Unemployment Insurance Compensation

Background
New Jersey’s unemployment insurance (UI) compensation system was originally established in 1935 to provide temporary partial wage replacement to individuals who lose their jobs through no fault of their own. The UI system operates as a federal-state partnership. The federal government sets broad requirements for its administration and for the states, and also determines the details of eligibility and program operation. General information concerning the system is provided below.

Who is eligible to collect unemployment insurance benefits?
To be eligible for benefits, an individual must have earned the minimum wage for at least 20 hours a week over a period of 20 base weeks or at least 1,000 hours over the course of a year. Thus, for 2020 an individual must have earned at least $200 per week for 20 weeks or at least $10,000 during the base year. (A base year is defined as the first four of the last five completed calendar quarters.) The individual must also be available and able to work and be actively seeking employment.

Temporary COVID-19 Changes:
Amidst the state shutdown due to COVID-19, the state has loosened some qualifications for collecting unemployment insurance benefits. Individuals who are out of work because their business closed, either voluntarily or by state mandate, qualify for unemployment insurance benefits. NJ DOL classifies these cases as temporary layoffs and, therefore, suspends the provision that they be able, available, and actively seeking work. Additionally, individuals who are working only 80% of their normal hours qualify for reduced unemployment insurance benefits. Individuals who are unable to work because they must care for children whose schools/daycares have closed, look after loved ones who have COVID-19, or were advised by a public health authority not to go to work can apply for unemployment insurance benefits, given they are no longer receiving wages.

Individuals who have already used up their 26 weeks of unemployment insurance benefits, are likely eligible for an additional 13 weeks of benefits due to the federal CARES Act.

Self-employed, independent contractors, and others typically unable to receive unemployment insurance benefits qualify for Pandemic Unemployment Assistance. These workers must be unemployed, partially unemployed, unable, or unavailable to work due to COVID-19 related issues.

Additionally, NJ Senate Bill 2350, introduced May 14, 2020, would change certain Unemployment Insurance provisions. Specifically, it would reduce the minimum weekly earnings required to qualify for Unemployment Insurance from 20 times the state minimum wage to 10 times the state minimum wage in each of the individual’s 20 base weeks.

Finally, the individual must not be disqualified from benefits for any of the reasons set forth below.

Who is disqualified from receiving unemployment insurance benefits?
Generally, UI benefits are available to individuals who, in most instances, have lost their jobs through no fault of their own. Those who quit voluntarily, are discharged for misconduct, or stop work over a labor dispute may not be eligible for benefits.

In terms of misconduct, New Jersey uses a two-tiered system to classify actions as “misconduct” or “gross misconduct.” If an individual lost their job because of misconduct, they must wait five weeks before becoming eligible to collect unemployment benefits. Gross misconduct includes crimes of the first, second, third or fourth degree. An individual who has been discharged for gross misconduct or who leaves work voluntarily shall be disqualified from collecting benefits until he or she becomes reemployed for eight weeks and earns 10 times his or her weekly benefit amount.

How is the state’s Unemployment Insurance Compensation system financed?
The UI system is financed by employees and employers through tax payments to the Unemployment Insurance Trust Fund. Each year employees pay a flat tax rate. On the other hand, employers pay a variable rate each year depending on the Unemployment Trust Fund reserve ratio (balance of UTF as of March 31st divided by total taxable wages) and their own Employer reserve ratios (contributions paid minus benefits claimed by former employees, divided by average annual payroll). State law establishes five tax columns (A-E), such that when the UTF reserve ratio is high, reflecting a healthy fund, employers pay rates in column A, which are lower. Once the tax column for the year has been established, employers pay variable rates depending on their Employer reserve ratios. An Employer’s reserve ratio decreases as more of its employees claim unemployment benefits, meaning the employer will be subject to a higher tax rate. Employer reserve ratios are sometimes referred to as experience ratings.

In 2020, employees paid a rate of .003825 on the first $35,300 in wages earned. For FY2020, the state was operating in Column B, meaning the fund was relatively healthy, and employers paid a rate ranging from 0.4 to 5.4% on the first $35,300 paid to each employee. Employers are required to make their contributions within 30 days of the close of each quarter. For 2020, employers were scheduled to make Q1 payments on April 30, Q2 payments on July 30, Q3 payments on October 30, and Q4 payments on January 30, 2021.

If a state realizes it will be unable to pay its unemployment benefits, it can request a loan from the Federal Unemployment Account (FUA), the loan account within the Unemployment Trust Fund (UTF). FUA is funded by federal unemployment tax rates on the first $7,000 employers pay to each employee. The tax rate is 6%, but states can apply an unemployment tax credit of up to 5.4% when they have no federal loans outstanding, meaning employers might only pay 0.6%. This was the case for NJ for FY2020. If states fail to repay outstanding loans by November 10 following the second consecutive January 1 after the state received the loan, their unemployment tax credit against the federal unemployment tax will be reduced until the loan is fully repaid. This means the rate employers pay increases to cover their state’s debts. States are also required to pay interest on their loans, equal to the prior year’s fourth quarter UTF earnings yield.

Which employers must participate in and contribute to the UI system?
New Jersey employers who pay at least $1,000 per year in wages to one or more employees are likely subject to the provisions of the UI law. However, certain services are exempted from coverage, and contributions need not be made for independent contractors doing business with a company. In addition, nonprofit organizations that are exempt under 501(c)(3) of the IRS code may elect to reimburse the UI fund for benefits paid in lieu of making quarterly contributions like other employers. Employers should contact the Division of Employer Accounts in the State Department of Labor and Workforce Development (DOLWD) at 609-633-6400 to find out if they are subject to the law.

