In 2014, DES and GDAC identified and investigated 6,399 cases of potential fraud cases.

In the first two quarters of 2015, there were 3,460 fraud cases investigated for fraud.

In the first year of implementation, the identification and investigation of fictitious employers dropped from 89 accounts to 21 accounts. There has only been one potential fictitious employer identified in the first eight months of 2015.

We see the decrease in number of fictitious accounts because we were able to see common attributes and put in appropriate detection at the initial application period.

TRUST FUND SOLVENCY

Suspend Reserve Fund Collection in 2016

In any year there is not a balance of at least $1 billion or more in the unemployment trust fund, employers are subject to a 20 percent surcharge for the state reserve fund.  The provisions of HB4 have allowed not only DES to pay off the $2.8 billion debt three years early, but it has also allowed DES to rebuild a reserve in the trust fund. DES expects the trust balance to be $1 billion by January of 2016.

This legislation will allow the state to suspend the collection of the 20 percent state reserve tax in 2016. For calendar year 2016, this will save employers $240 million that can be used by the employer community to assist with the expansion of their business and put people back to work.

Employer payments toward UI debt

$700 million in FUTA penalties

$262 million in interest payments

Quarterly Claims Activity

SB15 will begin charging benefits to employers on a quarterly basis. North Carolina is the only state that charges benefits annually rather than quarterly. This change will allow employer accounts to reflect more accurately the business climate and actuarially assess the liability to the system. This also provides employers the opportunity to identify any suspicious activity on their account and prevent fraudulent claims. Under current law, if benefits were paid to a person today, the benefit charges would not be applied to the employer’s unemployment account until August 2017, and not impact their tax rate until 2018.

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