H.B. 220

1

EMPLOYMENT SECURITY AMENDMENTS
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Peter C. Knudson
5 AN ACT RELATING TO WORKFORCE SERVICES; AMENDING WHAT CONSTITUTES
6 WAGES FOR EMPLOYMENT SECURITY; AMENDING PROVISION FOR
7 DETERMINATION OF CONTRIBUTION RATES; AMENDING RETIREMENT
8 PROVISIONS; MAKING TECHNICAL CORRECTIONS; PROVIDING FOR
9 RETROSPECTIVE OPERATION; AND PROVIDING AN EFFECTIVE DATE.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 35-4-502 (Renumbered 07/01/97), as last amended by Chapter 240, Laws of Utah 1996
13 35A-4-208 (Effective 07/01/97), as last amended by Chapter 129 and renumbered and amended
14 by Chapter 240, Laws of Utah 1996
15 35A-4-303 (Effective 07/01/97), as renumbered and amended by Chapter 240, Laws of Utah
16 1996
17 35A-4-502 (Effective 07/01/97), as renumbered and amended by Chapter 240 and last amended
18 by Chapter 243, Laws of Utah 1996
19 Be it enacted by the Legislature of the state of Utah:
20 Section 1. Section 35-4-502 (Renumbered 07/01/97) is amended to read:
21 35-4-502 (Renumbered 07/01/97). Administration of Employment Security Act.
22 (1) (a) The Industrial Commission of Utah shall administer this chapter.
23 (b) The commission may:
24 (i) make, amend, or rescind any rules and special orders;
25 (ii) employ persons;
26 (iii) make expenditures;
27 (iv) require reports;

1 (v) make investigations;
2 (vi) make audits of any or all funds provided for under this chapter when necessary; and
3 (vii) take any other action it considers necessary or suitable to that end.
4 (c) (i) The commission shall create the Department of Employment Security for the
5 purpose of administering this chapter.
6 (ii) All personnel of that department, including a full-time administrator, shall be
7 employed on a nonpartisan merit basis.
8 (iii) The full-time administrator shall, with the approval of the commission, determine the
9 department's organization and methods of procedure in accordance with the provisions of this
10 chapter, and shall, under the direction of the commission, supervise the department personnel and
11 its operations.
12 (iv) The Department of Employment Security shall have an official seal which shall be
13 judicially noticed.
14 (d) No later than the first day of October of each year, the commission shall submit to the
15 governor a report covering the administration and operation of this chapter during the preceding
16 calendar year and shall make any recommendations for amendments to this chapter as the
17 commission considers proper.
18 (e) (i) The report shall include a balance sheet of the moneys in the fund in which there
19 shall be provided, if possible, a reserve against liability in future years to pay benefits in excess
20 of the then current contributions, which reserve shall be set up by the commission in accordance
21 with accepted actuarial principles on the basis of statistics of employment, business activity, and
22 other relevant factors for the longest possible period.
23 (ii) Whenever the commission believes that a change in contribution or benefit rates will
24 become necessary to protect the solvency of the fund, it shall promptly inform the governor and
25 the Legislature and make appropriate recommendations.
26 (f) Any two commissioners constitute a quorum.
27 (g) No vacancy impairs the right of the remaining commissioners to exercise all the
28 powers of the commission.
29 (2) (a) The commission may make, amend, or rescind rules in accordance with Title 63,
30 Chapter 46a, Utah Administrative Rulemaking Act.
31 (b) The commission may adopt, amend, or rescind special orders after appropriate notice

- 2 -

1 and opportunity to be heard. Special orders become effective ten days after notification or mailing
2 to the last-known address of the individuals or concerns affected thereby.
3 (3) The commission shall cause to be printed for distribution to the public:
4 (a) the text of this chapter;
5 (b) the commission's rules;
6 (c) the commission's annual reports to the governor; and
7 (d) any other material the commission considers relevant and suitable and shall furnish
8 them to any person upon application.
9 (4) (a) The commission shall appoint on a nonpartisan merit basis, fix the compensation,
10 and prescribe the duties and powers of officers, accountants, attorneys, experts, and other
11 personnel as necessary in the performance of its duties. The commission shall provide for a merit
12 system covering all those persons, classify and fix the minimum standards for the personnel, and
13 formulate salary schedules for the service so classified.
14 (b) The commission shall hold or provide for holding examinations to determine the
15 technical and professional qualifications of applicants for positions in the commission, and provide
16 for annual merit ratings of employees in the commission to ascertain whether the employees are
17 maintaining the eligibility standards prescribed by the commission and those promulgated by the
18 Secretary of Labor.
19 (c) No employee may be separated or demoted so long as he meets the eligibility standards
20 of performance. When a reduction in personnel is made because of lack of funds, curtailment of
21 work, or the elimination of specific positions or classes of positions or identifiable programs, an
22 employee thus separated, reclassified, or reassigned shall be separated, reclassified, or reassigned
23 without prejudice and in accordance with an established separation formula based on merit system
24 principles and tenure of service approved by the commission and the United States Department
25 of Labor.
26 (d) The commission may delegate to any person so appointed the power and authority it
27 considers reasonable and proper for the effective administration of this chapter and may bond any
28 person handling moneys or signing checks under this authority.
29 (e) The commission may provide for the maintenance of the merit system required under
30 this section in cooperation and conjunction with any merit system applicable to any state agency
31 or agencies which meets the standards of the commission and those promulgated by the Secretary

