BATON ROUGE – The Louisiana Department of Labor has collected more than $440,000 from 16 businesses found to be using an illegal practice to reduce the amount of unemployment insurance taxes they are required to pay. The agency also has identified and expects to collect another $74,000 in the near future.
The practice, known as “SUTA (State Unemployment Tax Act) dumping,” involves businesses shifting payrolls to other entities with lower tax rates, thereby unfairly lowering their taxes.
The Labor Department was instrumental in getting a law passed recently to combat this practice. Previously, some businesses had used a loophole in SUTA legislation to pay less in taxes. The current law, enacted last year, allows the department to impose penalties on employers and individuals involved in SUTA dumping.
“Through our agency’s dedicated efforts to detect SUTA dumping, we have been able to get this money back where it belongs, in the Unemployment Insurance Trust Fund,” said Assistant Labor Secretary Marianne Sullivan. “By recovering these funds, we are ensuring that all businesses in the state pay their fair share.”
Unemployment insurance taxes are based upon an “experience rate” that is determined by several factors, including the number of employees, the amount of the payroll and the amount of UI benefits paid to former employees. Experience ratings obligate employers who lay off more workers to pay higher UI taxes. Rates in Louisiana range from one-tenth of a percent to a high of 6.2 percent. Under these rates, unemployment insurance tax obligations can range from $7 to $434 annually per employee.
“Every dollar we collect directly benefits Louisiana businesses,” said Office of Regulatory Services Chief Stephanie Rosaya. “And we will continue to recover additional funds as we fight SUTA dumping.”
Louisiana is not the only state fighting the practice. The Tennessee Department of Labor and Workforce Development has recovered more than $2 million in premiums and interest, while North Carolina’s Employment Security Commission recently settled a single claim for more than $8 million.
The Labor Department employs several methods to detect SUTA dumping. One of these is tracking the movement of employees between payrolls. When it is noted that a large number or large percentage of a business’ employees are moved to another business’ payroll, the department first checks to see if it has been informed of this move. If not, the department investigates to determine if SUTA dumping is involved.
R.S. 23:1539.1 authorizes civil and criminal penalties for both employers and individuals who knowingly violate or who knowingly advise another person to attempt unemployment insurance contribution fraud. Individuals can be fined up to $10,000 for each incident and may be imprisoned for up to six months. Employers can also be assigned the highest experience rate for the year in which the violation occurred or was attempted as well as the following three years.
For more information about SUTA dumping or to report a suspected case, contact the Louisiana Department of Labor at (225) 342-2992 or visit www.LAWORKS.net.
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