MADDEN BILL TO AVERT BIG UI HIKES FOR EMPLOYERS IMPACTED BY COVID-19 SIGNED INTO LAW
Legislation sponsored by Senator Fred Madden and Senate President Steve Sweeney that will save New Jersey employers hit hard by the coronavirus pandemic from high Unemployment Insurance (UI) cost increases was signed into law.
“Due to a loss of revenue, COVID-19 has forced many small businesses to lay off or furlough dedicated employees in an effort to stay in business,” said Senator Madden (D-Camden/Gloucester), chair of the Senate Labor Committee. “These layoffs were not wanted by any employer and, as a result, they should not be punished with paying the cost for Unemployment Insurance claims.”
“Many New Jersey businesses are struggling right now and we cannot allow them to be further penalized by a rise in Unemployment Insurance costs when layoffs were the only option for them to save their business,” said Senator Sweeney (D-Gloucester/Salem/Cumberland). “This law will be influential in preventing further economic damage to our businesses and communities.”
The law, S-3011, will provide relief by excluding the cost of UI claims paid by businesses as a result of COVID-19 from their payroll tax calculations.
Thanks to a constitutional amendment and other reforms pushed by Senate President Sweeney after the financial crisis of 2007-2009 that put an end to raids on the UI Trust Fund, the fund began the 2020 calendar year with a healthy surplus, showing a balance of $2.4 billion as late as March. However, nearly 1.6 million New Jersey workers applied for Unemployment Insurance benefits as a result of the COVID-19 pandemic, receiving nearly $15 billion in combined federal and state UI benefits and wiping out the entire $2.4 billion balance.
As a result, New Jersey applied for federal loans to shore up the fund and employer’s tax rates are set to spike next year. Because of the experience rating calculation, that increase in UI payroll tax rates would fall heaviest on the employers hardest hit by COVID-19, including restaurants, gyms, retailers and other businesses that had to lay off huge swaths of their workforce due to statewide business closures and social distancing measures.
The Madden-Sweeney law will prevent experience rating increases for employers who had to carry out layoffs through no fault of their own, spreading the burden across all employers to lessen the impact. The law will also phase in tax increases due to the statewide fund’s depletion over three years. A similar phase-in was provided after the financial crisis of 2007-2009.