- 3 -

1 of Labor.
2 (f) The commission may, when permissible under federal and state law, make
3 arrangements [that will permit individuals employed under this chapter] to voluntarily elect
4 coverage under the United States Civil Service Retirement System or a comparable private
5 retirement plan with respect to past as well as future services of individuals hired under this
6 chapter prior to October 1, 1980, and whose service continued without significant interruption.
7 (5) (a) The commission shall appoint a state advisory council composed of:
8 (i) not less than five employer representatives chosen from individuals recommended by
9 employers, associations, or groups;
10 (ii) not less than five employee representatives chosen from individuals recommended by
11 employees, associations, or groups; and
12 (iii) five public representatives chosen at large.
13 (b) The employee representatives shall include both union and nonunion employees who
14 fairly represent the percentage in the labor force of the state.
15 (c) Employers and employees shall consider nominating members of groups who
16 historically may have been excluded from the council, such as women, minorities, and individuals
17 with disabilities.
18 (d) (i) Except as required by Subsection (5)(d)(ii), as terms of current council members
19 expire, the commission shall appoint each new member or reappointed member to a four-year
20 term.
21 (ii) Notwithstanding the requirements of Subsection (5)(d)(i), the commission shall, at the
22 time of appointment or reappointment, adjust the length of terms to ensure that the terms of council
23 members are staggered so that approximately half of the council is appointed every two years.
24 (e) When a vacancy occurs in the membership for any reason, the replacement shall be
25 appointed for the unexpired term.
26 (f) The commission shall terminate the term of any council member who ceases to be
27 representative as designated by his original appointment.
28 (g) The commission may appoint local advisory councils similar in composition to the
29 state advisory council.
30 (h) The state and local advisory councils shall advise the commission and the Legislature
31 in formulating policies and discussing problems related to the administration of this chapter and

- 4 -

1 in assuring impartiality and freedom from political influence in the solution of those problems.
2 (i) (i) Members shall receive no compensation or benefits for their services, but may
3 receive per diem and expenses incurred in the performance of the member's official duties at the
4 rates established by the Division of Finance under Sections 63A-3-106 and 63A-3-107.
5 (ii) Members may decline to receive per diem and expenses for their service.
6 (6) (a) The commission, with the advice and aid of its advisory councils, shall take all
7 appropriate steps to:
8 (i) reduce and prevent unemployment;
9 (ii) encourage and assist in the adoption of practical methods of vocational training,
10 retraining, and vocational guidance;
11 (iii) investigate, recommend, advise, and assist in the establishment and operation by the
12 state of reserves for public works to be used in times of business depression and unemployment;
13 (iv) promote the creation and development of job opportunities and the reemployment of
14 unemployed workers throughout the state in every way that may be feasible;
15 (v) plan, coordinate, organize, or direct economic development programs as are necessary
16 to maintain or create job opportunities;
17 (vi) cooperate with local communities, industries, and organizations in encouraging and
18 promoting the full development of the state's mineral, water, and other natural resources;
19 (vii) appraise the agricultural and industrial potential of the state; and
20 (viii) carry on activities and organize, coordinate, and publish the results of investigations
21 and research studies.
22 (b) To accomplish these purposes, the commission may enter into agreements with
23 governmental or other agencies.
24 (7) In the discharge of the duties imposed by this chapter, the administrative law judge or
25 duly authorized representative or member of the commission or the board of review, as designated
26 by commission rule, may administer oaths and affirmations, take depositions, certify to official
27 acts, and issue subpoenas to compel the attendance of witnesses and the production of books,
28 papers, correspondence, memoranda, and other records necessary as evidence in connection with
29 a disputed matter or the administration of this chapter.
30 (8) (a) In case of contumacy by or refusal to obey a subpoena issued to any person, any
31 court of this state within the jurisdiction of which the inquiry is carried on or within the

- 5 -

1 jurisdiction of which the person guilty of contumacy or refusal to obey is found or resides or
2 transacts business, upon application by an administrative law judge or the board of review or the
3 commission or its duly authorized representative, shall have jurisdiction to issue to that person an
4 order requiring the person to appear before a commissioner, an administrative law judge, the board
5 of review, or the commission or its duly authorized representative to produce evidence, if so
6 ordered, or give testimony regarding the matter under investigation or in question. Any failure to
7 obey that order of the court may be punished by the court as contempt.
8 (b) Any person who, without just cause, fails or refuses to attend and testify or to answer
9 any lawful inquiry or to produce books, papers, correspondence, memoranda, and other records,
10 if it is in his power to do so, in obedience to a subpoena of an administrative law judge, or the
11 board of review, or the commission shall be punished by a fine of not less than $20 nor more than
12 $200 or by imprisonment for not longer than 60 days or by both fine and imprisonment. Each day
13 the violation continues is a separate offense.
14 (9) (a) No person may be excused from attending and testifying or from producing books,
15 papers, correspondence, memoranda, and other records before the commission or its
16 representatives or in obedience to the subpoena of the commission, any of its members, or any
17 duly authorized representative of the commission in any cause or proceeding before the
18 commission or its representatives, on the ground that the testimony or evidence, documentary or
19 otherwise, required of him may tend to incriminate him or subject him to a penalty or forfeiture.
20 (b) No individual may be prosecuted or subjected to any penalty or forfeiture for or on
21 account of any transaction, matter, or thing concerning which he is compelled, after having
22 claimed his privilege against self-incrimination, to testify or produce evidence, documentary or
23 otherwise, except that the individual testifying is not exempt from prosecution and punishment for
24 perjury committed while testifying.
25 (10) (a) In the administration of this chapter, the commission shall cooperate with the
26 United States Department of Labor to the fullest extent consistent with the provisions of this
27 chapter and shall take action, through the adoption of appropriate rules and administrative methods
28 and standards, as necessary to secure to this state and its citizens all advantages available under
29 the provisions of the Social Security Act that relate to unemployment compensation, the Federal
30 Unemployment Tax Act, the Wagner-Peyser Act, and the Federal-State Extended Unemployment
31 Compensation Act of 1970.

