Employers Face More Compliance Challenges

Gerald DavisThis past January, the Michigan Unemployment Insurance Agency (MUI) mailed a new determination to employers – Form UIA 6367, Notice of Determination of Employer Charging (Notice). The MUI uses this form to notify employers that they have the potential to be charged for (unemployment) claims for which the employer does not provide timely or adequate information in the calendar year.

Michigan law provides that if an employer or its agent has demonstrated a pattern of failing to timely or adequately respond to Agency requests for information, then benefits paid to a claimant will be charged to that employer’s account. State law defines what constitutes a “pattern” in this context as the following:
MCL 421.20(a) states that “pattern” means that the number of failures must be more than four in number and constitute two percent (2%) or more of all the requests directed to the employer during the prior calendar year.

In order to determine a pattern, the Agency established a baseline date to ensure that an employer’s failure to timely or adequately respond does not meet the requirements imposed by State law. The Agency then gathers, tracks, and analyzes the response data to determine, on an annual basis, which employers will be charged.

The Notice contains the information necessary for the employer to protest if they believe they were timely and designated as unresponsive in error. The Notice also includes a list of the cases (claimants) upon which the Notice was based and the criteria applied. Having established a pattern does not automatically indicate that the employer will be charged. The provision is only applied if the employer has established a pattern AND is not timely or adequate in responding on the current claim.

The rule from this new procedure is that, even if an employer does not wish to contest a claim, it is important that the employer responds to a request for information from the Agency. If, for example, the former employee voluntarily quit employment, that employee would not qualify for unemployment compensation benefits, but sometimes the employer would not respond if the employer agrees with the Agency’s determination. However, failing to respond is counted as an untimely or inadequate response and will impact the annual evaluation.

In the current version of the Notice, the Agency recites that the employer’s account will not be credited for any claims filed during the calendar year for which the employer does not provide timely or adequate information. In my opinion, this qualification is temporary. Why else would the Agency create this elaborate procedure to identify employers who have failed to timely respond to Michigan Unemployment Insurance Agency inquiries?

The American system of jurisprudence strongly disfavors imposing liability or guilt legislatively without a formal adjudication on a case-by-case basis. A Bill of Attainder is defined as a special legislative enactment that imposes penalty without a judicial trial upon a particular person or class of persons. A Bill of Attainder is thus an act of the legislature finding a person guilty without a trial, contrary to the United States Constitution, Article I, Section 9, Paragraph 3, that provides no “Bill of Attainder or ex post facto law will be passed.” An ex post facto law is a law that retroactively changes the legal consequences or status or actions that were committed, or relationships that existed, before the enactment of the law. In other words, it is a law that makes illegal an act that was legal when committed, or increasing the penalties for an infraction after it has been committed, or otherwise changes the rules of evidence or makes conviction easier. Interpretation of the ex post facto provision is therefore liberally interpreted.

The Notice constitutes a new Agency form and a new process, which undoubtedly will be court-tested to determine its efficiency, fairness, legality and, perhaps, its constitutionality, but in the interim, all employers are advised to respond to each Notice received from the MUI and requests for information, whether they agree with the decision, statement or conclusion or not.

Gerald C. Davis is a partner in our Livonia office where he concentrates his practice on corporate and business law, leveraged buy-outs, company reorganization and refinancing, analyzing investments for joint ventures, intellectual property, and drafting loan agreements. He may be reached at (734) 261-2400 or gdavis@cmda-law.com.