What is the weekly benefit rate for an eligible claimant?
The weekly benefit rate in 2020 is equal to 60% of the individual’s average weekly wage. The maximum benefit is $713 per week. Generally, benefits may not be collected for more than 26 consecutive weeks. However, in the past, special “extended benefits” have been offered at times of high unemployment to workers who exhaust their regular UI benefits. Currently, because of the COVID-19 crisis, unemployment insurance benefits have been extended to 39 consecutive weeks. Additionally, the federal government is supplementing state unemployment insurance benefits with an additional $600/week per claimant through July.

What is the weekly rate for individuals with dependents?
If a claimant is receiving less than the maximum weekly benefit rate, then their weekly benefit rate is increased by 7% for the first dependent and 4% for the next two dependents. Claimants only receive rate increases on their first three dependents. This means the biggest possible rate increase a claimant can receive is a 15% benefit increase, which cannot exceed the maximum weekly benefit rate of $713 for 2020. In order to be eligible for dependency benefits, the claimant’s spouse must also be unemployed. A “dependent” is defined as the claimant’s unemployed spouse or civil union partner, or unmarried child, stepchild or adopted child under the age of 19 (22 if attending an educational institution).

What are an employer’s pre-claim reporting obligations?
Every employer is required to maintain certain information concerning their employees including payroll records for the current year and the four preceding years for each pay period. The payroll records must include the beginning and ending dates of the pay period, the employee’s full name, address and Social Security number, the days of the week on which the employee worked and is credited compensation, and the total amount and value of compensation paid to each employee. A full listing of these requirements is available at: https://www.nj.gov/labor/handbook/chap1/chap1sec1employerresponsibilites.html#3

Employers must also file an “Employer Report of Wages Paid” (WR-30) form within 30 days of the end of each quarter. Reports can be filed electronically at:
https://www1.state.nj.us/TYTR_BusinessFilings/jsp/common/Login.jsp?taxcode=45

In January 2020, the “Millville Dallas Airmotive Plant Job Loss Notification Act,” P.L. 2007, c.212 (WARN Act), was amended so that 90 days prior to a mass layoff, New Jersey employers with 100 or more employees must notify the NJ Department of Labor and Workforce Development, the chief elected official of the municipality where the business is located, and any affected employees and bargaining units. A mass layoff is defined as the termination of 500 or more full-time employees or 50 or more full-time employees representing one-third or more of the workforce at the establishment. Even when notice is given, employers will be required to provide one week of severance pay for each year full year of employment. The required severance pay rate is the average regular rate of compensation over the last three years of employment or the final regular rate of compensation, whichever is larger. If unemployment occurs because of a labor dispute, the employer must notify the Division of Unemployment Insurance at 609-777-4974.

In April 2020, the state amended the WARN Act again to provide relief to employers during the COVID-19 outbreak. Now, the new provisions will not go into effect until 90 days after the state of emergency is lifted. Until then, employers will be operating under the prior framework, whereby 60 days’ notice must be given prior to a mass layoff and severance pay is only required when employers fail to give proper notice. Additionally, the amendment provides a new definition of ‘mass layoff’ so that employers that have conducted mass layoffs due to COVID-19, retroactive to March 9, 2020, will be exempt from the 60 days’ notice and severance requirements.

Finally, an employer must provide each terminated employee with a Form BC-10, “Instructions for Claiming Unemployment Benefits.” This form can be obtained by visiting
https://www.nj.gov/labor/forms_pdfs/ui/BC10.pdf

Can an employer be responsible for paying benefits for an individual who becomes unemployed under another employer?
Yes. The amount of unemployment insurance benefits that a claimant is eligible to receive is directly related to his actual earnings during the base year. A base year is defined as the first four of the last five completed calendar quarters. Thus, the eligibility of a person who seeks to collect unemployment in April 2020 will be based on his employment from January 1, 2019 to December 31, 2019. If the claimant worked for more than one employer during the period on which his benefits are based, the employer is then charged in proportion to the amount of wages that the employer paid the claimant during the base year to the total wages received during that period. In this case, all base year chargeable employers would share in the cost of each week of benefits payments.

As discussed below, an employer has the right to appeal a determination of benefits. Individuals who voluntarily quit employment or are discharged for misconduct, as determined by the DOLWD, may not be eligible for benefits.

Can an employer challenge or appeal a benefits determination?
The unemployment compensation law provides a mechanism for employers to appeal determinations or decisions of the Division of Unemployment Insurance. The appeals process has two administrative levels: the Appeals Tribunal and the Board of Review. Decisions of the Board of Review may be appealed to the Appellate Division of the Superior Court.

A determination becomes final unless a written appeal is filed within seven calendar days after delivery or within 10 calendar days after the mailing of the determination. An appeal period can be extended if good cause for late filing is shown. Good cause exists in situations where it can be shown that the delay was due to circumstances beyond the individual’s control that could not reasonably have been foreseen or prevented.

To file an appeal, you must mail or fax your appeal to:
New Jersey Department of Labor and Workforce Development Appeal Tribunal, PO Box 907 Trenton, NJ 08625-0907 Fax: 609-292-2438

For More Information
For a detailed description of employer rights and responsibilities under the NJ Unemployment Insurance system, request a copy of the Employer Handbook: New Jersey’s Unemployment & Disability Insurance Programs from the New Jersey Department of Labor at 609-777-3200. You can also access a copy of the handbook at: http://nj.gov/labor/handbook/content/contents.html

If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.

Updated: May 15, 2020
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.