Good News for Texas Employers: 2012 Unemployment Tax Rates Drop

It's rare for employers state-wide to get good news in this troubled economy.  Today, however, the Texas Workforce Commission presented Texas employers with an early Christmas present in the form of the newly released 2012 unemployment tax rates.   The tax rates range from .61 to 7.58 percent on the first $9,000 in wages paid to each employee down from a range of .78 to 8.25 percent. 

The Commission is mailing each Texas employer its specific 2012 tax rate today and should be received later this week.  To understand how your unemployment tax rate is calculated, you can review these sources:

Calculating the Texas Unemployment Tax Rate

Calculate Your Unemployment Tax

Your Tax Rates -2012

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Texas to Announce and Mail New Unemployment Tax Determinations

The Texas Workforce Commission will announce the new 2012 state unemployment tax rates on December 12, 2011.  The Commission will also mail each employer its 2012 unemployment tax determinations on that day.

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Should You Ever Hang Up on the Texas Workforce Commission?

In Texas, employees and employers are entitled to a telephone hearing before a hearing officer if either party disagrees with an initial determination issued by the Commission in unemployment benefit and Texas Pay Day Act claims.  There are some occasions, however, where an employer may consider foregoing these telephone conferences --even if it means losing the unemployment benefit claim.

Telephone hearings before hearing officers are conducted under oath and are recorded.  This constitute sworn testimony that will be binding on the parties in subequent proceedings.  Some attorneys representing employees use these telephone hearings to conduct discovery on potential discrimination, retaliation, harassment or wage and hour claims they may be thinking about filing.  If you appear for an administrative telephonic appeals hearing without your labor and employment counsel and the employee on the other side has a lawyer; think long and hard about whether you want to participate further in the proceeding without advice of counsel.  You might win the battle (i.e., the telephone hearing) but lose the war by having the testimony offered at the hearing used against the employer in a more significant lawsuit with more exposure.  Sometimes it may be better to just hang up and not oppose the unemployment benefit claim.

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Handling Texas Unemployment Compensation Claims

Most Texas employers handle claims for unemployment compensation in-house (i.e., they don't use an outside lawyer).  A good resource to consult when handling these claims (and for answers to many Texas specific employment-related legal issues generally) is published by the Texas Workforce Commission titled "Especially for Texas Employers".  According to its introduction, 

Especially for Texas Employers has been written to explain the sometimes confusing "legalese" of federal and state employment law in easy to understand language that makes sense in the everyday business setting. This publication is an effort to bring you the kind of information and assistance that you can use on a daily basis, and which you as a taxpayer deserve. 

ETE contains sections on: Hiring: Basic legal Issues for Employers; Pay and Policy Issues; Work Separation Issues; Post-Employment Problems and a resouce page Employment Law-Related Web Sites.  Guidance related to handling unemployment benefit claims is found under Post-Employment Related Problems. 

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Texas Employee Violating Attendance Policy Denied Unemployment Benefits

Texas employees are ineligible for unemployment benefits if the are terminated from employment for "misconduct connected with the work."  Misconduct connected with the work includes "mismanagement of a position of employment by action or inaction, neglect that jeopardizes the life or property of another, intentional wrongdoing or malfeasance, intentional violation of a law, or violation of a policy or rule adopted to ensure the orderly work and the safety of employees."  

A frequently litigated issues is whether termination due to excessive absences or tardiness constitutes misconduct connected with the work.  In the recent opinion of Murray v. Texas Workforce Commission, the Dallas Court of Appeals confirms that termination due to violations of employer's written attendance or tardiness policy constitutes misconduct connected with the work rendering the employee ineligible for unemployment benefits.

This is a useful case for employers to cite to hearing officers and examiners in unemployment compensation hearings when the employee has been terminated pursuant to a written time and attendance policy.  Timely and successful challengers to claims for unemployment compensation is one way an employer can keep its unemployment tax in check.  (See post, post).

 You can download the full opinion of Murray v. Texas Workforce Commission here.

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S.B. 314 Prohibiting Chargebacks to Employer Unemployment Benefit Accounts for Benefits Paid to Victims of Sexual Assault

Senate Bill 314 was enrolled in the Texas Legislature and would exclude, from an employer's unemployment tax account (i.e., no chargeback), unemployment benefits paid to an employee who left employment because he or she (or their immediate family member) is a victim of sexual assault.  Bill text here.