- 6 -

1 (b) In the administration of Section 35-4-402, which is enacted to conform with the
2 requirements of the Federal-State Extended Unemployment Compensation Act of 1970, 26 U.S.C.
3 3304, the commission shall take any action necessary to ensure that the section is interpreted and
4 applied to meet the requirements of the federal act, as interpreted by the United States Department
5 of Labor and to secure to this state the full reimbursement of the federal share of extended and
6 regular benefits paid under this chapter that are reimbursable under the federal act.
7 Section 2. Section 35A-4-208 (Effective 07/01/97) is amended to read:
8 35A-4-208 (Effective 07/01/97). Wages defined.
9 (1) (a) As used in this chapter[: (1) "Wages"], "wages" means all remuneration for
10 personal services, including commissions and bonuses and the cash value of all remuneration in
11 any medium other than cash.
12 (b) Gratuities customarily received by an individual in the course of the individual's
13 employment from persons other than the individual's employing unit are treated as wages received
14 from the individual's employing unit.
15 (c) The reasonable cash value of remuneration in any medium other than cash and the
16 reasonable amount of gratuities shall be estimated and determined in accordance with rules
17 prescribed by the department.
18 (2) For purposes of Section 35A-4-303, "wages" does not include that amount paid to an
19 individual by an employer with respect to employment subject to this chapter that is:
20 (a) in excess of $3,000 paid to an individual by an employer with respect to employment
21 subject to this chapter during any calendar year prior to calendar year 1964;
22 (b) in excess of $4,200 paid to an individual by an employer with respect to employment
23 subject to this chapter during calendar year 1964 or during any other single calendar year after
24 1964 [and] but prior to calendar year 1976;
25 (c) in excess of $6,000 paid to an individual by an employer with respect to employment
26 subject to this chapter during calendar year 1976;
27 (d) in excess of 75% of the insured average annual wage, rounded to the next higher
28 multiple of $100, during the calendar year two years prior to the calendar year of the payment to
29 the individual by [his] the individual's employer[, i.e., the calendar year 1983 for the payment year
30 1985, etc.,] during calendar year 1985 and during any single calendar year after 1985 [and] but
31 prior to January 1, 1988; or

- 7 -

1 (e) in excess of 75% of the insured average fiscal year wage, rounded to the next higher
2 multiple of $100, during the fiscal year prior to the calendar year of the payment to the individual
3 by the individual's employer[, i.e., fiscal year 1987, for the payment year 1988] on or after January
4 1, 1988.
5 (3) For purposes of this section, all remuneration in excess of the amounts provided in
6 Subsection (2) for any calendar year are considered to be wages subject to contribution to the same
7 extent that the remuneration is defined as wages by the Federal Unemployment Tax Act, as
8 amended.
9 (4) [If a] For the purpose of determining whether the successor employer during the
10 calendar year has paid remuneration to an individual with respect to employment equal to the
11 applicable taxable wages as defined by this subsection, any remuneration with respect to
12 employment paid to the individual by a predecessor employer during the calendar year and prior
13 to an acquisition is considered to have been paid by a successor employer if:
14 (a) the successor employer during any calendar year [acquired] acquires substantially all
15 the property used in a trade or business of [another] a predecessor employer; and
16 (b) immediately after the acquisition employs in the successor employer's trade or
17 business an individual who immediately prior to the acquisition was employed in the trade or
18 business of the predecessor[, then, for the purpose of determining whether the successor employer
19 has paid remuneration with respect to employment equal to the applicable taxable wages as defined
20 by this subsection, to the individual during the calendar year, any remuneration with respect to
21 employment paid to the individual by the predecessor during the calendar year and prior to the
22 acquisitions is considered as having been paid by the successor employer].
23 (5) The remuneration paid to an individual by an employer with respect to employment
24 in another state, upon which contributions were required of the employer under the unemployment
25 compensation law of that state, shall be included as a part of the taxable wage base defined in this
26 section.
27 (6) ["Wages"] As used in this chapter, "wages" does not include:
28 (a) the amount of any payment, including any amount paid by an employer for insurance
29 or annuities, or into a fund, to provide for [any such] a payment, made to, or on behalf of, an
30 employee or any of the employee's dependents under a plan or system established by an employer
31 that makes provision for:

