All About MN Unemployment Insurance
It is important that employers, especially HR professionals, understand Minnesota unemployment insurance. At a high level, Minnesota’s unemployment insurance program is designed to provide benefits to workers who are unemployed through no fault of their own, such as a layoff or worksite closing. One of the main objectives of unemployment insurance is to assist laid off workers to migrate into new employment more quickly. Unemployment benefits also help employers by stimulating the economy through consumer spending , and they act as an insurance policy for the business by ensuring that employees will get back on their feet if their job is terminated through no fault of their own.
The Minnesota Department of Employment and Economic Development (DEED) administers Minnesota’s unemployment insurance program through local county agencies.
Minnesota has many resources available for employers to assist them with Minnesota’s unemployment insurance program, including an employer handbook that can be downloaded here.
Who are the Employers?
Eligibility Criteria for Employers for MN Unemployment
Before an employer can participate in the Minnesota Unemployment Insurance program, it has to meet certain eligibility requirements. Once an employer meets the threshold, it is then required to maintain compliance with unemployment standards and requirements in order to continue participation. Most employers are "subject" to the Minnesota Employment and Economic Development Department ("DEED") Unemployment Insurance program if during a calendar year:
With a few exceptions, any person or organization who meets this definition of "employer" (also referred to as "contributor") must make regular contributions to DEED based on the taxable wage base and the designated contribution rate. This includes providing a written notification concerning the top wages and the rate classification within 30 days of request.
The unemployment insurance program does not cover all workers. While some workers are specifically excluded from employment and the unemployment program, employers also need to be aware that there could be some employees who go uncounted for the purposes of unemployment benefits.
In order to keep abreast of DEED’s policy changes and requirements for ongoing compliance, employers should review the regularly scheduled tax reports sent to them as well as any materials received from DEED regarding unemployment requirements.
Timelines and Filing Requirements
Minnesota Unemployment rules and regulations set forth mandatory filing requirements and time frames in which such filings must be made. Failure to comply with such requirements and deadlines can have dire consequences.
The amount of Unemployment Insurance Tax that an employer must pay under Minnesota law is affected by the timeliness and accuracy of the claims reporting and responses to Requests for Information submitted to the State so it is essential for employers to respond to all Requests for Information received from the DLI in a timely manner.
In addition, employers must submit their quarterly tax and wage reports on time, and pay their Unemployment Insurance Taxes on a timely basis, failure to do any of these items can result in the assessment of additional taxes. For example, if an employer fails to pay taxes for a particular quarter, their account will be deemed to have been terminated and a 10% liability for a surcharge will be assessed against the employer. If an employer fails to submit their wage and tax report within 30 days after the due date, their account will be deemed to have been closed and they will be assessed a surcharge of 10%.
It is vitally important – and the DLI has the computer capability to monitor this problem – to pay wages in accordance with the employer’s tax reporting period. If an employer issues a check at the end of the month that is intended to cover wages for the first or second day of the next month, the DLI will assess a surcharge equal to the tax rate times the amount of the wages. This practice by employers of holding checks until the beginning of a next payroll period is often referred to as "check lagging." Minnesota law actually prohibits employers from doing this, and the DLI will assess those employers a surcharge.
How to Respond to an Unemployment Claim
Employers are required to respond to all notices and questions from the Minnesota Unemployment Office. Failure to respond could result in the Employee receiving unemployment benefits that you will end up paying for, plus it could result in your company being assessed penalties for repeated failures to respond to notices.
When responding to the Minnesota Unemployment Office, it is critical that Employers be timely, accurate, concise, consistent, maintain professionalism in tone, language and attitude, review information carefully, and strive to provide information that helps the Minnesota Unemployment Office understand exactly what occurred.
Make sure to have someone at your company responsible for acknowledging receipt of all notices from the MN Unemployment Office and for tracking all deadlines even if your company is not a "cooperating employer." That way, even if your company is not responding to claims as a "cooperating employer" (discussed below), your company will still be able to present whatever evidence is needed to argue against an Employee receiving unemployment benefits. Also, be sure to note in the file or the record to show exactly what was sent to the Employee and the MN Unemployment Office, and at what addresses. This information is relevant in case the MN Unemployment Office claims that they never received some document or other material from the Employer or from the Employee.
In the "Cooperative Employer" Program, the Minnesota Unemployment Office explains that if your company has cooperated in cases that could affect former Employees’ right to receive unemployment benefits, the MN Unemployment Office may consider your company to be a "Cooperating Employer." A "Cooperating Employer" can take steps to prevent its former Employee from receiving unemployment benefits, including submitting title card notices and accumulating experience ratings (among other things). But if your company is not a Cooperating Employer (because, for example, you do not have an experience rating), then your company likely does not need to respond to MN Unemployment Office notices or proceedings before the "Appeals Referee."
