Jul 30, 2021 - 1:15pm

Up Next: Unemployment Insurance Reform


Senior Manager, Employment Policy

The ‘here and now’ has dominated the Unemployment Insurance (UI) conversation for the last 16 months—how much should the supplemental benefit be? How long should benefits last? How can fraudulent claims be minimized? These policy questions remain, but as expanded benefits inch closer to expiring, the conversation is shifting towards the future of UI. As such, Senators Wyden and Bennet released the Unemployment Insurance Modernization Act Discussion Draft earlier this year. The Chamber welcomes the opportunity to participate in the discussion around this proposed legislation.

The Act is comprised of two portions: a technology package and a benefits package. The technology package, Section 912, was originally introduced by Senator Wyden as the Unemployment insurance Technology Modernization Act of 2021 (S.490). This thoughtfully crafted legislation addresses UI infrastructure’s pressing needs. 

As proposed, the bill would provide a $500 million grant for the Federal government to develop a technology capable of efficiently receiving, processing, and administering UI benefits. States will be able to adopt this modular system in part or whole. Further, the technology will be useable by virtually all Americans. To achieve this, the legislation calls for the UI claims process to be accessible by phone, in person, and via the internet through both desktop and cell phone applications. The technology must also be able to support multiple modes of communication, such as text message, email, and live chat, and available in any language spoken by more than 1% of the state’s population. 

Finally, the legislation would mandate that the technology developers work in tandem with cybersecurity experts to ensure the secure storage of data and with key private and public stakeholders (such as state workforce agencies, UI experts, contributing employers, and UI claimants) to guarantee that the technology works well for all parties involved. In the long run, investing in UI technology modernization will streamline the benefit claims process, minimize fraud, and potentially reallocate valuable resources to workforce development and reentry programs. 

The benefits package is more complex than its tech counterpart. The proposal calls for tying extended benefits and federal top-ups to economic conditions. By establishing automatic triggers, benefits would be disbursed automatically, without providing payments that exceed a claimant’s previous earnings, and it would be less likely that benefits are available beyond the necessary timeframe. Furthermore, it would save Congress from having to negotiate emergency benefits whenever there is a recession.   

There is, however, a significant concern with another part of the bill.  Specifically, Section 212 mandates that all 50 states use an ABC test to determine for purposes of UI benefits if a worker is an employee or independent contractor.  This ABC test, identical to the test found in California’s disastrous AB 5 legislation, is immensely restrictive and makes it very difficult for a business to classify a worker as an independent contractor, even in cases in which the worker does not want to be considered a traditional employee. Notably, S. 490 does not include any of the multitudes of exemptions to AB-5 that the California legislature was forced to enact once they realized what a blunt instrument the ABC test is.

Including the AB-5 type test in S. 490 could threaten workers who wish to earn a livelihood as an independent contractor as well as businesses who offer flexible work arrangements and opportunities. 

A second concern is that the proposal mandates that states provide specific weekly benefits amounts for a specific duration or be subject to a decreased Federal Unemployment Tax Act (FUTA) tax credit. This strong-arm approach undermines states’ traditional role in the UI system and is likely to meet fierce resistance.

 UI reform is an important issue, and the COVID pandemic has demonstrated clearly the faults of the current system.  The Chamber is eager to work with members of Congress to improve UI so that it supports the needs of workers, businesses, state workforce agencies, and our economy as a whole. 

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About the Author

Senior Manager, Employment Policy