- 8 -

1 (i) (A) the employer's employees generally[, for];
2 (B) the employer's employees generally and their dependents[, for];
3 (C) a class or classes of the employer's employees[,]; or [for]
4 (D) a class or classes of the employer's employees and their dependents[,]; and
5 (ii) on account of:
6 [(i)] (A) sickness or accident disability, but, in the case of payments made to an employee
7 or any of the employee's dependents Subsection (6)(a)(i) excludes from wages only payments that
8 are received under a workers' compensation law; [or]
9 [(ii)] (B) medical or hospitalization expenses in connection with sickness or accident
10 disability; or
11 [(iii)] (C) death;
12 (b) any payment on account of sickness or accident disability, or medical or hospitalization
13 expenses in connection with sickness or accident disability, made by an employer to, or on behalf
14 of, an employee after the expiration of six calendar months following the last calendar month in
15 which the employee worked for the employer[.];
16 (c) the payment by an employing unit, without deduction from the remuneration of the
17 individual in its employ, of the tax imposed upon an individual in its employ under Section 3101,
18 [of the] Internal Revenue Code, with respect to domestic services performed in a private home of
19 the employer or for agricultural labor; [or]
20 (d) any payment made to, or on behalf of, an employee or the employee's beneficiary:
21 (i) from or to a trust described in Section 401(a), Internal Revenue Code, that is exempt
22 from tax under Section 501(a), Internal Revenue Code, at the time of the payment, except for a
23 payment made to an employee of the trust as remuneration for services rendered as an employee
24 and not as a beneficiary of the trust;
25 (ii) under or to an annuity plan that at the time of the payment is a plan described in
26 Section 403(a), Internal Revenue Code;
27 (iii) under a simplified employee pension, as defined in Section 408(k)(l), Internal
28 Revenue Code, other than any contributions described in Section 408(k)(6), Internal Revenue
29 Code;
30 (iv) under or to an annuity contract described in Section 403(b), Internal Revenue Code,
31 except for a payment for the purchase of the contract that is made by reason of a salary reduction

- 9 -

1 agreement whether or not the agreement is evidenced by a written instrument;
2 (v) under or to an exempt governmental deferred compensation plan as defined in Section
3 3121(v)(3), Internal Revenue Code; or
4 (vi) to supplement pension benefits under a plan or trust described in Subsections (6)(d)(i)
5 through (v) to take into account a portion or all of the increase in the cost of living, as determined
6 by the Secretary of Labor, since retirement, but only if the supplemental payments are under a plan
7 that is treated as a welfare plan under Section 3(2)(B)(ii) of the Employee Income Security Act of
8 1974; or
9 [(d)] (e) any payment made to, or on behalf of, an employee or the employee's beneficiary
10 under a cafeteria plan within the meaning of Section 125 [of the], Internal Revenue Code, if the
11 payment would not be treated as wages under a cafeteria plan.
12 Section 3. Section 35A-4-303 (Effective 07/01/97) is amended to read:
13 35A-4-303 (Effective 07/01/97). Determination of contribution rates.
14 (1) (a) On or [after] before January 1 of each year beginning January 1, 1985, an
15 employer's basic contribution rate will be the same as [his] the employer's benefit ratio, determined
16 [as follows: (a) On or before January 1 of each year,] by dividing the total benefit costs charged
17 back to an employer during the immediately preceding four fiscal years [shall be divided] by the
18 total taxable wages of the employer for the same time period, calculated to four decimal places,
19 disregarding the remaining fraction, if any.
20 (b) [If] In calculating the basic contribution rate under Subsection (1)(a):
21 (i) if four fiscal years of data are not available, the data of three fiscal years shall be
22 divided by the total taxable wages for the same time period[.];
23 [(c) If] (ii) if three fiscal years of data are not available, the data of two fiscal years shall
24 be divided by the total taxable wages for the same time period[.]; or
25 [(d) If] (iii) if two fiscal years of data are not available, the data of one fiscal year shall
26 be divided by the total taxable wages for the same time period.
27 (2) (a) On or before January 1 of each year beginning with January 1, 1985, all social costs
28 as defined in [Subsections] Subsection 35A-4-307(1)[(a) through (g)] applicable to the
29 immediately preceding four fiscal years shall be divided by the total taxable wages of all
30 employers subject to contributions for the same time period, calculated to four decimal places,
31 disregarding the remaining fraction, if any.

- 10 -

1 (b) [If] In calculating the social contribution rate under Subsection (2)(a):
2 (i) if four fiscal years of data are not available, the data of three fiscal years shall be
3 divided by the total taxable wages for the same time period[.]; or
4 [(c) If] (ii) if three fiscal years of data are not available, the data of two fiscal years shall
5 be divided by the total taxable wages for the same time period.
6 [(d)] (c) The quotient under Subsections (2)(a) [through (c)] and (b) is the social
7 contribution rate and shall be added to each employer's basic contribution rate after the basic
8 contribution rate has been adjusted by the reserve factor, if there is a reserve factor for that year.
9 (3) (a) On or before January 1 of each year beginning with January 1, 1985, the reserve
10 factor shall be computed under Subsection (3)(b). For purposes of computing the reserve factor:
11 (i) the five-year average benefit cost rate is calculated by [first]:
12 (A) determining the five highest benefit cost rates experienced in the 25 years ending
13 December 31 one year prior to the computation date[. The sum of these rates shall be divided];
14 (B) adding together the rates determined under Subsection (3)(a)(i)(A); and
15 (C) dividing the amount under Subsection (3)(a)(i)(B) by five, calculated to four decimal
16 places, disregarding the remaining fraction, if any[. The];
17 (ii) the minimum adequate reserve fund balance is calculated by:
18 (A) multiplying the five-year average benefit cost rate [obtained shall be multiplied] by
19 1.5; and [the resulting answer multiplied]
20 (B) multiplying the amount under Subsection (3)(a)(ii)(A) by total wages of the fiscal year
21 ending prior to the computation date, rounded to the nearest dollar [to determine the minimum
22 adequate reserve fund balance, and];
23 (iii) the maximum adequate reserve fund balance is calculated by:
24 (A) multiplying the five-year average benefit cost rate [shall be multiplied] by 2.0; and [the
25 resulting answer multiplied]
26 (B) multiplying the amount under Subsection (3)(a)(iii)(A) by the [same] total wages used
27 under Subsection (3)(a)(ii)(B), rounded to the nearest dollar [to determine the maximum adequate
28 reserve fund balance. If]; and
29 (iv) the computation date is the January 1 on which the reserve factor is calculated.
30 (b) (i) The reserve factor is one if the actual reserve fund balance as of June 30 preceding
31 the computation date is:

