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TRENTON — Legislation sponsored by Senator Fred Madden and Senator Joseph Vitale that requires the state to withhold payments from delinquent vendors who fail to contribute to the Unemployment Insurance Trust Fund cleared the Senate today. It now heads to the governor’s desk.

“This common sense bill closes a loophole and ensures that state vendors are up to date with their payments into the Unemployment Trust Fund,” said Madden (D-Camden, Gloucester). “This is about fairness. When employers fail to make the required contributions it puts financial pressure on other employers to make up the difference, especially in tough economic times.”

The bill, S-1622, is in response to a state audit of the unemployment fund that found at least 170 state vendors owed $36.7 million in unpaid unemployment compensation contributions to the fund as of June of 2013. Meanwhile, these same companies received at least $111.3 million in payments from state contracts during the 2011 and 2012 fiscal years, the audit found.

“Businesses that hold state contracts paid for by taxpayers have to play by the rules that are set up for companies in New Jersey,” said Senator Vitale (D-Middlesex). “Unfortunately, past audits have found that state vendors missed millions of dollars in payments into the state UI system. These companies must be held accountable, and this bill will ensure that happens.”

The state Treasury Department has a system in place that withholds payments from delinquent vendors, but the Department of Labor and Workforce Development (DOLWD) has not been taking advantage of it. This bill would ensure the DOLWD works with the Department of Treasury to ensure employers with state contracts settle their delinquent Unemployment Insurance collections.

New Jersey had to borrow roughly $2 billion from the federal government to cover the increased unemployment costs caused by the Great Recession. The borrowing costs were passed on to employers in the form of higher unemployment insurance taxes.  Madden worked with the DOLWD and the business community to hold down unemployment tax increases and restore solvency to the Unemployment Trust Fund.

Madden’s bill would allow the Labor Department to refer delinquent accounts to the Treasury Department for garnishment. The bill would also impose a fee on delinquent accounts to pay for the administrative costs of enforcement and also apply to the state’s Disability Benefits fund and the Family Temporary Disability Leave Account.

The bill passed the Assembly unanimously. The Senate approved it today by a vote of 39-0.