Senate Bill 42 Prevents a $1 Billion Tax Hike on Employer Unemployment Compensation Taxes

Building on the comprehensive reform to our state’s unemployment insurance system in 2013, the General Assembly passed Senate Bill 42 yesterday that includes measures necessary to keep state law in conformity with federal Unemployment Compensation (UC) law. Senate Bill 42 amends UC information from public records which prevents future improper disclosures of confidential UC information, as well as keeping state law in conformity with federal laws. This protects the confidentiality of employment records and prevents employers from seeing a major tax increase.

Becki Gray, John Locke Foundation and NC SPIN panelist, outlined the significance of the confidentiality issues prior to the fix in her recent article, Fix it now, stating:

“One potentially critical piece is ensuring the confidentiality of unemployment information. It turns out that under previous administrations, North Carolina’s Employment Security Commission was selling notices of unemployment compensation appeals hearings to law firms. It also turns out that this is a pretty serious violation of federal law. The practice has changed under the leadership of Assistant Secretary of the Employment Security Commission Dale Folwell but NC’s law that allowed it hasn’t. Unless the law is changed, there could be serious repercussions and monetary penalties. The State’s Title III grant funding is in jeopardy and North Carolina’s non-compliance could affect the federal Unemployment Tax Act rate – potentially costing every North Carolina business hundreds of dollars per employee.

The US Department of Labor sent a letter in March ordering the state Department of Employment Security to immediately stop selling confidential unemployment information (which of course they have) and must comply with state and Federal laws on confidentiality. It is imperative that we change our state law to comply with these federal regulations and that we do it now. Again, there are significant financial penalties for state taxpayers and for North Carolina employers at stake.”

She could not be more correct as failure to comply with federal law and conform with U.S. Department of Labor law could create serious implications for the business community, directly impacting your federal unemployment insurance taxes. Senate Bill 42 save employers from a $126 to $420 per employee jump in their FUTA rates in 2015 – this amounts to a tax of more than $1 billion a year on businesses.

We appreciate the General Assembly’s attention to this issue and we urge the Governor’s approval, as it is was sent to him for consideration.

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