- 11 -

1 (A) equal to or greater than the minimum adequate reserve fund balance; and
2 (B) equal to or less than the maximum adequate reserve fund balance[, then a reserve
3 factor shall not be applied to the basic contribution rate].
4 [(b)] (ii) If the actual reserve fund balance as of June 30 preceding the computation date
5 is less than the minimum adequate reserve fund balance, the reserve factor shall be the greater of:
6 (A) 2.0000 minus an amount equal to the actual reserve fund balance [shall be] divided
7 by the minimum adequate reserve fund balance, calculated to four decimal places, disregarding
8 the remaining fraction, if any[. The quotient shall be subtracted from 2.0000 and the result shall
9 represent the reserve factor, unless]; or
10 (B) the reserve factor calculated in the prior year [was higher, under which circumstances
11 the higher reserve factor shall apply].
12 [(c) In the event that] (iii) The reserve factor is 2.0000 if:
13 (A) the actual reserve fund balance as of June 30 preceding the computation date is:
14 (I) insolvent[, the reserve fund balance is]; or
15 (II) negative[,]; or
16 (B) there is an outstanding loan from the Federal Unemployment Account [the reserve
17 factor shall be 2.0000].
18 [(d)] (iv) If the actual reserve fund balance as of June 30 preceding the computation date
19 is more than the maximum adequate reserve fund balance, [then] the reserve factor shall be
20 calculated by:
21 (A) dividing the actual reserve fund balance [shall be divided] by the maximum adequate
22 reserve fund balance, calculated to four decimal places, disregarding the remaining fraction, if
23 any[. The quotient shall be subtracted]; and
24 (B) subtracting the amount under Subsection (3)(b)(iv)(A) from 2.0000 [and the result
25 shall represent the reserve factor].
26 (4) (a) Until January 1, 1995, an employer's overall contribution rate is [his] the employer's
27 basic contribution rate multiplied by the reserve factor, if there is a reserve factor, calculated to
28 four decimal places, disregarding any further fraction, plus the social contribution rate, and
29 rounded up to the next higher multiple of .10%, but not more than a maximum overall contribution
30 rate of 8.0% and not less than 1% for new employers.
31 (b) On or after January 1, 1995, an employer's overall contribution rate is [his] the

- 12 -

1 employer's basic contribution rate multiplied by the reserve factor, calculated to four decimal
2 places, disregarding any further fraction, plus the social contribution rate, and rounded to three
3 decimal places, disregarding any further fraction, if the fourth decimal place is .0004 or less, or
4 rounding up to the next higher number, if the fourth decimal place is .0005 or more, but not more
5 than a maximum overall contribution rate of 8.0% and not less than 1% for new employers.
6 (c) The overall contribution rate does not include the addition of any penalty applicable
7 to an employer as a result of delinquency in the payment of contributions as provided in
8 Subsection (10).
9 (5) Except as provided in Subsection (10), each new employer shall pay a contribution rate
10 based on the average benefit cost rate experienced by employers of the major industry as defined
11 by department rule to which the new employer belongs, the basic contribution rate to be
12 determined as follows:
13 (a) [On] Except as provided in Subsection (5)(b), on or before January 1 of each year, the
14 basic contribution rate to be used in computing the employer's overall contribution rate is the
15 benefit cost rate which is the greater of:
16 (i) the amount calculated by dividing the total benefit costs charged back to both active
17 and inactive employers of the same major industry for the last two fiscal years [shall be divided]
18 by the total taxable wages paid by those employers that were paid during the same time period,
19 computed to four decimal places, disregarding the remaining fraction, if any[. The benefit cost rate
20 shall constitute the basic contribution rate of a new employer, but not less than]; or
21 (ii) 1%. [This basic contribution rate is used in computing the employer's overall
22 contribution rate.]
23 (b) If the major industrial classification assigned to a new employer is an industry for
24 which a benefit cost rate does not exist because [such] the industry has not operated in the state
25 or has not been covered under this chapter, the employer's basic contribution rate shall be 5.4%.
26 This basic contribution rate is used in computing the employer's overall contribution rate.
27 (6) (a) A reopening employer's basic contribution rate is the average overall contribution
28 rate for all employers in the state, but not less than 1%, until such time as the reopening employer
29 becomes a qualified employer as defined in Section 35A-4-301.
30 (b) The average overall contribution rate for all employers in the state shall be defined by
31 rule.

