THE UNDERSECRETARY OF LABOR
In the Matter of )
State of Minnesota )
Department of Economic ) Case No. 84-CCP-1
Pursuant to a Notice of Hearing published on March 6, 1984,49 FR 8309, proceedings were instituted with respect to the conformity of the State of Minnesota with those requirements of the Federal Unemployment Tax Act (FUTA) codified at Section 3303(a)(1) of the Internal Revenue Code of 1954, as amended, 26 U.S.C. 3303(a)(l). This notice established the date for a hearing on the issues raised in the notice. By subsequent agreement of the parties, however, the hearing was canceled; an Agreed Settlement of Facts was filed, and the case was submitted on briefs. On August 24, 1984, Administrative new Judge John W. Earman issued a Recommended Decision on the issues raised in the notice. The matter is now before me for decision under section 3303(b)(1) of FUTA, 26 U.S.C. § 3303(b)(1).
Specifically before me is whether subdivisions 2 and 8 of section 268.06 of the Minnesota unemployment compensation law, Minn. State § 268.06, subd. 2 and 8, meet the requirements of section 3303(a)(1) of FUTA. Under section 3303(a)(1) of FUTA, any reduced rate of contributions permitted by State laws must be based on experience with respect to unemployment or other factors having a direct relation to unemployment risk during not lest than three consecutive years immediately preceding the computation date. This section has been consistently interpreted as requiring both that the experience of all employers in a State be measured by the same factor or factors bearing a direct relation to unemployment risk, and that any reduced rate of contribution be based on all, rather than a portion, of an individual employer's experience immediately preceding the computation date.
Subdivision 2 of section 268.06 of the Minnesota law permits employers, who have an experience ratio of less than one-tenth of 1 percent, to pay contributions only on the first $8,000 in wages. Since such employers pay contributions on lesser wages than other employers, a question arises as to whether this provision has the effect of measuring the experience of the employers with an experience ratio of less than one-tenth of one percent by a different factor than applicable to employers with greater experience ratios, and hence by
a factor not having a direct relation to unemployment risk.
Subdivision 8 of section 268.06 of the Minnesota law provides that, if an employer's experience ratio (which is computed on the basis of the employer's experience for the 4 year period preceding the computation date) has increased or decreased within the current calendar year by more than 2-1/2 percentage points, the increase or decrease shall be limited to 2-1/2 percentage points. That subdivision also provides that small business employers are eligible for a further reduction in these percentage limitations to 1-1/2 percentage points. With respect to subdivision 8, the issue in whether the 2-1/2 percentage point limitation and the further reduction for small business employers result in a reduced rate of contribution which is based only on a portion of an individual employer's unemployment experience immediately preceding the computation date.
The administrative law judge recommended that I find that subdivision 2 of section 268.06 of the Minnesota unemployment -compensation law conforms with the requirements of section 3303(a)(i) of FUTA. Specifically, the administrative law judge concluded that the applicable wage base is directly related to the employer's unemployment risk because it is directly related to the employer's experience ratio which is a factor bearing a direct relation to unemployment risk. With respect to subdivision 8 of section 268.06 of the Minnesota law, the administrative law judge recommended that I find the State of Minnesota in nonconformity with section 3303(a)(1) of FUTA. This recommendation was based on the administrative law judge's conclusion that both the 2-1/2 percentage limitation on changes in the employer's employment ratio and the 1-1/2 percentage limitation for smalJ~business employers result in reduced rates of contribution apart from any factor bearing on unemployment risk.
Upon review of the entire record in this case, I agree with the analysis and the conclusions of the administrative law judge. I, thus adopt his decision in its entirety. I, consequently, find that subdivision 2 of section 268.06 of the Minnesota unemployment compensation Law is in conformity with section 3303 (a)(1) of FUTA. I, however, find that subdivision 8 of section 268.06 of the Minnesota law no longer contains the provisions specified in section 3303 (a)(1) of FUTA and that the State of Minnesota has, at least since March 31, 1982, failed to substantially comply with such section. Accordingly, subdivision 8 of section 268.06 of the Minnesota unemployment law will not be included in the listing of those laws which will be certified by me to the Secretary of Treasury on October 31, 1984 under section 3303(b)(1) of FUTA.
Dated: OCT 2 9 1984
CERTIFICATE OF SERVICE
Case Name:State of Minnesota Department of Economic Security
Case No.: 84-CCP-1
Document: Final Decision
This is to certify that on October 29, 1984 a copy of the above-captioned document was mailed to the following persons.
William B. DuRoss, III Hubert B. Humphrey, II
Associate Solicitor for Employment Attorney General
and Training Legal Services State of Minnesota
U.S. Department of Labor 1100 Bremer Tower
Room N-21-1 7th Pl. & Minnesota Street
200 Constitution Ave., N.W. St. Paul, Minnesota 55101
Washington, D.C. 20210
William E. Walker, Esq.
Office of the Solicitor
U.S. Department of Labor
200 Constitution Ave., N.W.
Washington, D.C. 20210
Peter C. Andrews
Assistant Attorney General
1100 Bremer Tower
7th Place and Minnesota Street
St. Paul, Minnesota 55101
Winston W. Borden, President
Minnesota Association of
Commerce and Industry
480 Cedar Street
300 Hanover Building
St. Paul, Minnesota 55101
U.S. Depactment of Labor Office of Administrative Law Judges
Washington, D.C. 20036
In the Matter of •
• Case No. 84-CCP-1
STATE OF MINNESOTA DEPARTMENT •
OF ECONOMIC SECURITY •