Washington conformity decision on experience rating

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CLASSIFICATION

UI/FUTA
U.S. DEPARTMENT OF LABOR
Employment and Training Administration
CORRESPONDENCE SYMBOL
Washington, D. C. 20213
TEU
ISSUE DATE

March 30, 1987
RESCISSIONS
EXPIRATION DATE

March 31, 1988
DIRECTIVE : UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-87

TO : ALL STATE EMPLOYMENT SECURITY AGENCIES

FROM : DONALD J. KULICK
Administrator for Regional Management

SUBJECT : Secretary's Decision in the 1986 State of Washington Conformity Proceedings

1. Purpose. To announce the Secretary of Labor's Decision in the 1986 conformity proceedings concerning the State of: Washington.
2. References. Section 3303(a)(1) of the Federal Unemployment Tax Act (FUTA);
Secretary's Decision in Case No. 86-CCP-1, dated October 28, 1986.
3. Background. In 1984, the State of Washington amended its Employment Security Act to include provisions relating to workers with Marginal Labor Force Attachment (MLFA), which primarily affected the measurement of experience of employers relative to MLFA workers. MLFA workers are regularly and predictably unemployed during parts of each year and include, for example, certain agricultural, lodqinq, and construction workers.

Washington's experience rating system is a benefit ratio system which uses experience for the four years preceding the computation date in calculating an employer's contribution rate. Beginning in 1985, certain benefits paid to MLFA workers were noncharged. Rates for 1986 were calculated using the actual 1985 benefit charges (and no noncharges). Using the 1985 data, a "rate of savings" was applied to MLFA employers to receive a reduction in benefit charges for each of the prior three years, although the MLFA noncharging provision had not been in effect daring those years.

This resulted in the actual benefit charges for these years being reduced, on the assumption that employer's experience in the three preceding years (1982-1984) was the same as in 1985.

The Department of Labor (DOL) challenged this retroactive application of 1985 experience as a violation of the experience ratinq requirements of Section 3303(a)(1), FUTA, which provides that no reduced rate may be allowed to an employer unless such rate is based on the employer's "experience with respect to unemployment or other factors bearing a direct relation to unemployment risk." DOL argued that Washington used "assumed" rather than actual experience for three of the four years in calculating 1986 rates, and that "assumed" experience does not meet the requirements of Section 3303(a)(1), FUTA.

A hearing on this issue was held before a Department of Labor administrative law judge (ALJ). On October 10, 1986, the ALJ issued a recommended decision and on October 28, 1986, the Secretary issued his Decision.

4. Secretary's Decision. The Secretary adopted the Findings and conclusions in the ALJ's
   recommended decision and held that the Washington Employment Security Act "no longer contains the provisions" required by Section 3303(a) (1) , FUTA.

On December 22, 1986, the Secretary issued a final order which approved the settlement agreement between the State of Washington and the Department of Labor reached as a result of that decision. Under this agreement, the Secretary found, that the offending provision of the Washington Employment Security Act had been declared inoperative as of October 31, 1986. Therefore, the Secretary stated he would "certify the unemployment tax law of the State of Washington to the Secretary of the Treasury."

5. Action Required. Administrators are requested to provide the above information to
   appropriate staff.
6. Inquiries. Direct inquiries to the appropriate Regional Office.
7. Attachments.
   a. Order Approving Settlement and Modifying Order of October 28, 1986, dated
   December 22, 1986.
   b. Final Decision and order, dated October 28, 1986. (Contains Recommended
   Decision of the Administrative Law Judge, dated October 10, 1986.)

The Secretary’s orders and ALJ decision are separate adjudicative attachments on pages 3–20 of the source PDF; they are not transcribed here.