- 13 -

1 (c) The reopening employer is an employer that is not substantially related to or affiliated
2 with the predecessor employer and that acquires, for the purpose of reopening, substantially all the
3 assets of a business or operating component of a business that has been closed or substantially
4 closed for 90 days or more of its normal operating period immediately prior to the acquisition.
5 (d) A business or operating component of a business has been substantially closed if:
6 (i) its normal production has been stopped[,];
7 (ii) a majority of its workers have been laid off[,]; and
8 (iii) the services of remaining employees are devoted to the protection and disposition of
9 assets and inventory or administrative duties.
10 (7) Notwithstanding any other provision of this chapter, and except as provided in
11 Subsection (8), if an employing unit that moves into this state is declared to be a qualified
12 employer [by virtue of having] because it has sufficient payroll and benefit cost experience under
13 another state, a rate shall be computed on the same basis as a rate is computed for all other
14 employers subject to this chapter if that unit furnishes adequate records on which to compute the
15 rate.
16 (8) An employer who begins to operate in this state after having operated in another state
17 shall be assigned the maximum overall contribution rate until the employer acquires sufficient
18 experience in this state to be considered a "qualified employer" if the employer is:
19 (a) regularly engaged as a contractor in the construction, improvement, or repair of
20 buildings, roads, or other structures on lands;
21 (b) generally regarded as being a construction contractor or a subcontractor specialized in
22 some aspect of construction; or
23 (c) required to have a contractor's license or similar qualification under Title 58, Chapter
24 55, Utah Construction Trades Licensing Act, or the equivalent in laws of another state.
25 (9) (a) If an employer, other than a reopening employer, [has acquired] acquires the
26 business or all or substantially all the assets of another employer and the other employer had
27 discontinued operations upon the acquisition[,]:
28 (i) for purposes of determining and establishing the acquiring party's qualifications for an
29 experience rating classification, the payrolls of both employers during the qualifying period shall
30 be jointly considered in determining the period of liability with respect to:
31 (A) the filing of contribution reports[,];

- 14 -

1 (B) the payment of contributions[,]; and
2 (C) after January 1, 1985, the benefit costs of both employers[,]; and [the payrolls of both
3 employers during the qualifying period shall be jointly considered for the purpose of determining
4 and establishing the acquiring party's qualifications for an experience rating classification. The]
5 (ii) the transferring employer shall be divested of [his] the transferring employer's payroll
6 experience.
7 (b) Any employing unit or prospective employing unit that acquires the payroll experience
8 of an employer shall, for all purposes of this chapter, be an employer as of the date of acquisition.
9 (c) Notwithstanding Section 35A-4-310, when [an] a transferring employer, as provided
10 in [this] Subsection (9)(a), [has been] is divested of [his] the employer's payroll experience by
11 transferring all of [his] the employer's business to another and by ceasing operations as of the date
12 of the transfer, the transferring employer shall cease to be an employer, as defined by this chapter,
13 as of the date of transfer.
14 (10) (a) A rate of less than 8% shall be effective January 1 of any contribution year on or
15 after January 1, 1985, but before January 1, 1988, and a rate of less than the maximum overall
16 contribution rate on or after January 1, 1988, only with respect to new employers and to those
17 qualified employers who, except for amounts due under division determinations that have not
18 become final, paid all contributions prescribed by the division with respect to the four consecutive
19 calendar quarters in the fiscal year immediately preceding the computation date on or after January
20 1, 1985.
21 (b) Notwithstanding Subsections (1), (5), (6), (7), and (9), on or after January 1, 1988, any
22 employer who fails to pay all contributions prescribed by the division with respect to the four
23 consecutive calendar quarters in the fiscal year immediately preceding the computation date,
24 except for amounts due under determinations that have not become final, shall pay a contribution
25 rate equal to the overall contribution rate determined under the experience rating provisions of this
26 chapter, plus [an additional] a surcharge of 1% of wages.
27 (c) [A qualified] Any employer who pays all required contributions shall, for the current
28 contribution year, be assigned a rate based upon [his] the employer's own experience as provided
29 under the experience rating provisions of this chapter effective the first day of the calendar quarter
30 in which the payment was made.
31 (d) Delinquency in filing contribution reports shall not be the basis for denial of a rate less

- 15 -

1 than the maximum contribution rate.
2 Section 4. Section 35A-4-502 (Effective 07/01/97) is amended to read:
3 35A-4-502 (Effective 07/01/97). Administration of Employment Security Act.
4 (1) (a) The department shall administer this chapter through the division.
5 (b) The department may make, amend, or rescind any rules and special orders necessary
6 for the administration of this chapter.
7 (c) The division may:
8 (i) employ persons;
9 (ii) make expenditures;
10 (iii) require reports;
11 (iv) make investigations;
12 (v) make audits of any or all funds provided for under this chapter when necessary; and
13 (vi) take any other action it considers necessary or suitable to that end.
14 (d) (i) The department shall create the division pursuant to Section 35A-1-202 for the
15 purpose of administering this chapter.
16 (ii) All personnel of that division, including a full-time administrator, shall be employed
17 on a nonpartisan merit basis.
18 (iii) The division director as the full-time administrator shall[,]:
19 (A) with the approval of the department, determine the division's organization and
20 methods of procedure in accordance with this chapter[,]; and [shall,]
21 (B) under the direction of the department, supervise the department personnel and its
22 operations.
23 (iv) For purposes of this chapter, the department shall have an official seal [which] that
24 shall be judicially noticed.
25 (e) No later than the first day of October of each year, the department shall submit to the
26 governor a report covering the administration and operation of this chapter during the preceding
27 calendar year and shall make any recommendations for amendments to this chapter as the
28 department considers proper.
29 (f) (i) The report required under Subsection (1)(e) shall include a balance sheet of the
30 moneys in the fund in which there shall be provided, if possible, a reserve against liability in future
31 years to pay benefits in excess of the then current contributions, which reserve shall be set up by

