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December 3, 2013

New York State Unemployment Insurance Law Reform

New York State has recently enacted several changes to the Unemployment Insurance Law.   These changes are likely to increase employers’ unemployment insurance costs. 

Effective October 1, 2013, employers may be effectively penalized for providing late responses or insufficient information to the New York State Department of Labor’s (NYSDOL) request for information.  Typically, the NYSDOL requires that employers respond to requests for information concerning a claimant’s application for benefits within 10 calendar days of the date on the claim notice.  Previously, if an employer provided a late or insufficient response to the NYSDOL’s request for information, the NYSDOL would award the claimant benefits but allow for reimbursement of such benefits to the employer’s account if it was later determined that the claimant was ineligible for benefits.  Currently, however, employers that provide a late response or insufficient information to the NYSDOL are precluded from recouping any benefit overpayments, even if the NYSDOL later determines that the claimant was ineligible for benefits or received an overpayment.

Additional significant changes that will take effect on January 1, 2014 include:

  • Contribution Rates: Employers contribution rates will be increased due to the Federal Unemployment Tax Act (FUTA) taxable wage. All New York employers currently pay a FUTA tax based upon the number of individuals they employ within the state. The FUTA tax, which is currently assessed only on the first $8,500 of each employee’s earnings, will be increased to assess the first $10,300 of each employee’s earnings, with gradual increases annually of up to $13,000 by 2026. 
  • Dismissal or Severance Pay: Claimants that receive severance payments that exceed the maximum weekly unemployment benefit (currently $405) will be precluded from receiving unemployment benefits.  If, however, the initial payment of dismissal pay is made more than 30 days from the last day of the claimant’s employment, this provision will not apply.
  • Standard for Eligibility: Beginning on January 1, 2014, the standard used to determine unemployment insurance eligibility for individuals will change.  The NYSDOL has revised the definition of “actively seeking work”, from “ready, willing and able to work” to “engaged in systematic and sustained efforts to find work.”  This heightened standard will prohibit claimants who are not actively seeking employment from obtaining benefits.  The NYSDOL plans to establish regulations to monitor claimants’ work search efforts by December 2015.
  • Pension Payments: If a claimant is collecting pension benefits from the employer and that employer had contributed to the pension, the claimant’s unemployment benefits will be reduced by the amount of the prorated weekly amount of the pension.

Takeaway for Employers

As a result of these changes, employers should expect their unemployment insurance costs to increase. Further, if an employer intends on contesting an unemployment claim, the employer should be sure to timely respond to the NYSDOL’s request for information.  Additionally, employers should consider these changes in the law when structuring separation or severance agreements for employees to prevent such employees from collecting unemployment. 

The NYSDOL’s “Fact Sheet” explaining the impact of these changes on employers is available at:‎.   

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If you have any questions regarding these changes to the Unemployment Insurance Law please do not hesitate to contact us.