by Richard L. Rainey
North Carolina’s law overhauling the state’s unemployment system will take effect July 1, bringing about a small tax increase for many employers and a reduced maximum weekly benefit amount for claimants. It also will change the circumstances in which a claimant is disqualified from benefits.
During the economic recession, the state borrowed more than $2.5 billion from the federal government to cover unemployment payments. The North Carolina General Assembly enacted the new law to pay back the loan as quickly as possible.
Tax changes
The law increases both the minimum and maximum contribution tax rates for employers by .06%. Before July 1, the maximum rate is 5.7%, and the minimum is zero. The new rate is a small tax hike for many employers. Also, there will be a 20% surtax on employers’ contributions. The surtaxes will be credited to the unemployment insurance reserve fund. When the fund exceeds $1 billion, the surtax will be suspended.
Government and nonprofit employers that have been participating in the unemployment system via a reimbursement method will see changes as well. Currently, employers using a reimbursement method pay into the system only when benefits are paid to an individual. Under the new law, those employers must maintain an account balance equal to 1% of their taxable wages. The law provides for a phase-in period for employers using the reimbursement method.
Benefit changes
As of July 1, claimants will see a reduction in the amount and duration of weekly benefits. Currently, a claimant receives two-thirds of his wages, with a maximum weekly benefit of $535. An individual who continues to qualify can receive benefits for a maximum of 26 weeks.
Under the new law, the maximum weekly benefit amount will be $350, and the duration will depend on the unemployment rate during the six-month base period in which the claim is filed. The statute establishes a sliding scale based on the unemployment rate. If the rate is no more than 5.5%, the minimum number of weeks that benefits will be paid is five, and the maximum number of weeks is 12. If the unemployment rate is greater than 9%, the minimum number of weeks for which benefits will be available is 13, and the maximum number of weeks is 20.
New standards
The new law creates new standards for determining whether benefits should be awarded. Under the old law, an individual is disqualified from receiving benefits if he (1) left his job without good cause attributable to the employer, (2) is unemployed because of misconduct, or (3) was terminated because of substantial fault on his part.
The new law eliminates the “substantial fault” category and makes changes to what constitutes “leaving work with good cause attributable to the employer” and “termination for misconduct.” The burden continues to be on the employee to prove he left work with good cause attributable to the employer, and it outlines situations that constitute leaving work for good cause.
Richard L. Rainey is a partner at Womble Carlyle Sandridge & Rice, LLP, in Charlotte, North Carolina. He is the editor of North Carolina Employment Law Letter and can be reached at rrainey@wcsr.com.