CAI’s Senior HR Advisor and Government Relations Specialist George Ports explains the five major changes to North Carolina’s Unemployment System now that Governor Pat McCrory signed House Bill 4, UI Fund Solvency & Program Changes on February 19, 2013.
House Bill 4, UI Fund Solvency & Program Changes was drafted in efforts to address the $2.8 billion debt owed to the federal government and to improve efficiency at the North Carolina Division of Employment Security (DES).
Highlights of the five changes to North Carolina’s Unemployment System are:
- Near elimination of “attached claims”
- Elimination of “Substantial Fault”
- Higher taxes at the state and federal levels
- Elimination of most “good cause” reasons
- Reductions in benefit amounts and duration
The effective date for most of these changes is July 1st, 2013 with the exception of new employer contribution rates, which will be effective January 1st, 2014
Let’s breakdown the three changes that are receiving most of the attention: reduction in benefit amounts, reduction in the duration of benefits and near elimination of “attached claims”
Reduction in benefit amounts
Currently the maximum weekly unemployment benefit is $535.00. This maximum benefit, under current law, is indexed annually based upon North Carolina’s average weekly insured wage (AWIW). So if the AWIW increases, so does the maximum weekly benefit. The new law’s purpose in reducing the weekly benefit to $350.00 is to bring North Carolina’s maximum weekly unemployment benefit in line with neighbor states that are as follows:
- Florida –$275
- South Carolina–$326
In addition to the reduction in benefits, the maximum weekly will no longer be indexed annually; adjustments will require legislative action by the North Carolina General Assembly.
Reduction in duration of benefits
Under current North Carolina law, the maximum duration of benefits is 13 to 26 weeks based upon an individual’s work history. The new law provides that benefit duration is based upon a sliding scale determined by unemployment rates and an individual’s work history. An example of this sliding scale is as follows:
UI Rate is 5.5%: 12 weeks max. (5-12)
UI Rate is 9.5%: 20 weeks max. (13-20)
Each calendar year there will be two unemployment rates that will affect duration. One of the rates will be announced in January by the Bureau of Labor Statistics (BLS). The BLS, although a federal agency, announces the unemployment rate reported by North Carolina. This rate is actually the rate from the previous October. The second rate will be announced by the BLS July 1st (North Carolina’s rate from the previous April). In other words, if a claimant files in March the duration would be determined by the January rate. If a claimant files in September the duration of benefits would be determined by the rate announced in July.
Near Elimination of “attached claims”
Employers are currently able to file attached claims for employees to receive UI benefits during periods of work slowdowns or temporary layoffs. If the employer provides less than 60% of an employee’s regularly scheduled workweek, attached claims are filed and employees are not separated from the company.
The new law, for the most part, repeals the use of “attached claims” with some exceptions. The attached claims provision will be available if the employer has a positive credit balance and submits payment to cover cost of benefits. The payments are to be made at the time the claims are filed and will be credited to the employer’s account. The logic here is to ensure that the employer’s account does not go into a negative balance. This provision is limited to one time per employee per calendar year for a maximum of six weeks (Employers with a debit balance can utilize as above if they make an additional payment that would bring their account to at least zero).
CAI/ECNC (Employers Coalition for North Carolina) helped to fund an independent study conducted by a national organization specializing in unemployment and workers’ compensation system. Recommendations from the study were based on an analysis of North Carolina’s current debt/system issues and comparisons with other state systems. CAI/ECNC voiced concerns regarding the total repeal of the “attached claims” provision, which resulted in the limited exceptions included in the legislation as noted above. One of the main sponsors of House Bill 4 testified in a legislative committee that benefits paid out for “attached claims” accounted for nearly half of North Carolina’s $2.8 debt to the federal government.
This new law has pain points for both claimants and employers. However, the passage of the legislation was necessary to pay off the $2.8 billion unemployment debt owed to the federal government, bringing solvency back and repairing North Carolina’s broken Unemployment System.
The Employers Coalition of North Carolina (ECNC) is committed to improving the business climate of North Carolina through political advocacy at the legislative and administrative levels of government. For more information about ECNC, please visit www.ecnc.us.