Unemployment Compensation Changes Proposed by House Bill 382

House Bill 382, currently pending in the Ohio General Assembly, is an attempt to increase the solvency of Ohio’s unemployment compensation fund (renamed the unemployment compensation insurance fund by the bill), so the fund can better withstand an economic downturn in the future. It does so by a combination of increasing taxes or contributions (referred to as premiums in the bill) on employers, forcing employees to pay a share of the unemployment premiums, and reducing the amount of benefits employees can receive. Highlights of the bill include the following:

MORE WAGES ARE SUBJECT TO THE UC PREMIUM: Current law specifies only the first $9,000 of an employee’s wages is subject to the UC tax. Nothing is owed for wages in excess of $9,000 during the year. Under current law, this cap increases to $9,500 in 2018. House Bill 382 raises the cap to $11,000. Basically, the amount of wages subject to the UC tax is increased by more than 20% over current levels (more than 15% over 2018 levels).

AUTOMATIC INCREASE IN PREMIUM RATES: House Bill 382 would provide for an automatic increase in the amount of premium rates for employers if the unemployment compensation insurance fund is 60% below minimum safe level, from two tenths to three tenths of 1%.

EMPLOYEES WILL START TO PAY A PORTION OF THE UC PREMIUMS: HB 382 creates a new statute, R.C. 4141.252. Under this statute, employees will start to pay a share of the UC premium. Employee “coinsurance” payments will accrue and become payable when both (1) the employee has been employed by the employer(s) for at least 20 qualifying weeks during any calendar year, and (2) the employee earned at an average weekly wage not less than 27.5% of statewide average weekly wage for those weeks. The amount of the employee’s premium payment is equal to 10% of premium paid by employer. The employer is to determine the amount of payment and withhold coinsurance payments when the employee has enough qualifying weeks and wages to qualify for benefit rights if separated from employment. If there is more than 1 employer, they each will collect the required amount based on the employment with that employer. If the employee has sufficient qualifying weeks and wages but not with a single employer, the Director of Jobs and Family Services will calculate what the employee’s payment would have been and will reduce UC benefits to recoup those premiums if the employee files for benefits at a future date.

This constitutes a major change, as for the first time employees will have to pay for a portion of the unemployment compensation premiums, rather than the current practice of employers paying 100% of the UC tax. Some employers may find it confusing as to how to calculate and collect the employee’s share of the UC premium. The bill does require that employers give notice to prospective employees, disclosing the most recent premium rate and a reasonable estimate of the prospective employee’s coinsurance payments.

BENEFITS MAY BE REDUCED IF THERE ARE OTHER SOURCES OF INCOME: Under HB 382, the Director of Jobs and Family Services may reduce the maximum weekly benefit amount a claimant with dependents may receive if there are additional sources of household income that reduce or eliminate the individual’s need to receive up to the maximum level of benefits. Few guidelines are provided for this new section of law, but it may affect claimants who have a working spouse, are receiving child support, or have any other sources of household income.

MAXIMUM WEEKS OF BENEFITS REDUCED: Benefits are reduced by capping the number of weeks that can be paid at 24, as opposed to current 26. An employee may be entitled to an additional 2 weeks of benefits if certain conditions are satisfied, including that the individual was separated from his/her most recent employment due to weather conditions.

SUPPLEMENTAL BENEFITS ARE AUTHORIZED: Employees may agree, individually or through collective bargaining, to a supplemental unemployment benefit program with their employer. The program must be actuarially sound, a copy must be submitted to DOJFS, and it does not apply to any agreement entered into before the effective date of this section. Private unemployment benefits are not deemed compensation for personal services, and UC benefits otherwise payable shall not be denied or reduced because of private unemployment benefits.

For a discussion of Ohio’s current unemployment compensation system, go to our web page https://livornoandarnett.com/practice-areas/unemployment-compensation/