Unemployment Insurance

This section of JobsND.com is designed to help you comply with North Dakota Unemployment Insurance law and promote understanding of the law and its requirements.

Employer Reporting and Payment of Taxes

Who must pay unemployment taxes?
What is the taxable wage base?
What are excess wages and how are they calculated?
What are the tax rates in North Dakota?
What is the rate for new employers?
When does our rate change?
Who are employees?
Why do corporate officer wages have to be reported when they will never be able to collect unemployment benefits?
How are limited liability company managers' earnings handled?
If I've been paying in on myself, why can't I draw if my business closes?
Must out-of-state residents be reported?
How do I register?
How do I report and pay the taxes due?
How does it affect my account when someone draws unemployment against me?
Why did my unemployment rate increase?
How are unemployment rates figured?
Why are my unemployment tax rates so high when I haven't had a claim in a long time?
If I lay a person off and he/she only files for five weeks, how much will I have to pay?
Why is my account being charged when the individual went to work for another employer and then quit or was fired from that job?
Why is my account being charged when the employee was fired?
The employee we have isn't working out. If we just lay the employee off, how much will he/she get?
When purchasing a company, can I assume their experience rate?
How can someone file or collect unemployment if they quit or were fired?
Are 401K or tax deferred plans taxable?
Can I make a voluntary contribution to lower my rate?
What is the Benefit Accuracy Measurement/Quality Control Program (BAM/QC)?

How does the system work?
Why is the information necessary?
Why is the information needed?
How does the BAM/QC program benefit employers?
As an employer, how can I help?

Who do I contact with my questions or if I want more information?
What if I disagree with a notice, determination, or decision?
How do I file an appeal?
What happens after I file an appeal?
Can I withdraw my appeal?
What happens in an appeals hearing?

About Reporting and Payment of Taxes

Who must pay unemployment taxes?
All non-agricultural employers who during the current or preceding year had one or more persons employed at any time during 20 or more weeks, or paid $1,500 or more in wages in a calendar quarter. Persons paying $1,000 or more in wages for domestic services in a calendar quarter in either the current or preceding year. Employers of agricultural labor who during the current or preceding year had 10 or more persons employed at anytime during 20 weeks, or paid in any quarter $20,000 or more in cash wages for agricultural labor. For more information, please check out the Employer's Guide to Unemployment Insurance in North Dakota.

What is the taxable wage base?
The 2008 taxable wage base is $22,100 and the 2007 taxable base is $21,300. Each year the taxable wage base is recalculated for the next calendar year as 70% of the statewide average annual wage.

What are excess wages and how are they calculated?
Excess wages are those wages paid to an employee this quarter that are over the taxable wage base for the year. DO NOT ACCUMULATE THE EXCESS WAGES ON THE QUARTERLY REPORT. Only report the excess wages for that quarter.

What are the tax rates in North Dakota?
The tax rates vary depending on the employer's experience with the unemployment insurance (contributions paid and benefits charged). Beginning in 2000 there are two tax rate schedules, Positive Balance and Negative Balance. Tax rate schedules range from 0.20% to 1.30% for Positive balance accounts and 6.26% to 9.86% for Negative balance accounts.

What is the rate for new employers?
Tax rates for new employers for year 2008 are 1.17% for non-construction employers and 9.86% for construction employers. Tax rates for 2007 are 1.60% for non-construction employers and 8.09% for construction employers.

When does our rate change?
Unemployment Insurance Tax Rates are recalculated each year after September and are effective on January 1.

Who are employees?
If your business is a:

Sole proprietorship - all persons performing services for you except: services performed by your spouse, minor children, or parent
Partnership - family members are excluded only if they have an exempting relationship with each partner
Corporation - all persons performing services are employees, including officers
Limited Liability Company (LLC) - Managers of LLCs that are treated as corporations for federal income taxation and all LLC managers who are not members are considered employees.

Corporations and LLCs may apply to exclude officers/managers with 25% or more ownership from employment if an application to exclude those wages is filed in January of any year or within 60 days of the formation of the corporation/LLC.

Why do corporate officers wages have to be reported when they will never be able to collect unemployment benefits?
The North Dakota Unemployment law specifically defines corporate officers and certain limited liability company managers (see previous question) as employees if they work for their respective companies. You may choose to be excluded from coverage by applying to do so during the month of January of any year, or within 60 days of formation of the corporation/LLC. However, you may still be liable for the Federal Unemployment Tax, which will be higher if you are not covered under the state tax. You should take this into consideration before deciding whether to apply to exempt corporate officers from coverage.