Poor customer service and misunderstandings in the MN unemployment office make communication with the MN unemployment office critical.
Effects of Layoffs and Reducing Your Workforce
Changes to the size of an employer’s workforce, such as a reduction or layoff of its workforce, can have significant financial implications for an employer under Minnesota unemployment law. In Minnesota, as in many states, most employers pay unemployment taxes based on covered payroll for each employee and those payments are used to provide unemployment benefits to eligible employees after job loss. The unemployment benefit payments to separated individuals are drawn from a pool of funds collected from Minnesota employers through these unemployment tax payments.
Generally, the contributions paid by an employer into the unemployment benefits fund are experience rated, meaning that an employer’s unemployment tax rate will be affected by its history of unemployment claims. The employer’s tax rate will increase if it has a larger than average number of claims in relation to covered payroll attributable to the employer. As a result of the experience rating system, employers should be concerned if a layoff or reduction in workforce will trigger an influx of unemployment claims .
The overall cost burden resulting from unemployment claims is especially apparent during times of economic upheaval. For example, during the 2018-2019 government shutdown, the Minnesota Department of Employment and Economic Development ("DEED") received thousands of claims related to federal, furloughed employees and non-federal employees who were laid off. When a large number of claims are filed in a short period of time, that can impact the unemployment tax rate paid by all Minnesota employers. For example, an influx of new claims may bump other employers into a higher experience rating tier (since an employer’s experience rating encompasses an analysis of a partial year’s data).
Specific to employers that reduce or lay off their workforces, there are several things that employers can do to manage the adverse impact of layoffs or reductions in workforce absent substantial changes to the company’s overall solvency.
Meeting Minnesota Unemployment Law Requirements
For employers operating in Minnesota, staying compliant with the state’s unemployment laws is essential to avoid penalties and legal complications. It’s critical to understand the scope of Minnesota unemployment regulations, as well as how to fulfill your obligations with regard to your employees and the Minnesota Department of Employment and Economic Development (DEED).
The first step to compliance is understanding when state laws apply to you. DEED Minnesota unemployment regulations are in effect in all areas outside of the federal government, military and Indian tribes. This means that almost all private-sector employers in the state are subject to Minnesota unemployment law. There are certain exceptions in place for non-profit organizations — contact your lawyer to clarify whether the law applies to your organization.
As an employer, you must ensure that you pay unemployment insurance tax on your employees’ wages. However, if your sole employee is your spouse, or if you are operating a family farm or a family-owned business with three or fewer employees, you are exempt from paying unemployment insurance tax. Families whose businesses employ only immediate family members may file for a family farm or business exemption form with the state.
To stay compliant, you will need to be familiar with the specifics of Minnesota unemployment law related to unemployment insurance tax, and how it works depending on your organization’s classification (i.e., general business, nonprofit, local government or public educational institution). You should also ensure that you know the rate at which you are taxed for unemployment, how this will change over time and how to adjust your wage basis for the unemployment insurance tax.
Be sure to keep an eye out for the deadline for filing your unemployment insurance tax, as well as any other state regulations applicable to your organization.
State Resources for Minnesota Employers
The following is a list of agencies, guides, and manuals available to Minnesota employers as well as links to official state websites with information pertaining to unemployment.
Minnesota Department of Employment and Economic Development
The Minnesota Department of Employment and Economic Development maintains a searching engine for employer guides, manuals, and references available to employers.
Minnesota Department of Employment and Economic Development, Unemployment Insurance Program
The Minnesota Unemployment Insurance program has considerable information for employers available online. The Minnesota Unemployment Program’s "Employer Toolkit" contains a variety of resources, including guidance on tax screenings, a Tax Rate Summary , and an Employer Handbook available for download. The Form 9403 is also contained in the Toolkit. The Form 9403 is Minnesota’s Unemployment State Tax Form; employers with at least one employee during any 20 week period, or who paid $1,500 for services in any calendar quarter, are required to file the form and are charged a 0.1% contribution rate. The Minnesota DEED’s Employer Resource Guides provides further information on a wide range of relevant issues.
Minnesota Department of Revenue
The Minnesota Department of Revenue’s website has extensive resources for employers as well. The MN Department of Revenue’s "Tax Guides & Directories" page contains a "Business/Nonprofits" tool box for employers, containing specific information on how to make the transition from federal to state employer.