Calculating the 2011 Texas Unemployment Tax Rate

There continues to be a substantial increase in the number of unemployment claims filed by Texas employees. This increase has the potential to raise the unemployment tax rate for employers that do not take proactive steps to manage their Texas unemployment tax rates.  The state unemployment tax rate is the only business tax an employer can control.

To understand how to manage the unemployment tax rate, an employer first must understand how the tax rate is calculated. Texas employers pay state unemployment tax on the first $9,000 of wages paid to each employee.  For calendar year 2011, the unemployment tax rate is composed of four components. The unemployment rate ranges from a minimum of .78 percent to a maximum of 8.25 percent.  An employer’s state unemployment tax rate is the sum of four components: Replenishment Tax Rate (RTR); Employment and Training Investment Assessment (ETIA); Unemployment Obligation Assessment Rate (OA) and the General Tax Rate (GTR).  The effective tax rate is calculated by adding the ETIA, RTR, OA and GTR.

The RTR is a flat tax rate assessed to all Texas employers to replenish ½ of the unemployment trust fund payments made to claimants that were not charged back to (i.e., assessed against) a specific employer. The RTR is calculated by dividing ½ of the unemployment benefits paid, but not charged to a particular employer, by the total taxable wages for the year. The rate is then spread across all experience-rated employers.  An individual employer has no meaningful way to reduce its RTR. 

The second component of the Texas unemployment tax rate is the ETIA. It is a fixed rate of .10 % which is taxed to fund the Skills Development fund.  The ETIA is fixed and applies to all Texas employers, so there is no way to manage or reduce this tax rate. 

The third component of the unemployment tax rate is the OA. The OA is used to collect amounts needed to pay bond obligations due in 2011 and interest due on loans from the federal government. The OA is the same for all Texas employers during 2011 and is .26 percent.          

The final component, the GTR, is based on the employer’s individual responsibility for repaying unemployment benefits to its former employees.  The GTR is the employer's only opportunity to reduce Texas unemployment tax by lowing the employer's experience rating.  Experience ratings can be reduced by limiting the unemployment benefit claims paid to former employees. This is principally done by limiting employee turnover and timely challenging claims for unemployment benefits filed by former employees who are not eligible for benefits. The GTR is calculated by multiplying the RTR by the ratio of three years of chargeback by three years of the employer's taxable wages.    

To see how an employer can lower its unemployment tax rate, read the following article: Lower Your Texas Unemployment Taxes

Texas Increases the Unemployment Tax Rate for 2011

The Texas Workforce Commission has published the unemployment tax rates for 2011.  The minimum tax rate increases from .72 percent to .78 percent.  The maximum tax rate; however, will drop from 8.60 percent to 8.25 percent.  The average unemployment tax rate will increase from 1.83 to 2.03 percent and the average experience tax rate will be 1.96 percent.

El Paso Court Holds Employee Abandoned Job --Did Not Quit for Good Cause

Last week, the El Paso Court of Appeals affirmed a judgment in favor of an employer on an unemployment benefit eligibility issue where the employee, abandoned his job.  The employee was a Nationwide Financed Agent from January 2003 until November 2005.  A Financed Agent is an employee-agent of Nationwide who starts an insurance agency and operates it to the point of economic self-sustainability.  At that point the Financed Agent becomes an independent contractor. 

In June 2005, the employee's supervisor met with the employee to discuss his poor job performance.  The employee continued to under perform and the employer attempted to meet with the employee on three successive occasions to address the continued poor performance; however, the employee failed to attend those meetings.  Ultimately, the supervisor telephoned the employee and left a message for him to return the call immediately.  The call went unreturned.  Further investigation revealed that the employee had not been to the office in two months and that he had removed computer equipment and all of his personal belongings from the office.  The supervisor wrote the employee to advise that Nationwide considered his employment to have been abandoned. 

The employee filed for unemployment benefits claiming he quit with good cause.  He contended that he quit with good cause because: 1) he was require to work overtime without being paid time -and-a half; 2) he believed he was about to be laid off; and 3) supervisor acted in bad faith to create a record for his eventual discharge.  The appellate court affirmed the judgment for the employer because:

Uranga had been employed by Nationwide from January of 2003 to November 2005. As an agent, Uranga would have a full day but he was able to set his own office hours. Uranga was aware at the time he was hired of the job responsibilities and the required time commitment. When Uranga's job performance became a problem, Scott met with him to discuss the deficiencies in his operation. Uranga's job performance did not improve and Scott attempted to meet with him again, but Uranga did not attend the scheduled meetings. Scott subsequently discovered that Uranga had been absent from the office for most of the two previous months and he had removed computer equipment and personal belongings. Scott determined Uranga had abandoned his employment and wrote Uranga a letter notifying him that Nationwide considered his employment at an end.