Wages paid to corporate officers and limited liability company managers are insured and can qualify for benefits. Ownership criteria must be considered and may cause some to be denied benefits. The primary factor in determining eligibility for corporate officers or limited liability company managers is whether the individual continues to maintain ownership interest in the corporation. To establish whether an individual had actually ceded his/her interest in the corporation, the individual must show that they have given up their ownership interest in the corporation or have dissolved the business interest.

Business owners (sole proprietorship, partnership) are not defined in law as employees and consequently are not insured nor are wages taxed for unemployment insurance.

How are limited liability company managers' earnings handled?
The North Dakota Unemployment law specifically defines corporate officers and certain limited liability company managers (see previous question) as employees if they work for their respective companies. You may choose to be excluded from coverage by applying to do so during the month of January of any year, or within 60 days of formation of the corporation/LLC. However, you may still be liable for the Federal Unemployment Tax, which will be higher if you are not covered under the state tax. You should take this into consideration before deciding whether to apply to exempt corporation officers from coverage.

Business owners (sole proprietorship, partnership) are not defined in law as employees and consequently are not insured nor are wages taxed for unemployment insurance.

If I've been paying in on myself, why can't I draw unemployment insurance if my business closes?
Business owners (sole proprietorship, partnership) are not defined in law as employees and consequently are not insured nor are wages taxed for unemployment insurance. You should not list yourself on your North Dakota unemployment insurance quarterly reports.

Must out-of-state residents be reported?
Yes, if their principal place of employment is in North Dakota. If their principal place of employment is in another state and their work in North Dakota is temporary or transitory in nature, their wages should be reported to the state where principally employed.

How do I register?
To register, you may do one of the following:

Contact the Unemployment Insurance division, Tax & Field Services section at Job Service North Dakota
Download the Report to Determine Liability (PDF: 3 pages / 831 KB)

How do I report and pay the taxes due?
After you are registered, you must file an Employer's Contribution and Wage Report each calendar quarter. Forms will be mailed to you each quarter and may be filed online through UI EASY through secure FTP, by submitting diskette, cd-rom or magnetic tape (using the ICESA format) or by using the traditional paper method. Reports and payment must be submitted by the end of the month following the quarter.

You may also contact the Unemployment Insurance Field Representative at the Job Service Customer Service Office in your area.

How does it affect my account when someone draws unemployment against me?
Benefit payments are charged to an employer's account in proportion to the wages paid by the employer during the base period. "Base period" means a 12-month period consisting of the first four of the last five completed calendar quarters preceding the date the employee filed a claim.

Why did my unemployment rate increase?
An increase to your tax rate can occur as a result of several factors including:

an increase in the average taxable payroll
benefits charged against your account *
an increase to the rates in the tax rate schedule

* Note: Benefit payments are charged to an employer's account in proportion to the wages paid by the employer during the base period. "Base period" means a 12-month period consisting of the first four of the last five completed calendar quarters preceding the date the employee filed a claim.

How are unemployment rates figured?
The rates are determined by first calculating the amount of your cumulative reserve (the total taxes you have paid since you started paying minus the total benefits charged to your account) to determine if your account has a positive or negative balance. This then determines which tax rate schedule applies. Next the amount of your six-year reserve (the total taxes you have paid in the last six years minus the total benefits charged to your account in the last six years) is divided by your average taxable payroll in the last three years. This calculation result is a reserve ratio. The reserve ratio is then applied to the appropriate tax rate schedule (Positive Balance or Negative Balance) to determine your tax rate. The higher your reserve ratio, the lower your tax rate.

Why are my unemployment tax rates so high when I haven't had a claim in a long time?
The rates are determined by first calculating the amount of your cumulative reserve (the total taxes you have paid since you started paying minus the total benefits charged to your account) to determine if your account has a positive or negative balance. This then determines which tax rate schedule applies. Next the amount of your six-year reserve (the total taxes you have paid in the last six years minus the total benefits charged to your account in the last six years) is divided by your average taxable payroll in the last three years. This calculation result is a reserve ratio. The reserve ratio is then applied to the appropriate tax rate schedule (Positive Balance or Negative Balance) to determine your tax rate. The higher your reserve ratio, the lower your tax rate.

If I lay a person off and he/she only files for five weeks, how much will I have to pay?
The rates are determined by first calculating the amount of your cumulative reserve (the total taxes you have paid since you started paying minus the total benefits charged to your account) to determine if your account has a positive or negative balance. This then determines which tax rate schedule applies. Next the amount of your six-year reserve (the total taxes you have paid in the last six years minus the total benefits charged to your account in the last six years) is divided by your average taxable payroll in the last three years. This calculation result is a reserve ratio. The reserve ratio is then applied to the appropriate tax rate schedule (Positive Balance or Negative Balance) to determine your tax rate. The higher your reserve ratio, the lower your tax rate.

