Law targets companies that dodge paying benefits
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A new law, signed recently by Gov. Phil Bredesen, will target companies and accounting firms who try to avoid paying unemployment insurance taxes by moving employees from company to company, thereby acquiring fraudulently lower rates when it comes time to pay unemployment. Auditors have already pointed to $2.5 million in lost revenue as a result of illegal dumping. The tactic, according to James Neeley of the Tennessee Department of Labor, creates an unfair advantage for those who avoid paying their fair share.
“Law abiding employers get hurt by dumping,” Neeley said. “Honest employers can be put at a competitive disadvantage in marketing their products and services and also find themselves with fewer funds available to expand their businesses.”
Under the new law, both the prior employer and successor employer (both of which are involved in the dumping since it involves moving an employee from company to company to avoid the actual unemployment payment rate) will be assigned the premium rate of unemployment payments dating back to the first quarter of the violation. Both employers will also be assessed a 2 percent penalty for three years on their annual taxable payroll.
Criminal charges may also be sought against the violators, with up to an 11-month, 29-day jail sentence and fine.