- 16 -

1 the division in accordance with accepted actuarial principles on the basis of statistics of
2 employment, business activity, and other relevant factors for the longest possible period.
3 (ii) Whenever the department believes that a change in contribution or benefit rates will
4 become necessary to protect the solvency of the fund, it shall promptly inform the governor and
5 the Legislature and make appropriate recommendations.
6 (2) (a) The department may make, amend, or rescind rules in accordance with Title 63,
7 Chapter 46a, Utah Administrative Rulemaking Act.
8 (b) The director of the division or the director's designee may adopt, amend, or rescind
9 special orders after appropriate notice and opportunity to be heard. Special orders become
10 effective ten days after notification or mailing to the last-known address of the individuals or
11 concerns affected thereby.
12 (3) The director of the division or the director's designee shall cause to be printed for
13 distribution to the public:
14 (a) the text of this chapter;
15 (b) the department's rules pertaining to this chapter;
16 (c) the department's annual reports to the governor required by Subsection (1)(e); and
17 (d) any other material the director of the division or the director's designee considers
18 relevant and suitable and shall furnish them to any person upon application.
19 (4) (a) The division shall appoint on a nonpartisan merit basis, fix the compensation, and
20 prescribe the duties and powers of officers, accountants, attorneys, experts, and other personnel
21 as necessary in the performance of its duties, in accordance with the requirements of:
22 (i) Title 67, Chapter 19, Utah State Personnel Management Act; and
23 (ii) the rules of the Department of Human Resource Management.
24 (b) The division shall hold or provide for holding examinations to determine the technical
25 and professional qualifications of applicants for positions in the division, and provide for annual
26 merit ratings of employees in the division to ascertain whether the employees are maintaining the
27 eligibility standards prescribed by the department and those promulgated by the Secretary of
28 Labor.
29 (c) [No] An employee may not be separated or demoted so long as [he] the employee
30 meets the eligibility standards of performance, as set forth in:
31 (i) Title 67, Chapter 19, Utah State Personnel Management Act; and

- 17 -

1 (ii) the rules of the Department of Human Resource Management.
2 (d) The division may delegate to any person so appointed the power and authority it
3 considers reasonable and proper for the effective administration of this chapter and may bond any
4 person handling moneys or signing checks under this authority.
5 (e) The division may provide for the maintenance of the merit system required under this
6 section in cooperation and conjunction with any merit system applicable to any state agency or
7 agencies [which meets] that meet the standards of the department and those promulgated by the
8 Secretary of Labor.
9 (f) The department may, when permissible under federal and state law, make arrangements
10 [that will permit individuals employed under this chapter] to voluntarily elect coverage under the
11 United States Civil Service Retirement System or a comparable private retirement plan with
12 respect to past as well as future services[.] of individuals employed under this chapter who:
13 (i) were hired prior to October 1, 1980; and
14 (ii) have been retained by the department without significant interruption in the employees'
15 services for the department.
16 (g) An employee of the [division] department who no longer may participate in a federal
17 or other retirement system as a result of a change in status or appropriation under this chapter may
18 purchase credit in a retirement system created under Title 49, Chapter 3, Public Employees'
19 Noncontributory Retirement Act, with the employee's assets from the federal or other retirement
20 system in which the employee may no longer participate.
21 (5) There is created an Employment Security Advisory Council composed of the members
22 listed in Subsections (5)(a) and (b).
23 (a) The executive director shall appoint:
24 (i) not less than five employer representatives chosen from individuals recommended by
25 employers, employer associations, or employer groups;
26 (ii) not less than five employee representatives chosen from individuals recommended by
27 employees, employee associations, or employee groups; and
28 (iii) five public representatives chosen at large.
29 (b) [(i) The] The following shall serve as nonvoting ex officio members of the council:
30 (i) the executive director or the executive director's designee [shall serve as a nonvoting
31 member of the council.]; and

- 18 -

1 (ii) [Each] each member of the Workforce Appeals Board [shall serve as nonvoting, ex
2 officio members of the council].
3 (c) The employee representatives shall include both union and nonunion employees who
4 fairly represent the percentage in the labor force of the state.
5 (d) Employers and employees shall consider nominating members of groups who
6 historically may have been excluded from the council, such as women, minorities, and individuals
7 with disabilities.
8 (e) (i) Except as required by Subsection (5)(e)(ii), as terms of current council members
9 expire, the executive director shall appoint each new member or reappointed member to a
10 four-year term.
11 (ii) Notwithstanding the requirements of Subsection (5)(e)(i), the executive director shall,
12 at the time of appointment or reappointment, adjust the length of terms to ensure that the terms of
13 council members are staggered so that approximately half of the council is appointed every two
14 years.
15 (f) When a vacancy occurs in the membership for any reason, the replacement shall be
16 appointed for the unexpired term.
17 (g) The executive director shall terminate the term of any council member who ceases to
18 be representative as designated by [his] the member's original appointment.
19 (h) The council shall advise the department, the division, and the Legislature in
20 formulating policies and discussing problems related to the administration of this chapter and in
21 assuring impartiality and freedom from political influence in the solution of those problems.
22 (i) The executive director or the executive director's designee shall serve as chair of the
23 council and call the necessary meetings.
24 (j) (i) [Members] A member shall receive no compensation or benefits for [their] the
25 member's services, but may receive per diem and expenses incurred in the performance of the
26 member's official duties at the rates established by the Division of Finance under Sections
27 63A-3-106 and 63A-3-107.
28 (ii) [Members] A member may decline to receive per diem and expenses for [their] the
29 member's service.
30 (k) The department shall provide staff support to the council.
31 (6) (a) The division, with the advice and aid of its advisory council shall take all