An increase to your tax rate can occur as a result of several factors including:

an increase in the average taxable payroll
benefits charged against your account *
an increase to the rates in the tax rate schedule

Why is my account being charged when the individual went to work for another employer and then quit or was fired from that job?
An employer's account being charged depends on several factors. If you are a reimbursable employer, your account will always be charged for any benefits that Job Service pays to former workers with your wages in the base period. If you are a tax rated employer, your account may or may not be charged depending on the circumstances. These may include: did the employee voluntarily quit working for you, was the employee fired for misconduct, was the employee working for you part time and continues to do so under the same working agreement, is the person being trained under an approved training program, etc. Because of the many factors that can influence the charging, each determination is made on a case by case basis. In all cases, you must respond to the notice you receive from Job Service advising that this person has filed a claim for benefits. If no response is received, the determination will be made from the information available.

The amount of benefits a person receives depends on the amount earnings they received during a "base period" of time from all their employers. (Base period means a 12-month period consisting of the first four of the last five completed calendar quarters at the time the employee filed a claim). The amount of the benefits charged to an employer's account is proportionate to the wages from each employer.

Why is my account being charged when the employee was fired?
An employer's account being charged depends on several factors. If you are a reimbursable employer, your account will always be charged for any benefits that Job Service pays to former workers with your wages in the base period. If you are a tax rated employer, your account may or may not be charged depending on the circumstances. These may include: did the employee voluntarily quit working for you, was the employee fired for misconduct, was the employee working for you part time and continues to do so under the same working agreement, is the person being trained under an approved training program, etc. Because of the many factors that can influence the charging, each determination is made on a case by case basis. In all cases, you must respond to the notice you receive from Job Service advising that this person has filed a claim for benefits. If no response is received, the determination will be made from the information available.

The employee we have isn't working out. If we just lay the employee off, how much will he/she get?
The amount of benefits a person receives depends on the amount earnings they received during a "base period" of time from all their employers. (Base period means a 12-month period consisting of the first four of the last five completed calendar quarters at the time the employee filed a claim). The amount of the benefits charged to an employer's account is proportionate to the wages from each employer.

When purchasing a company, can I assume their experience rate?
The acquisition of a former owner's tax rating account may be possible either voluntarily or mandatorily depending on certain circumstances:

An employer that acquires all or part of another employer and continues essentially the same business activity of the acquired business may request transfer of the experience record, reserve balance, and benefit experience of the acquired business when submitting the Report to Determine Liability to Job Service North Dakota.

An employer acquiring (successor) all or part of another employer (predecessor) WILL BE REQUIRED TO assume all or part of the experience record, reserve balance (positive or negative) of the old business (predecessor) if:

The predecessor owned or controlled the successor, or the successor owned or controlled the predecessor; OR
Both the predecessor and successor were owned or controlled by the same interests.

For further information on a specific case you may:

Contact your local field representative from Job Service North Dakota
Contact the Unemployment Insurance division at Job Service North Dakota

How can someone file or collect unemployment if they quit or were fired?
The reason for separation from the "most recent employer" determines if an individual can qualify for unemployment benefits. Many factors are considered when determining eligibility for benefits, consequently each determination is made on a case by case basis. However, in general terms it is possible to quit employment and still be eligible for benefits if the reason for quitting is attributable to the employer. Some factors considered are the degree of risk to the employee's health, safety, and morals, or whether there was a substantial change in the conditions of employment such as driving distance, wages, hours, etc.

It is also possible for an individual who has been discharged to receive benefits. The employer, in this case, has the burden of proof to show that misconduct occurred. Again, because each case is unique, determining an individual's eligibility is made on a case by case basis. Some factors to consider are whether there was negligence on the part of the individual, whether the individual acted willfully, if company policy was violated, or if the individual's actions represent a substantial disregard of the employer's interests.

Are 401K or tax deferred plans taxable?
Amounts deducted from employees pay for any purpose are considered wages. Employer paid contributions for certain health and retirement purposes are not taxable. See NDCC 52-01-01.31 for details.

Can I make a voluntary contribution to lower my rate?
Employers may make voluntary contributions to their job insurance account to improve their contributions-to-benefits balance and thereby decrease their assigned tax rate. If your cumulative lifetime balance is negative, you must first decide if you want to improve your rate within the negative schedule or to the positive schedule. To figure the amount required, using the information provided to you by Job Service North Dakota in the latest "Job Insurance Tax Rate and Taxable Wage Base Notice", multiply your average taxable payroll by the six-year reserve ratio needed for the desired rate (within the appropriate schedule, Positive Balance or Negative Balance) and subtract your present six-year reserve. The payment of a voluntary contribution can only be made from the time the new rate is assigned (early December) through April 30th of the calendar year to which that new rate applies (i.e., new rate assigned December 3, 2006, the voluntary contribution must be made by April 30, 2007.)

