DAR File No. 27192

Workforce Services, Workforce Information and Payment Services

R994-405

Ineligibility for Benefits

NOTICE OF PROPOSED RULE

DAR File No.: 27192
Filed: 05/28/2004, 02:52
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This amendment changes the fraud penalty provision to match recent legislative changes in S.B. 5 (2004). (DAR NOTE: S.B. 5 (2004) is found at UT L 2004 Ch 7, and will be effective 07/01/2004.)

Summary of the rule or change:

The legislature passed an amendment to the Employment Security Act which changes to fraud penalty. The maximum penalty under this new rule will be the 100% of the amount actually received by reason of fraud and the overpayment is limited to the amount actually received by reason of fraud.

State statutory or constitutional authorization for this rule:

Section 35A-4-405

Anticipated cost or savings to:

the state budget:

There will be no costs or savings to the State budget because this is a federally-funded program. This rule change is only being made to bring the rule into compliance with recent statutory changes. If there were costs associated with that change, it was contemplated by the legislature at the time.

local governments:

In addition to the reasons stated in relation to the State budget, there will be no costs or savings to local government as this is a federally-funded, state-wide program that does not affect local government.

other persons:

There will be no cost or savings to any person for the reasons stated in relation to the State budget.

Compliance costs for affected persons:

There will be no compliance costs to any person for the reasons stated in relation to the State budget.

Comments by the department head on the fiscal impact the rule may have on businesses:

This change will have no fiscal impact on any business in Utah as it merely codifies the new legislative changes.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at spixton@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/16/2004

This rule may become effective on:

07/19/2004

Authorized by:

Raylene G. Ireland, Executive Director

RULE TEXT

R994. Workforce Services, Workforce Information and Payment Services.

R994-405. Ineligibility for Benefits.

R994-405-504. Disqualification and Penalty.

(1) Penalty Cannot Be Modified.

The Department has no authority to reduce or otherwise modify the period of disqualification or the monetary penalties imposed by statute.

(2) Week of Fraud.

A "week of fraud" shall include each week any benefits have been paid due to fraud.

(3) Overpayment and Penalty.

[When fraud is found to exist,]For any fraud decision where the initial fraud determination was issued on or before June 30, 2004, the claimant shall repay to the division an overpayment [shall be established]which is equal to [in ]the amount of the benefits actually received. In addition, a claimant shall be required to repay, as a civil penalty, the amount of benefits received as a direct result of fraud. [(a) ]"Benefits actually received" means the benefits paid or constructively paid by the Department. Constructively paid refers to benefits used to reduce or off-set an overpayment or used as a payment to the Office of Recovery Services for child support obligations or other payments as required by law.

(4) For all fraud decisions where the initial department determination is issued on or after July 1, 2004, the claimant shall repay to the division the overpayment and, as a civil penalty, an amount equal to the overpayment. The overpayment in this subparagraph is the amount of benefits the claimant received by direct reason of fraud.

([4]5) Additional Penalties.

Criminal prosecution of fraud may be pursued as provided by Subsection 35A-4-104(1) in addition to the administrative penalties.

R994-405-506. Future Eligibility.

A claimant shall be ineligible for unemployment benefits or waiting week credit following a disqualification for fraud until any overpayment established in conjunction with the disqualification has been satisfied in full. Any overpayment established under Subsection 35A-4-405(5) may NOT be satisfied by deductions from benefit checks for weeks claimed after the penalty period ends, as a claimant is precluded from receiving any future benefits or waiting week credit as long as there is an outstanding fraud overpayment. However, a claimant may be permitted to file a new claim to preserve a particular benefit year. An overpayment shall be considered satisfied as of the beginning of the week during which the cash payment or credit card payment is received by the Department or in the case of payment by personal check, the beginning of the week during which the check is honored by the bank. [ If a claimant was not aware at the time of filing an initial claim that there was an outstanding fraud overpayment,] [b]Benefits [shall]will be allowed as of the effective date of [the]a new claim if a claimant repays the outstanding fraud overpayment and penalty within seven days of the date the notice of the outstanding overpayment is mailed.

R994-405-507. Examples.

Depending on the issue, a disqualification could result in a denial of benefits for one week, a specific number of weeks or an indefinite number of weeks. A disqualifying separation results in an indefinite denial, continuing until the claimant has returned to work and earned six times his or her weekly benefit amount. The disqualification applicable to the reason for the underlying denial determines the amount of the fraud penalties and disqualification periods in each case.

(1) Failure to Report Reason for Separation. A claimant who was discharged for disqualifying conduct reports the separation as a layoff and receives benefits. Each benefit check received is paid due to the original false statements, even though the claimant may subsequently answer the Department's weekly questions correctly. Therefore, all benefits received would be "due to fraud." The fraud penalties and disqualification periods would, therefore, apply to all weeks benefits were received.

(2) Failure to Report Earnings.

The fraud overpayment and penalty, where the initial department fraud determination was issued on or before June 30, 2004, is calculated as in the following example: The claimant has a weekly benefit amount of $100 and reports no earnings when there was $50 in reportable earnings for the week at issue. The Act provides a claimant may earn up to 30% of his or her weekly benefit amount with no deduction. After considering the 30% factor in the present example, the claimant was overpaid in the amount of $20. If the elements of fraud were established, all benefits paid for a disqualified week would be established as an overpayment. The claimant would also be liable to repay, as a civil penalty, the $20 received by direct reason of fraud. Therefore, in this example, the claimant would be liable for a total overpayment of $120, an amount that would have to repaid in its entirety before the claimant would be eligible for any further waiting week credit or unemployment benefits. The claimant would also be subject to a 13-week penalty period. If the initial department fraud determination was issued on or after July 1, 2004, the overpayment would be $20 and the penalty would be $20 for a total due of $40.

KEY: unemployment compensation, employment, employee's rights, employee termination

[January 1, 2002]2004

Notice of Continuation June 27, 2002

35A-4-502(1)(b)

35A-1-104(4)

35A-4-405

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at spixton@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.