- 19 -

1 appropriate steps to:
2 (i) reduce and prevent unemployment;
3 (ii) encourage and assist in the adoption of practical methods of vocational training,
4 retraining, and vocational guidance;
5 (iii) investigate, recommend, advise, and assist in the establishment and operation by the
6 state of reserves for public works to be used in times of business depression and unemployment;
7 (iv) promote the creation and development of job opportunities and the reemployment of
8 unemployed workers throughout the state in every way that may be feasible;
9 (v) plan, coordinate, organize, or direct economic development programs as are necessary
10 to maintain or create job opportunities;
11 (vi) cooperate with local communities, industries, and organizations in encouraging and
12 promoting the full development of the state's mineral, water, and other natural resources;
13 (vii) appraise the agricultural and industrial potential of the state; and
14 (viii) carry on activities and organize, coordinate, and publish the results of investigations
15 and research studies.
16 (b) To accomplish these purposes, the division may enter into agreements with
17 governmental or other agencies.
18 (7) In the discharge of the duties imposed by this chapter, the administrative law judge or
19 the division director or the director's designee as designated by department rule, may in connection
20 with a disputed matter or the administration of this chapter:
21 (a) administer oaths and affirmations[,];
22 (b) take depositions[,];
23 (c) certify to official acts[,]; and
24 (d) issue subpoenas to compel the attendance of witnesses and the production of books,
25 papers, correspondence, memoranda, and other records necessary as evidence [in connection with
26 a disputed matter or the administration of this chapter].
27 (8) (a) In case of contumacy by or refusal to obey a subpoena issued to any person, any
28 court of this state within the jurisdiction of which the inquiry is carried on or within the
29 jurisdiction of which the person guilty of contumacy or refusal to obey is found or resides or
30 transacts business, upon application by an administrative law judge, the Workforce Appeals Board,
31 or the director of the division or the director's designee shall have jurisdiction to issue to that

- 20 -

1 person an order requiring the person to appear before the director or the director's designee, an
2 administrative law judge, the Workforce Appeals Board, or the director or the director's designee
3 to produce evidence, if so ordered, or give testimony regarding the matter under investigation or
4 in question. Any failure to obey that order of the court may be punished by the court as contempt.
5 (b) Any person who, without just cause, fails or refuses to attend and testify or to answer
6 any lawful inquiry or to produce books, papers, correspondence, memoranda, and other records,
7 if it is in his power to do so, in obedience to a subpoena of an administrative law judge, or the
8 Workforce Appeals Board, or the director of the division or the director's designee shall be
9 punished by a fine of not less than $20 nor more than $200 or by imprisonment for not longer than
10 60 days or by both fine and imprisonment. Each day the violation continues is a separate offense.
11 (9) (a) [No] A person may not be excused from attending and testifying or from producing
12 books, papers, correspondence, memoranda, and other records before the division or in obedience
13 to the subpoena of the, or any division in any cause or proceeding before the division, on the
14 ground that the testimony or evidence, documentary or otherwise, required of [him] that person
15 may tend to incriminate [him] the person or subject [him] the person to a penalty or forfeiture.
16 (b) [No] An individual may not be prosecuted or subjected to any penalty or forfeiture for
17 or on account of any transaction, matter, or thing concerning which [he] the individual is
18 compelled, after having claimed [his] that individual's privilege against self-incrimination, to
19 testify or produce evidence, documentary or otherwise, except that the individual testifying is not
20 exempt from prosecution and punishment for perjury committed while testifying.
21 (10) (a) In the administration of this chapter, the division shall cooperate with the United
22 States Department of Labor to the fullest extent consistent with the provisions of this chapter and
23 shall take action, through the adoption of appropriate rules by the department and administrative
24 methods and standards, as necessary to secure to this state and its citizens all advantages available
25 under the provisions of:
26 (i) the Social Security Act that relate to unemployment compensation[,];
27 (ii) the Federal Unemployment Tax Act[,];
28 (iii) the Wagner-Peyser Act[,]; and
29 (iv) the Federal-State Extended Unemployment Compensation Act of 1970.
30 (b) In the administration of Section 35A-4-402, which is enacted to conform with the
31 requirements of the Federal-State Extended Unemployment Compensation Act of 1970, 26 U.S.C.

- 21 -

1 3304, the division shall take any action necessary to ensure that the section is interpreted and
2 applied to meet the requirements of the federal act, as interpreted by the United States Department
3 of Labor and to secure to this state the full reimbursement of the federal share of extended and
4 regular benefits paid under this chapter that are reimbursable under the federal act.
5 Section 5. Effective date -- Retrospective operation.
6 (1) The amendments to Section 35-4-502 in this act take effect May 5, 1997.
7 (2) The amendments to Sections 35A-4-208 and 35A-4-303 in this act take effect July 1,
8 1997 and have retrospective operation to January 1, 1997.
9 (3) The amendments to Section 35A-4-502 in this act take effect on July 1, 1997.




Legislative Review Note
as of 12-27-96 9:45 AM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

- 22 -