Employer Unemployment Tax Fraud Law Takes Effect in La.

June 6, 2006

The Louisiana Department of Labor announced it is educating employers about a new state law meant to discourage the practice of illegally lowering unemployment insurance taxes. The new law, which took effect June 1, allows the labor department to impose stiff penalties for the practice called “SUTA (State Unemployment Tax Act) dumping.”

“SUTA dumping is a method used by some employers to avoid contributing their fair share to the state’s Unemployment Insurance Trust Fund by shifting their payrolls to another entity that has a lower rate, thereby paying less taxes,” said Assistant Labor Secretary Marianne Sullivan. “As a result, these employers unfairly pass along their proper tax liability to all other employers in the state.”

Unemployment taxes go into the state’s UI Trust Fund, which is used to pay unemployment benefits to qualified applicants. The enforcement of SUTA dumping laws has the potential to generate millions of dollars in revenue for the trust fund.

Unemployment insurance taxes are based upon an “experience rate” which is determined by several factors, including the number of employees 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 per employee.

In addition to employers, R.S. 23:1539.1 authorizes civil and criminal penalties for 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.

Source: Louisiana Department of Labor

Was this article valuable?

Here are more articles you may enjoy.