House Panel Moves Unemployment Insurance Reform Bill, Implements Recommendations in Chamber Foundation Study

June 22, 2011

Wednesday, June 22 -- Earlier today, the House Commerce Committee passed House Bills 4781-82, legislation to implement the major reform proposals recommended by the Michigan Chamber Foundation’s Unemployment Insurance (UI) Reform Study commissioned earlier this year. We expect this legislation to be considered by the full House the week of June 27.

The Foundation Study identified up to $550 million in annual cost-saving reforms to eliminate the $3.1 billion debt Michigan’s employer-financed UI system has incurred with the federal government.  House Bills 4781-82 will re-engineer Michigan’s UI system to offset the need for higher UI taxes on Michigan job providers to repay the federal debt. The bills also address common complaints raised by employers about how the system is administered and the law is interpreted. 

House Bills 4781-82 include four key changes recommended in the Foundation Study, including:

  1. Revising the formula for determining weekly benefit amounts. This change would move Michigan from computing weekly benefit amounts by using a high quarter formula to an annual income formula.  The current formula permits “benefit spiking” whereby, for example, one high commission check or a large seasonal job can skew the weekly benefit determination.  The annual income formula injects fairness into the formula by dividing an employee’s total earnings during a year, regardless of how many weeks the employee has worked, by 52. 
  2. Expanding the seasonal employer designation. This change would allow employers with peak periods of employment to hire seasonal workers without the usual higher unemployment costs associated in so far as they are able to provide assurance that the position will be available the next season. 
  3. Revising suitable work requirements. This change lowers the “suitable work” threshold as an unemployment claim ages so to incentivize the unemployed to become reemployed in a reasonable time. The revised definition of suitable work is more realistic for Michigan’s modern labor market. It requires individuals to accept work outside their prior training and experience and/or usual pay as their unemployment claim ages, thereby prohibiting individuals from refusing jobs because they can “make the same amount on unemployment” or because they want to “hold out” for a higher paying job.  
  4. Revising disqualification standards. This change clarifies that unemployment benefits are meant to cover individuals who are unemployed due to “no fault of their own”.  Current law allows for benefits when a worker was fired by an employer for “cause”, such as chronic tardiness or absences and failure or inability to perform the work correctly or meet production quotas. These circumstances put employers in a lose-lose position:  pay wages to a worker who isn’t performing to expectations or showing up for work vs. pay unemployment benefits to that worker through the employer-financed UI system. The revised language would begin to specify additional circumstances whereby an individual discharged (fired) from a job would be disqualified from receiving benefits.

House Bills 4781-82 represent upwards of $300 million in annual cost-savings and mark a necessary and important the path forward by beginning to eliminate the debt incurred and ensuring that UI benefits are available to workers when they need them. Taken as a whole, the reforms will restore the financial solvency of Michigan’s the UI trust fund, thereby improving our state’s overall competitiveness. HBs 4781 and 4782 are a significant – and necessary – step forward for Michigan.

Please do not hesitate to contact Wendy Block at 517/371-7678 or if you have any questions.