New Jersey Governor Chris Christie has signed a bill that should compel small businesses to review their unemployment benefits tax payments and all employers to consider contesting more claims for unemployment compensation benefits.

The bill, S-1813, is designed to protect small businesses and help reform the state Unemployment Insurance Trust Fund. It was signed into law July 2, 2010.

The law requires small businesses to pay a tax of only $130 per employee towards the UI Trust Fund. This is a significant decrease in the original automatic adjustment that would have subjected these same employers to a tax increase of up to $683 per employee beginning on July 1, 2010.

S-1813 also distinguishes among employees who are dismissed due to misconduct, severe misconduct, and gross misconduct, and either prohibits payment of unemployment benefits or extends the period leading up to such benefits being paid. This measure is expected to save businesses approximately $150 million per year.

The bill was originally introduced to help repair significant revenue loss by the state UI Trust Fund due to rising unemployment claims. Because the tax rate to employers correlates with the UI Trust Fund deficit, if this bill had not been signed, small-business owners would have been automatically subjected to the highest tax rates established by law, plus additional surcharges.

In addition to these savings, the Unemployment Insurance Fund Task Force has been created to help resolve the financial crisis surrounding the UI Trust Fund. The Task Force will review current standards pertaining to benefit eligibility, definitions in the law, and tax contributions and experience tables. Any measures adopted by the Task Force will continue to help balance the interests of workers, employers, and the economy.

Small businesses should review their unemployment benefits tax payments to ensure they are receiving these significant cost savings. Employers should also consider contesting more claims for unemployment compensation benefits in circumstances where an employee’s separation results from misconduct, as they may now be better able to successfully defend against such claims.

If you have any questions about this new development, please contact Louis L. Chodoff, 856.761.3436 or, or any member of Ballard Spahr's Labor and Employment Group.

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