New Unemployment Law Requires Employers to Respond

By:  Masud Labor Law Group

The Michigan Legislature recently passed package amendments to the Michigan Employment Security Act, MCL 421.1, et seq., imposing new obligations on employers with regard to unemployment claims.  Although this legislation is designed to prevent unemployment fraud, it could also change the landscape of separation agreements between employers and employees dealing with unemployment claims and the manner in which these agreements are drafted.

In 2011, the federal legislature passed the Unemployment Insurance Integrity Act (“UIIA”), which primarily concerned extending retraining assistance to employees displaced by foreign workers.  However, the UIIA also required states to incorporate provisions into their own unemployment laws to 1) enhance penalties for fraudulent unemployment claims; 2) revise the timing of “new hire” reports; and 3) impose new obligations on employers when responding to unemployment insurance claim notices.

In response to the federal law’s requirements, the Michigan legislature passed Public Acts 142 through 147, which became effective October 29, 2013.   The Michigan amendments require employers to respond to monetary determinations issued by the Unemployment Agency.  If the employer demonstrates a “pattern” of failing to provide the Unemployment Agency with requested information on a timely basis, and benefits are wrongfully paid to an employee as a result of that failure to respond, the wrongfully paid benefits will be charged against the employer’s account.  The Unemployment Agency will begin documenting instances in which an employer has failed to respond to a request for information for purposes of determining if a “pattern” exists sufficient to sanction the employer.  Of course, employers must be truthful when responding to these requests for information from the Unemployment Agency.

In the past, employers sometimes reached agreements with terminated employees not to respond to requests for information from the Unemployment Agency, thereby allowing employees to obtain unemployment benefits based solely on the employee’s rendition of the underlying facts before the Unemployment Agency.  However, the legislative amendments make the future of such agreements to “not contest unemployment” uncertain, to say the least.  In light of this legislation, separation agreements should be carefully written to avoid creating agreements which may violate the employer’s obligations under the new statutory provisions.