State Of Michigan Assesses Two Companies $281,000 For Avoiding Unemployment Tax Payments

APRIL 4, 2006 – The State of Michigan has found two companies in violation of the state’s unemployment insurance law.

The companies underreported a substantial portion of their unemployment tax liability to the state’s Unemployment Insurance Agency (UIA) and must now reimburse $281,416 to the state for unpaid unemployment taxes, penalties and interest.  The Agency found the employers had engaged in a practice known as SUTA (state unemployment tax act) Dumping.

“When employers SUTA dump, they typically move employees from their high-rate tax accounts to lower-rate accounts,” explained David Plawecki, deputy director of Michigan’s Department of Labor & Economic Growth, “in order to pay less in unemployment taxes than they should.”

The first case involves a Michigan employer in the construction industry.  The employer avoided unemployment taxes by opening a new company and shifting its employees from the original construction company with a high unemployment tax rate to the new construction company with a much lower tax rate.  The company now owes the state $109,913 in taxes, penalties and interest.

The second case involves a professional employer organization (PEO) that had multiple movements of employees between employer accounts.  Again, employees were moved from a company with a higher tax rate to one with a lower rate, without disclosing the transferring of employees, as required by the Agency.  The total amount of tax, penalties, and interest owed by the company is $171,503.

“We are working aggressively to ensure that all employers comply with the requirements of the Michigan Employment Security Act,” said UIA Director Sharon Bommarito.  “By enforcing the unemployment insurance (UI) program’s integrity, we help to maintain the solvency of the UI Trust Fund and make certain that all employers pay their fair share of taxes.”

Unemployment taxes are based on an employer’s layoff experience and can range from $5.40 to $927 per employee annually.  These taxes are paid into the state’s UI Trust Fund from which unemployment benefits are paid to eligible, unemployed Michigan workers.