Given these facts, there is nothing surprising or controversial about about the fact the appellate court affirmed the conclusion that the claimant resigned without good cause.  Similarly, the opinion doesn't state any new rules of law.  However, the opinion emphasizes a few points about eligibility for unemployment benefits under Texas law including:

  • Leaving a job when work is still available (even when a definite notice of layoff is given) constitutes a voluntary resignation.
  • Claimant working under objectionable conditions for a prolonged period of time weighs against a finding that his eventual resignation was for good cause.

A copy of the court's opinion is available here.

Lower Your Texas Unemployment Taxes

In this post I want to outline a series of steps an employer can implement that may decrease its unemployment tax rate and taxes.  The state unemployment tax rate is the only tax rate that an employer can effectively control.  Because the tax rate is calculated over a three year rolling average, it may take a year or two to start realizing these savings.  Here are the steps. 

  • Document employee problems and rule violations at the time those issues occur.  Keep thorough, accurate records of these issues in the employee's personal file.  An even better record is one where the employee signs, at the time the performance is documented, that he has had an opportunity to review the documentation.
  • Make solid hires and don't over hire.  Turnover can dramatically increase your unemployment tax rate.  Consequently, make sure that you take all reasonable steps to ensure you are hiring good, qualified candidates for employment.  Do background checks (but comply with the Fair Credit Reporting Act) and check references.  Don't hire more employees than you think you will need for the foreseeable future. 
  • Designate a specific person to receive and review unemployment claims.  Ensure all employees responsible for receiving and distributing company mail know where to route correspondence from the Texas Workforce Commission.  Ensure that when the designated person is away from work for vacation or leave of absence that another person is responsible for timely receiving and reviewing claims.
  • Review every claim immediately.  Ensure that all information on the claim form is correct.  Errors in the employee's stated compensation or termination date can result in the Texas Workforce Commission paying at incorrect rates or for improper periods.  
  • Timely respond to the TWC's requests for information.  This seems obvious, but the deadline for opposing unemployment benefit claims is jurisdictional and it is difficult to convince the Commission that good cause exists for a late response.  Moreover, keep in mind that the deadline for the response runs from the date of mailing; not the date you receive the claim or determination.
  • Timely appeal determinations that incorrectly award benefits.  Some reasons for benefit ineligibility include: 1) misconduct connected with the work (this includes policy violations and intentional acts --not general poor performance); 2) voluntarily leaving work (i.e., a resignation that is not a constructive discharge or due to injury, illness or pregnancy); 3) aliens not authorized to work in the United States; 4) failure to apply for, accept or return to work; 5) leaving work pursuant to a labor dispute (i.e., union strike); 6) any periods where the employee is receiving wages in lieu of notice or is receiving workers' compensation benefits for temporary or permanent disability.
  • Attach evidence to support the reasons for benefit disqualification.  For example, in a resignation case, attach the letter of resignation.  In misconduct cases, attach copies of the policies the employee violated; evidence that the employee received notice of and/or training on those policies (e.g., handbook acknowledgments signed by the employee); and any copies of written warnings the employee received related to the ultimate reasons for termination.
  • Appear at the telephone appeal hearing.  Provide supporting evidence to the hearing officer several days prior to the hearing and bring witnesses that can testify and support the reasons that the employee should be disqualified from the receipt of benefits.

One final word of caution.  If you think the former employee is likely to file a lawsuit or charge of discrimination against the company and the employee shows up at the appeal hearing with a lawyer (Remember: appeal hearings are recorded testimony under oath), the employer should seriously consider whether it might be prejudiced by moving forward with the hearing in the absence of counsel.  Stated another way, consider whether it is worth winning an unemployment benefit hearing only to give the employee's lawyer a preview of the company's defenses that might be used in later litigation.  Some plaintiff's lawyers use unemployment benefit hearings as opportunities to conduct early free discovery and they know that most employers use nonlawyers to appear and attend these hearings.