House Backtracks, Passes Bill to Lower Unemployment Insurance Taxes

After a journey of many twists and turns a bill that will lower unemployment taxes was passed by the Legislature in the wee hours of Sunday night as the legislative session came to a close.

AGC supported the original version of the bill SB 5963 but then opposed it as the House added amendments that would have increased not lowered unemployment taxes. The Senate rejected many of the House amendments and AGC again threw its weight behind it.

Calls and emails from AGC members to legislators helped get the bill back to a form that assists businesses said AGC Government Affairs Manager Christine Swanson. If the business community had not united around this issue wed be faced with a tax increase in the middle of a recession.

As passed the bill addresses the fact that the state system does not currently conform to federal rules. Plus the measure right sizes the unemployment insurance fund by slightly reducing the unemployment insurance tax for most business and addresses the voluntary quits issue.

Without changes to the states unemployment compensation system to bring it into conformity with federal law employers in the state could lose $300 million in federal unemployment tax credits.

The U.S. Department of Labor (DOL) has ruled that a provision of Washington State law is out of conformity with federal unemployment-insurance laws. The provision in question is commonly known as pay at 2 charge at 4. According to DOL combining two-quarter averaging for calculating benefits with four-quarter averaging for calculating taxes - as is the case in Washington State - does not conform with federal law because federal law requires that tax rates directly correlate with an individual employers experience with unemployment.

Washington State employers are currently receiving the tax credit but it could soon be lost without action by the Legislature.

AGC also believes a review of the current unemployment tax structure is in order as the trust fund has developed reserves well beyond what is needed to pay a years worth of benefits which is the general standard. Under the legislation 98 percent of employers would have their unemployment insurance taxes remain the same or reduced by an average of 15 percent.

Finally current law allows persons who voluntarily quit to receive unemployment benefits if they left for one of the specified good cause provisions. This bill makes the clarification to voluntary quit language that was needed due to a Supreme Count decision. The new language makes it clear that the reasons to quit as listed in the statute are the ONLY reasons employees may quit and still be eligible for benefits. This limits the Employment Security Departments discretion when making a determination. This bill also establishes another good cause provision for individuals who leave work to relocate for the employment of a spouse or domestic partner that is outside the existing labor market area if the claimant remained employed as long as was reasonable prior to moving.

The bill is on the Governors desk awaiting action which is required by May 19.

For more information contact Christine Swanson at 360-352-5000.