The Wisconsin Legislature recently enacted major changes to Wisconsin’s unemployment insurance laws, a number of which will become effective on January 5, 2014. The most significant changes include an expansion of what conduct constitutes “misconduct” and establishes a new standard of “substantial fault,” which if proven, can temporarily disqualify an employee for unemployment insurance benefits. Another significant change limits the circumstances under which an employee may be entitled to unemployment benefits following a voluntary resignation. These new changes can be found in Wisconsin’s 2013-2015 Biennial Budget Bill, 2013 Wisconsin Act 20 (“Act 20”). The Wisconsin Legislature recently enacted major changes to Wisconsin’s unemployment insurance laws, a number of which will become effective on January 5, 2014. The most significant changes include an expansion of what conduct constitutes “misconduct” and establishes a new standard of “substantial fault,” which if proven, can temporarily disqualify an employee for unemployment insurance benefits. Another significant change limits the circumstances under which an employee may be entitled to unemployment benefits following a voluntary resignation. These new changes can be found in Wisconsin’s 2013-2015 Biennial Budget Bill, 2013 Wisconsin Act 20 (“Act 20”).

Definition of Misconduct Wis. Stat. § 108.04(5) currently provides that claimants who are terminated for “misconduct” are temporarily ineligible for unemployment compensation benefits. Act 20 amends Wis. Stat. § 108.04(5) to incorporate the longstanding definition of “misconduct” that was set forth by the Wisconsin Supreme Court in Boynton Cab Co. v. Neubeck & Industrial Comm’n, 237 Wis. 249, 296 (1941). Boynton set a high standard for misconduct that was difficult for employers to meet. Act 20 incorporates, but further expands that standard to include actions and conduct that may not have been considered “misconduct” under the Boynton standard.

Act 20 also eliminates the stringent requirements relating to termination for absenteeism and tardiness (formerly set forth in Wis. Stat. § 108.04(5g)) and incorporates absenteeism and tardiness within the new definition of “misconduct.” Pursuant to Wis. Stat. § 108.04(5)(e), absenteeism or excessive tardiness by an employee in violation of the employer’s policy, if the employee does not provide both notice and a valid reason for the absenteeism or tardiness, constitutes misconduct.

This new definition of misconduct applies to new unemployment compensation claims filed on or after January 5, 2014.

Substantial Fault Act 20 also creates a new standard – the “substantial fault” standard – intended to cover conduct by an employee that does not rise to the level of misconduct, but can still temporarily disqualify employees for unemployment compensation benefits. An employee who is terminated for “substantial fault” of the employee connected with the employee’s work, will be temporarily ineligible for benefits. “Substantial fault” includes acts or omissions over which an employee exercised reasonable control and which violate reasonable requirements of the employer. Substantial fault does not include: minor rule violations, unless the violation is repeated after the employee is warned; inadvertent errors by the employee; and any failure of the employee to perform work due to insufficient skill, ability, or equipment.

Voluntary Resignation/Quit Exceptions Act 20 changes the law with respect to the current statutory exceptions that allow an employee to voluntarily resign from employment and still collect unemployment benefits if the resignation involved certain circumstances. Act 20 eliminates 8 of the previously recognized exceptions and modifies four of the remaining exceptions. These changes will first apply to claims for unemployment benefits filed on or after January 5, 2014.

The following exceptions are no longer recognized under Wisconsin law and will no longer be valid reasons for an employee to collect unemployment benefits after he or she has voluntarily resigned employment:

1. Employee terminated his or her employment to accept a recall to work for a former employer within 52 weeks after having last worked for that employer.

2. Employee maintained temporary residence near the work terminated, maintained a permanent residence in another locality, and terminated the work and returned to his or her permanent residence because the work available was reduced to less than 20 hours per week in at least 2 consecutive weeks.

3. Employee left or lost his or her work because of reaching the employer’s compulsory retirement age.

4. Employee terminated part-time work because of loss of other full-time employment makes it economically unfeasible for employee to continue part-time work.

5. Employee terminates work with a labor organization if termination cause employee to lose seniority rights granted under a collective bargaining agreement and if termination results in loss of employee’s employment with the employer that is party to the collective bargaining agreement.

6. Employee terminated work in a position serving as a part-time elected or appointed member of a government body or representative of employees, employee was engaged in work for an employer other than the employer in which the employee served as the member or representative, and employee was paid wages in terminated work constituting not more than 5% of employee’s base period wages for purpose of entitlement for benefits.

7. Employee owns or controls an ownership interest in a family corporation and employee’s employment was terminated because of an involuntary cessation of the business of the corporation under certain conditions.

Employers should be sure to update their employee handbooks, policies, and procedures to reflect these new changes that will take effect January 5th. If you have questions about which policies you should update or would like assistance in reviewing your existing policies to ensure compliance with these updates, please contact us.