by Gerard E. Dempsey and Kathleen T. Henn

In this article we address a question submitted by a reader who asked about liability under the Illinois Unemployment Compensation Act (the "Act") when an employing library, library district or library system (hereinafter, "library") hires a person who has been laid off from other employment.

Because of the arcane and complex terminology used by the Act, we begin with a general overview of the operative definitions with respect to employer liability under the Act.  (If you would like to "skip" directly to the answer to the question addressed by this column, you will find it in the italicized paragraphs below.)

First, the Act does cover "local governmental entities" (which the Act defines as the State and its instrumentalities, and also local government entities), unless the Act specifically excludes from coverage the employees in question.   In general, local government entities are "employers" covered by the Act.  Consequently, each library is subject to the Act, regardless of its past or current employment experience, the number of workers providing services for the library, the size of its payroll, or the fact that the library is exempt from the Federal Unemployment Tax Act.

Most persons providing services for the library are counted as "employees" covered by the Act regardless of whether they are full-time, part-time or temporary workers, or whether they receive wages in cash or in any other form of remuneration.  However, certain employment services are not counted under the Act.  With respect to libraries, the pertinent statutory exclusions are limited to employment service as an elected official and service as a worker serving on a temporary basis in case of fire, storm, snow, earthquake, flood or similar emergencies.

Libraries, like other local government entities, covered by the Act, have an option to elect to be a "reimbursable" employer, as opposed to being a "compensation-type" employer.

A reimbursable employer agrees to reimburse the State dollar-for-dollar for the actual amount of unemployment compensation benefits paid to the library's former employee, plus 100% of the extended benefits paid to that former employee, if the library was both the so-called "last employer" and a so-called "base period employer."  (These quoted terms are discussed below.)  However, a reimbursable library's reimbursement obligation is reduced to 50% of these amounts if the library was the last employer but not a base period employer.

In other words, a reimbursable library does not incur any unemployment compensation tax or other unemployment compensation expense unless and until an employee of the reimbursable library becomes entitled to unemployment compensation benefits.

Unless the library timely elects to be a "reimbursable" employer, the library will be classified as a "compensation-type" employer, meaning that the library will have to make the customary quarterly contributions pursuant to the Act's statutory contribution rates.

Under the Act, the term "last employer" generally refers to the employer that last provided the former employee with 30 days of employment (whether or not in the former employee’s so-called "base period").

The “last employer” is required to pay for the entire unemployment compensation benefits claim.  In addition, an Illinois "last employer" that pays wages allowing the former worker to requalify for unemployment compensation benefits after a benefit disqualification will generally be charged, even if the 30 day employment time frame is not met.

The "base period" is the first four of the last five completed calendar quarters immediately preceding the commencement of the former employee’s "benefit year."

A "benefit year" is the one-year period beginning with the Sunday of the week in which the former employee first files a valid claim for unemployment compensation benefits; and, therefore, a "base-period employer" refers to any library from which the former employee received wages during the employee's benefit year (which is the period that will determine the former employee's unemployment compensation benefits).   In other words, under the Act a base period employer is the employer who employed the former employee for five quarters before his or her first quarter of unemployment, and status as a base period employer ends one quarter before the employee's first quarter of unemployment. 

The Illinois Department of Employment Security charges each unemployment compensation benefit payment to the account of a "chargeable employer."  See Section 1502.1(A)(3) of the Act (820 ILCS 405/1502.1(A)(3).  These benefit charges ultimately affect the employer's "reimbursement" obligation (or its unemployment compensation tax rate if the employer is a compensation-type employer).

            Under Section 1502.1(A)(3), a library will be a "chargeable employer" if the library:

1. Separated the employee in question from his or her employment with the library or reduced his or her hours of employment, causing the employee to become unemployed; 
2. Provided employment that allowed the former employee to requalify for unemployment compensation benefits after the employee was previously disqualified from receiving such benefits (for the reasons designated in the Act); or
3. Employed the former employee before he or she filed the unemployment compensation benefits claim, but only if the library employed that person for at least 30 working days, whether or not such days are consecutive.

 

We stress that under the Act the library will generally not be a "chargeable employer" unless the employee has worked for the library for at least 30 days -- as distinguished from 30 days from the employee's date of hire by the library.  Consequently, with respect to all new hires, the library should be sure to review the employee's performance after he or she has worked, for example, two or three weeks.  Upon completion of the performance evaluation, if there are significant problems with his or her performance, any new employee should be terminated before the employee has worked 30 days.

Following this practice will usually protect the library from becoming a "chargeable employer" under the Act and so will avoid any increase in the library's reimbursement obligation (or in its unemployment compensation tax rate if the library is a compensation-type employer).

Gerard Dempsey and Kathleen Henn are partners with the law firm of Klein, Thorpe & Jenkins, Ltd. which is an Illinois law firm with offices in the Civic Opera Building at 20 North Wacker Drive in Chicago and at 15010 S. Ravinia, Orland Park.  The firm concentrates in the representation of local libraries, Library districts and Library systems, as well as other local governmental units.

 

Published June 17, 2009 in vol. 3, iss. 12 [View]