Bill Summary for An Act Relative to Modernizing and Protecting the Unemployment Insurance System

Lead Sponsors: Senator Thomas McGee and Representative Martin Walsh

Bill Number: SB698/HB1867

Background: Unemployment Insurance (UI) is the first line of defense in a recession. It is a crucial source of income for jobless workers and their families, and it puts badly-needed dollars back into the economy immediately. However, the UI program has not kept pace with today’s economic realities. The underlying financing structure of the program is regressive and burdensome on small businesses, and many workers who should be eligible for UI are unfairly denied benefits. Congress has recognized these shortcomings, and in the UI Modernization Bill now under consideration has added financial incentives for states to adopt reforms to their UI laws, many of which are included in this bill.

Current law: The UI payroll tax covers only the first $14,000 of an employee’s wages. This low taxable wage base is a regressive tax that falls disproportionately on small businesses. And because the tax is static and not indexed to keep up with inflation, the imbalance between UI trust fund income and UI expenses increases. Sixteen states have a higher taxable wage base and 13 states index their taxable wage base to keep up with inflation – these states are much more likely to be able to preserve the solvency of their UI trust funds, thereby avoiding borrowing and interest penalties for employers.
A small number of workers are completely ineligible for UI or their UI is reduced simply because their wages have fluctuated from quarter to quarter, they have worked multiple jobs, their highest paying job was not their most recent job, or they have been forced to leave their job because their spouse has relocated, or due to the illness or disability of an immediate family member. Moreover, many workers in temp jobs are ineligible for UI because of a recent law change that requires them to prove that they requested a new assignment upon completion of an old one. This burden of proof is difficult to meet and ignores the long-standing purpose of UI which is designed to provide income while a worker looks for suitable, permanent work. Fewer than three percent of unemployed workers in Massachusetts now participate in training programs because of various barriers and limitations, even through current law provides for up to 18 weeks of extended benefits for unemployed workers to learn new skills. Finally, the state’s UI agency often makes erroneous redeterminations that go into effect without benefit of a hearing. And employees who testify at UI appeals have no protection against employer retaliation.

What this bill will do: This bill will increase the taxable wage base to the same % of average weekly wages as UI benefits and will index it to keep up with inflation. The bill will remove ineligibility for workers who have fluctuating income and whose highest paying job was not their most recent job and will restore full UI eligibility for many categories of workers now ineligible: workers who have left temp jobs and are actively seeking work and have not refused suitable work, workers who leave work to accompany a spouse who has moved to a new locality, and workers who once worked two jobs and who left a second part-time job and later lost their full-time job through no fault of their own. It will grant UI eligibility to workers who must leave work due to illness or disability of an immediate family member, will improve training opportunities and extend the number of weeks of UI to participate in training to 26 weeks, and will protect employees testifying in UI appeals hearings from employer retaliation and protect both employees and employers from erroneous redeterminations by requiring hearings before redeterminations are made.