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Out With the Old, In With the New – Wisconsin Act 20 Changes Unemployment Eligibility

Labor & Employment Law Alert Lindsey W. Davis

Although it’s received little attention, Wisconsin Act 20 — the 2013-2015 budget bill — has made several substantial legal changes that are expected to reduce unemployment obligations and costs for Wisconsin employers when they take effect on January 6, 2014. Here’s a brief outline of some of the more significant changes, what they mean for Wisconsin employers, and what you should do now to take advantage of them.

1. Act 20 Expands the Definition of Misconduct

Until now, employees discharged for engaging in egregious conduct have often remained eligible for unemployment benefits because employers couldn’t demonstrate that a former employee engaged in conduct demonstrating “a willful or wanton disregard of an employer’s interest.” To meet this burden, an employer needed to prove that its former employee deliberately violated or disregarded an existing and known policy or engaged in recurring carelessness or negligence with “wrongful intent or evil design.”

Act 20 eases this burden slightly by expanding the definition of misconduct to include several specific acts. Under this new definition, “misconduct” will automatically be found when employees are discharged for the following reasons:

  • Violation of an employer’s reasonable written policy concerning the use of alcohol or a controlled substance;
  • Theft of an employer’s property or services;
  • Intentional or negligent conduct by an employee that causes substantial damage to the employer’s property;
  • Conviction of a crime or other offense subject to civil forfeiture, if the conviction makes it impossible for the employee to perform his/her job duties;
  • Harassment, assault, or other physical violence instigated by an employee at the employer’s workplace;
  • Falsifying business records of the employer, unless directed to do so by the employer; and
  • A willful and deliberate violation of a written and uniformly applied government standard or regulation, if the standard has been communicated to the employee, and the violation would cause the employer to be sanctioned or have its license/certification suspended.

2. Act 20 Redefines When Absenteeism and Tardiness Result in Ineligibility to Receive Benefits 

Prior to Act 20, employers also faced an uphill battle in demonstrating that an employee’s absences or failure to report to work on time warranted a finding that the employee was ineligible for benefits. An employer had to demonstrate that the employee: (1) was either absent five times or tardy six times in the year preceding discharge; and (2) failed to provide notice to the employer of each absence or tardy.

Under Act 20, absences and tardiness will be viewed under a harsher light. Act 20 provides that unless otherwise specified in an employment manual, an employee engages in misconduct if s/he: (1) is absent on more than two occasions within the 120-day period before the discharge; and (2) fails to provide both notice and a valid reason for the absenteeism. With respect to tardiness, an employee engages in misconduct if s/he displays excessive tardiness in violation of a policy and fails to provide both notice and a valid reason for the tardiness.

3. Act 20 Introduces a New “Substantial Fault” Disqualification

Finally, Act 20 introduces a new manner in which employers can demonstrate that an employee is ineligible to receive unemployment benefits. Under this new provision, an employee discharged for “substantial fault” connected with his/her work will be ineligible for unemployment insurance benefits.

Under the Act, a discharge will be considered the substantial fault of an employee if the employee violates a reasonable requirement of the employer while engaging in an act or omission over which the employee had reasonable control. However, discharge for substantial fault does not include any of the following:

  • One or more minor infractions of rules, unless the infraction is repeated after the employer warns the employee about the infraction;
  • One or more inadvertent errors made by the employee; or
  • Any failure of the employee to perform work because of insufficient skill, ability, or equipment.

Although it remains somewhat unclear how the unemployment division will interpret this new disqualification provision, it gives employers a fighting chance on unemployment claims that would have been sure losers in the past.

Realizing the Benefits of Act 20

Act 20 provides Wisconsin employers with new weapons to use in the battle against rising unemployment costs. However, many of these new provisions are dependent on the content of an employer’s own policies.

For instance, while Act 20 may make it easier for an employer to demonstrate misconduct when an employee is discharged for showing up to work under the influence, only employers who can point to a reasonable drug and alcohol policy will be able to take advantage of this lower threshold. In the same way, while Act 20 makes it easier for an employer to win attendance-related claims, those victories will hinge on whether the employer’s attendance policy is written to capitalize on this legal advantage. And the extremely pro-employer “substantial fault” language won’t do much for employers who haven’t spelled out in handbooks or policies what the rules of the road are that employees are expected to follow.

Employers hoping to take full advantage of the Act 20 changes, therefore, need to take a fresh look at their policies and handbooks, ensuring that provisions governing matters such as attendance and workplace conduct are also “working” for them.

If you have questions regarding these Act 20 changes or would like assistance with a handbook or policy review, please contact Lindsey Davis at (414) 277-3073 / lindsey.davis@quarles.com, or your Quarles & Brady attorney.