About Benefits Accuracy Measurement/Quality Control

What is the Benefit Accuracy Measurement/Quality Control Program (BAM/QC)?
BAM / QC is a management information tool that helps control error and fraud in the Unemployment Insurance program. The tool provides valid information on the rates, responsibility for and causes of unemployment insurance benefit over- and under- payments. The benefits of the audit are better prevention, detection and collection of improper payments.

How does the system work?
Unemployment Insurance claimants are randomly selected for a complete review of their unemployment insurance claim. A member of the BAM/QC staff will contact the employers to verify payroll and separation information. Claimant's work search contacts are researched. The result of each audit answers the question, "Was this person truly eligible for the amount of benefits received?"

Based on the investigation, a determination is made as to whether the claim for the week was paid properly or improperly. If paid improperly, it is then determined whether the error was made by the claimant, the unemployment insurance agency, or the employer. Finally, the reason for the improper payment is documented and the claim corrected.

Once all this information is obtained, a statistical analysis is performed and management information on the rates, responsibility and causes of over- and under- payments of unemployment insurance benefits is produced.

Why is the information necessary?
Contacts with employers by BAM/QC auditors are an integral part of the audit in order to:

Verify the claimant's past or present work and earnings.
Verify that the reason given by the claimant for becoming unemployed or working reduced hours is correct.
Verify that the claimant did, in fact, inquire about or apply for work as the claimant reported.

Why is the information needed?
To qualify for benefit payments, the claimant must be able and available for, as well as actively seeking work. Claimants are required to report all work search contacts and the results of each. Thus, employers will be contacted to verify the claimant's work search.

In addition, to qualify for benefit payments, claimants must have become unemployed or must be working reduced hours through no fault of their own. Employers may be contacted to substantiate reasons for the claimant's work separation.

Wages are verified because the unemployment insurance benefit entitlement is based on previous earnings, length of employment and current earnings.

How does the BAM/QC program benefit employers?
Better detection and collection of improper unemployment insurance payments may result in reduced costs and may have a favorable impact on employer taxes.

Also, the program is intended to reduce improper payments in the future by deterring future unemployment insurance claimants from submitting inaccurate information on the claim application.

As an employer, how can I help?
There are a number of ways you can help:

Honor the BAM/QC request for information.
Provide the information promptly.
Provide information that is accurate to the best of your knowledge.
Cooperate with Unemployment Insurance appeals hearings when requested to do so.
Share other information that might help the BAM/QC staff determine if the person under audit was truly eligible for benefits and received the proper benefit payment.

For instance, if an employer is aware that a person under audit has returned to work or has been working while collecting benefits, an auditor should be notified.

Who do I contact with my questions or if I want more information?
The BAM/QC program supervisor is available during regular business hours by phoning:
Job Service North Dakota at (701) 328-3065

Or by writing:
Job Service North Dakota
Benefit Accuracy Measurement
1000 E Divide Ave
P.O. Box 5507
Bismarck ND 58506-5507

About Appeal Hearings

What if I disagree with a notice, determination, or decision?
Employers and claimants have the right to appeal all notices, determinations, and decisions made by Job Service regarding Unemployment Insurance benefits and employer contributions, tax rate, etc.

How do I file an appeal?
Each notice, determination, or decision contains information regarding how and when the appeal must be filed. Requests for an appeal must be in writing and filed before the deadline stated on the notice, determination, or decision. Appeals may also be filed online.

What happens after I file an appeal?
Upon receiving the appeal or request for hearing, the case is assigned to an appeals referee. If the request is filed timely a hearing is scheduled and you will receive a written notice of the date and time of the hearing. You will also receive a brochure, Guide to Unemployment Insurance Appeals, explaining the appeals process and how to prepare for the hearing.

Can I withdraw my appeal?
Yes, there are circumstances when the interested party may choose to withdraw his or her appeal. If you choose to withdraw your appeal, you must notify the appeals referee prior to the date of the hearing. You will also be asked to submit the request in writing.

What happens in an appeals hearing?
The hearing is typically conducted by telephone, although the referee may, upon request of one of the parties of interest, conduct the hearing in person. The hearing is conducted with all parties of interest. When necessary, witnesses may also participate in the hearing process. The employee, employer, and witnesses give testimony relevant to the case under oath. Each party has the opportunity to ask questions of the other party. Documents that are relevant to the case and support your testimony may be submitted into evidence for the referee to consider in making a decision. When all testimony is on the record, the hearing is closed and the referee will issue a decision.

Requires the free Adobe Acrobat Reader