The concept of mandatory government unemployment insurance was spawned during the 1930s when 15 million Americans were out of work and the country was mired in its deepest recession. The economy is much improved but the system remains a vital safety net for millions of working Americans.
Unfortunately, no other tax is nearly as frustrating and confusing to employers. Camp directors, as employers, are probably among the most bewildered trying to administer the FUTA — the Federal Unemployment Tax Act — and its state-spawned equivalents, because unlike most other taxes, you can and do have a significant influence on just how much or little it is going to cost
Unemployment insurance began as a federal initiative designed to coerce states into passing individual laws patterned after a single uniform model. As a result, all states sponsor very similar programs today — yet each retains a few individual quirks and nuances. We will look at how the overall system functions and how it affects you, but with a disclaimer. Exact details and thresholds will vary slightly from state to state! Please check with your own state administrator for exact parameters.
How The System Works
While the program is dubbed "insurance," that word is a misnomer. Insurance is voluntary — this is not. Further, the person it is designed to protect, the worker, pays little or none of the premium. You, the employer, pay most of it. Therefore, it is a tax, not a premium.
Your premiums, or taxes, are based on a concept called "experience rating." Simply put, your tax rate is adjusted each year using a formula based on the number and level of claims filed by your former employees in the prior twelve- to fifteen-month period. As more former staff members collect a benefit check, the higher your tax rate will be on the entire payroll the next year.
Methods of computing the exact rate vary slightly by state, but in general, each employer has a fund or account credit set up somewhere within the bureaucracy. Each payment you make into that fund is credited to your ledger. Each time a former employee draws a benefit check, a negative charge in that amount is posted against you. At the end of the year, the fund is reviewed and a payroll tax is mandated at such level as to bring your camp's fund balance back up to a predetermined level. You are notified in the fall, by mail, as to your proposed next year's rate. Then, you budget.
Hence, a very stable employer who never fires or lays anyone off could conceivably find their rate going as low as 0 percent. On the other hand, a few major claims can drive it over 7 percent of total payroll. To many of us, it is frustrating that when we terminate a worker, we end up paying one way or another. The conclusion you might draw is "don't terminate anyone." Of course, in the real world, this is not going to happen.
Another unexpected liability is the person who leaves for a better or different job. Then, ten months later becomes unemployed, and you, through no fault of your own, must share in the prorated cost (some states base it on percentage of wages, others are "time" rated).
Seasonality also affects camp. At the end of summer, the majority of our workers become unemployed. This makes us especially vulnerable. Only about five states, such as Colorado, with large seasonal economies, make provision for employees as part of a seasonal work force. In the other states — and that is most of us — the day after camp ends, our summer employees potentially qualify to file and collect up to 60 percent of their former earnings for up to twenty-six weeks (more during down turns when federal subsidy funds kick in).
The Employer's Responsibility
While it varies slightly by state, if you are not a government agency or a church, and you pay wages that exceed $1,000 in aggregate to one or more persons other than the camp owner or a family member, you are an employer. The law mandates you register with your state's unemployment division. They will send report forms and payment coupons, and you must complete, return, and remit on a quarterly basis, even for those times you have no activity. Note that summer camp contracts are not stipends or expenses, they are wages!
You must report every employee to whom you paid any wage. This is entirely separate from Federal Income Tax, FICA, and state income taxes. You must supply legal names, social security numbers, and report the amount of wages and the dates earned for each employee for each pay period or week in the quarter — commissions and bonuses included. Record starting and termination dates carefully. The state eventually compiles this information in a computer. Even if you have previously paid to a sufficient level to require zero taxation, you must still submit reports on time or face costly fines.
Your last obligation is posting information about filing unemployment claims where staff can see it. Further, on separating an employee, you are required to inform them of their rights under the law, and provide directions about where and how to file. I doubt most camps do this, but it's law.
To qualify for unemployment benefits a person must be out of work, report to a designated office to file a written claim, undergo an interview, and sit through an orientation. They must be able, willing, and available to accept a new job and they must not refuse an offer of suitable work or a recall by a previous employer. They must continue to report weekly, either in person or by telephone, and demonstrate they are actively seeking work.
Employees can continue to work part time or reduced hours while collecting, and are allowed to earn varying amounts up to 20 percent of former salary (or small fixed amounts such as $25 a week in South Dakota) without diminishing the claim. Over a specified threshold, the benefit is slightly reduced based on an established formula.
A Few Misconceptions
The system is slanted toward the worker. It is designed for their protection, and the government intended this. Other then footing the bill, we (employers) really have little to say about the operation or legitimate claim payments.
Second, some nonprofits and church camps are exempted in a few states, but regulations are finicky. It is safe to say the exemption likely includes few camps, so request a written ruling in your case, to be sure.
Another misunderstood issue is the status of students. They can and do collect benefits! Some states exclude high school students, most don't. College students are almost never excluded. The issue is simply whether they meet the employment test — number of weeks worked, and total dollars earned. The state ranges vary from thirteen to twenty weeks employed in four of the previous five quarters, and earned wages of from $5,300 to $8,000. If a student had a good part-time job before camp, there is a fair chance they can collect after camp — even if they go back to school! Most of them don't realize this. Legally, you are supposed to tell them. Another misconception in most states is that seasonal work doesn't count. It does.
