Madden Bill Package To Redefine Provisions Of Fraudulent Unemployment Insurance Penalties Clears Labor Committee

Measures Will Align State’s Unemployment Insurance Fund to National Standard

TRENTON – A two-bill package sponsored by Senate Labor Committee Chairman Fred H. Madden to close loopholes in how the state directs and deposits penalties recovered from fraudulently obtained unemployment benefits, was approved today by the committee.

“While the state is legally authorized to collect penalties from individuals who fraudulently obtain unemployment benefits, we need to make sure that strict guidelines are in place so that these funds are managed in a timely and uniform manner,” said Senator Madden, D-Gloucester and Camden. “These bills are about improving transparency and standardizing the way that funds are directed under the state and federal unemployment compensation process, so that there is sufficient funding left for those who truly need it and none of it goes to waste.”

The U.S. Department of Labor has been and is currently implementing a number of strategies to facilitate states with the management of improper payments of unemployment insurance benefits. The Trade Adjustment Assistance Extension Act (TAAEA) of 2011 provides individual states the statutory authority to help maintain the integrity of the nationwide unemployment compensation program. The two bills are modeled in direct accordance with TAAEA and will bring provisions that oversee New Jersey’s unemployment insurance funds up to federally mandated standards.

The first bill (S-2738) would require that the New Jersey Department of Labor and Workforce Development immediately deposit any amount recovered from penalties relating to the erroneous payment of unemployment benefits. Further, the bill would mandate that a recovered fine of 15 percent of the amount fraudulently obtained be deposited into the unemployment insurance trust fund, and a recovered fine of 10 percent of the amount fraudulently obtained be deposited into the unemployment compensation auxiliary fund. Currently, the total amount of the recovered fine is deposited into the unemployment compensation auxiliary fund.

In addition to clarifying when and where the collected penalties are to be deposited, the bill would also require that guidelines concerning the assessment and deposit of penalties extend to federally provided unemployment compensation benefits, instead of just those distributed by the state.

Under provisions of the second bill (S-2739), an employer’s unemployment insurance account would not be relieved of charges related to a fraudulent benefit payment under certain circumstances. The bill would prohibit charges from being relieved if it is determined by the Department of Labor and Workforce Development that the employer is at fault for the erroneous payment because the employer failed to respond in a timely or adequate manner, and the employer engaged in a “pattern of failing to respond” – defined as three documented failures to respond within 365 days of requests from the department.

“In order to collect unemployment insurance benefits, citizens are held to a high standard, expected to file claims accurately and respond to requests for information in a timely manner,” said Madden. “It is important that employers are held to the same high standards while fulfilling their requirements.”

The committee unanimously approved the package of bills. They now head to the Senate Budget and Appropriations Committee for consideration.

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