NC legislators could wade into legal dispute over notices of contested unemployment cases

dranii@newsobserver.comApril 2, 2014 

  • Debt payment update

    The massive debt that the state racked up paying unemployment benefits in the wake of the recession should dip below the $1 billion mark by midyear and should be paid off by the end of 2015. Dale Folwell, who heads the state Division of Employment Security, laid out that timeline for lawmakers at a committee meeting Wednesday.

    The state’s debt to the federal government, money it borrowed to pay unemployment benefits, peaked at $2.8 billion and triggered higher federal unemployment taxes for the state’s employers.

    Lockhart Taylor, whose many roles at Employment Security include systems and procedure analyst, said after the committee meeting that the state is on track to retire all of its debt by Nov. 10, 2015.

    That’s the cutoff date for whether the federal unemployment taxes paid by employers would rise again in 2016. Those employer taxes increase $21 per employee per until the debt to the federal government is erased.

    In addition to avoiding another increase in federal unemployment taxes, retiring the debt would also eliminate prior $21-per-employee-per-year tax hikes.

    Employers pay both state and federal unemployment taxes. Workers don’t pay any unemployment taxes.

    Staff writer David Ranii

  • Appeals update

    The head of the Division of Employment Security told legislators Wednesday that the time it takes for the state to handle upper-level appeals of claims for unemployment benefits is meeting federal standards for the first time in years.

    Dale Folwell said in February the state Board of Review took an average of 33 days to handle “higher appeals.” That’s down from an average of 270 days in December 2012 and within the 40-day federal standard.

    Folwell has made reducing the agency’s backlog a priority since he took the helm a year ago. The state has consistently ranked last among the states in handling upper-level appeals.

    Upper-level appeals are the second level of appeals involving employment benefits. Those appeals can be made by either unemployed workers who have been denied benefits or by employers who challenge whether benefits are warranted.

    Today upper-level appeals are heard by the independent Board of Review, but Folwell previously handled them himself. The three-person review board didn’t exist until Gov. Pat McCrory appointed board members in December, and the board didn’t start hearing appeals until the end of January.

    The agency also has reduced the timeline for lower appeals, which are handled by referees. Those cases were handled in an average of 40 days in February, down from 94 days in December 2012. The federal guideline is less than 30 days.

    According to agency data, what it has always called its “backlog” of claims awaiting an initial decision stood at 12,945 last week, up from 12,415 in February but down from 13,912 in December.

    Calling this a backlog is somewhat of a misnomer, however, because it will never be whittled down to zero. The state currently is receiving more than 5,000 new unemployment claims a week.

    The more important number is that 9,450 of its pending cases are more than 21 days old, which is the federal guidelines for initial decisions. Comparable past numbers aren’t available from the state; it didn’t previously break out how many of its pending cases were more than 21 days old.

    Folwell said the state’s pending cases that dated back to January or prior months had been cleared. In February legislators were complaining that claims going back several months were still awaiting decisions — a huge problem for jobless workers who rely on unemployment checks to pay their bills.

    Staff writer David Ranii

— Lawmakers could seek a legislative solution to the quandary faced by the state Division of Employment Security, which is caught between opposing mandates from a Wake County judge and the U.S. Department of Labor.

The ultimate goal is to preserve the state agency’s $57.7 million in federal funding, its sole source of operating funds.

Last month, the U.S. Department of Labor notified the state agency that its federal funding was jeopardized because it makes hearing notices of contested unemployment cases available to employment law attorneys who pay a monthly fee. The Labor Department contends that practice, which dates back to 2004, violates federal regulations enacted in 2006 regarding dissemination of confidential information.

However, the state is under court order to continue to make those documents available to attorneys daily. The preliminary injunction issued March 13 by Wake County Superior Court Judge Paul Ridgeway remains in effect until a lawsuit filed by Durham employment law attorney Monica Wilson goes to trial.

The agency is complying with the court order, which has raised concerns that its federal funding is in jeopardy.

“This is a very precarious situation,” said Rep. Julia Howard, a Davie County Republican and co-chair of a committee that oversees the state’s unemployment benefits system, which is run by Employment Security.

Wilson filed her lawsuit after the head of Employment Security, Dale Folwell, instituted a policy that made the hearing notices available less frequently and also doubled the monthly cost to $600. Wilson and other lawyers rely on the notices to send solicitation letters to potential clients.

The possibility of revamping state law, possibly by changing the public records statute, was broached at a committee meeting Wednesday.

Sen. Bob Rucho, R-Mecklenburg and co-chair of the committee, said after the session that lawmakers could change state law to somehow bar the agency from disseminating the hearing notices to attorneys.

Taking such a step, he noted, wouldn’t preclude Wilson from going back to court to challenge the law.

“All we are trying to do is protect DES, which is our responsibility,” Rucho said.

Jan Paul, a staff attorney with the legislature’s Research Division, told committee members that she and other staff members are conferring with federal Labor Department officials about steps the state could take to comply with federal regulations.

“It is staff’s opinion that there are legislative changes that the General Assembly can make, specifically with regard to what the agency is directed and not directed to do,” that would resolve the agency’s problem, Paul said.

Ranii: 919-829-4877

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