Finally, there is tremendous confusion over cause of separation and how it affects your liability to the tax fund. It's simple. Laid off — you pay. End of the contractual season — you pay. You fire them — you eventually pay. This raises the issue of "good cause" which aggravates many of us. With only the rarest exceptions, whatever your "good cause" for firing them, after a short waiting period, they are functionally out of work, and the system pays.
When an employee quits, it gets trickier. In theory, they do not qualify for benefits until after they have worked four weeks for someone else. But that doesn't presume "good cause" on their part — something you have no influence over. If quitting was entirely non-job related — and the burden of proof is on you — they may, at worst, be penalized and have to undergo a waiting period of additional weeks before collecting. If the employee articulates a work or job related cause for quitting, they usually collect now, and you pay.
The only two disqualifiers you can count on are when the worker enters or leaves a mandated job training program or when dismissal is due to a criminal act. Flagrant misconduct as a disqualifier doesn't always work without the criminal aspect. I have seen employees assault their supervisor, and when the supervisor chose not to prosecute, the "flagrant" defense of the employer was dismissed on appeal.
The Appeal Process
So, you just received notice a former counselor is about to collect benefits and your account charged. It just doesn't seem fair considering the circumstances of termination. What next? Well, if you have a legitimate objection to the claim or its assessment to your account, you immediately respond with a detailed, documented, written objection. Send it certified mail. Failure to respond immediately results in forfeiture of all future rights to object.
Having done this and later been notified your objection was found to be without merit, you can request an appeal hearing with a referee or judge. If you have a good point, it is vital you appeal to prevent unfair assessments and abuse of the system. If your argument is weak, don't bother. It's a bad use of time simply to vent frustration.
Here are the points you can usually contest, and sometimes win! A lawyer can help but is usually not encouraged by the system at this level.
1. If the information in the initial notice is inaccurate to wages paid or dates worked, and the correct information disqualifies the claimant or reduces camp's liability, challenge it. Document everything. I personally found 50 percent of what we get back in our (unnamed) state has pertinent and significant errors. Two or three times a year we are assigned claims for people we never even heard of. Pay attention.
2. If you detect fraud by the applicant, you have a chance to prevail if you can prove it. If they put down too much in wages, never worked for you, or lie about the time period, they often get away with it as the state's computer is so far behind posting. Many states just take the applicant's word. They may catch up later, but I have yet to meet anyone voluntarily reimbursed one or two years after the fact!
3. If the applicant is a full-time student (twelve credits or more) and you know their schedule will prohibit them accepting the same work or working sufficient hours to qualify for the job they left, you can win in some states. The key is proving they are unavailable.
4. If criminal behavior was the root of termination, you must show it is being prosecuted. However, old history is often irrelevant. Gross example: if you find you hired a previously convicted molester and subsequently dismiss them as unsuitable to work with children, it's no fault of their own they are newly unemployed (unless they lied on an application), so don't bother fighting it.
5. In flagrant misconduct, which you feel the claimant intentionally committed hoping to be fired and then collect benefits, you have a basis for an appeal. But the burden of proof is on you — the employer. That means — angry as it makes us — the hearing officer takes the claimant's word over yours unless you bring legal proof.
Usually that means first-hand witnesses — those who can actually substantiate and swear under oath as to what they saw or heard — not reports and affidavits. On the other hand, sometimes the former employee fails to show up for the hearing. In that case, you obviously stand a better chance of winning.
6. "Fired With Just Cause" is one you generally won't win. As insurance, the system is meant to protect the employee from you, and to a similar degree, from themselves — even if that means their own poor, unreliable, or irresponsible job performance. All they have to do is show up, on occasion. At most, you will earn a four week penalty suspension of the benefits paid, but they just resume in the fifth week.
7. "Quit With Good Cause" is another tough battle. If the "good cause" is entirely personal and totally unrelated to anything remotely associated with the job, you have a chance to at least delay payment of benefits. The down side test is whether the applicant can connect their departure to dissatisfaction with the job.
Example — employee starts showing up late, calling out a lot, and you fire them after repeated warnings. The former employee need only argue their car broke down and they can't afford a new one, or that the job or a supervisor was causing them stress and anxiety compelling them to seek a change of scenery for mental health reasons!
8. "Refusing Suitable Employment." If you call them back or offer a similar job, they must accept. If they refuse, you have a winnable claim. The same applies if you are aware someone else has made an offer and been rejected. However, the operative word is "suitable." A nuclear physicist may turn down a janitor's job, with no contention. There will be wide latitude of interpretation as to what a camp counselor can turn down in terms of "suitable employment."
Whether you are a veteran or novice camp director, you have an obligation to be familiar with your state's law. One thing is certain. If you pay attention, plan wisely, hire carefully, and follow through afterwards, you can save money. If you let things slide or remain uninformed about your options, it will cost you more. Every state will provide a free copy of its regulations and an employer's handbook supposedly written in plain English. Often, this can even be downloaded off the Web.
Originally published in the 1999 Winter issue of The CampLine.