Operations and Performance of the Virginia Employment Commission (Joint Legislative Audit and Review Commission, November 8, 2021)
Summary
The Joint Legislative Audit and Review Commission's November 8, 2021 report to the Governor and General Assembly reviews how the Virginia Employment Commission handled unemployment insurance during COVID-19. New UI claims increased by a factor of 34 within the first two months of the pandemic, totaling 236,000 in April 2020, and VEC staff worked over 191,000 hours of overtime between March and December 2020. JLARC estimates VEC may have incorrectly paid $930 million in state UI benefits in 2020 and an additional $322 million between January and June 2021, almost all of it overpayments. The report links mounting claim backlogs, poor call center performance, undetected fraud and a delayed IT system replacement to inadequate staffing, and counts over 580,000 employer separation reports not yet reviewed.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Commonwealth of Virginia
November 8, 2021
Report to the Governor and the General Assembly of Virginia
Operations and Performance
of the Virginia Employment Commission
2021
JOINT LEGISLATIVE AUDIT
AND REVIEW COMMISSION
Joint Legislative Audit and Review Commission
Delegate Kenneth R. Plum, Chair
Senator Janet D. Howell, Vice Chair
Delegate Terry L. Austin
Delegate Betsy B. Carr
Delegate M. Kirkland Cox
Delegate Eileen Filler-Corn
Delegate Charniele L. Herring
Senator Mamie E. Locke
Senator Jeremy S. McPike
Senator Thomas K. Norment, Jr.
Delegate Robert D. Orrock, Sr.
Delegate Mark D. Sickles
Senator Lionell Spruill, Sr.
Delegate Luke E. Torian
Staci Henshaw, Auditor of Public Accounts
JLARC staff
Hal E. Greer, Director
Tracey Smith, Associate Director
Lauren Axselle, Project Leader
Sarah Berday-Sacks
Nick Galvin
Landon Webber
Dillon Wild
Information graphics: Nathan Skreslet
Managing Editor: Jessica Sabbath
JLARC Report 555
©2021 Joint Legislative Audit and Review Commission
jlarc.virginia.gov
Contents
Summary i
Recommendations and Policy Options ix
Chapters
1. Overview of the Virginia Employment Commission 1
2. Impacts of COVID-19 on VEC 11
3. VEC’s Resources and Management 17
4. Unemployment Insurance Claims and Appeals Process 39
5. Quality and Accuracy of Claims Determinations 63
6. Unemployment Insurance System Modernization and IT Security 77
7. Unemployment Insurance Eligibility Criteria and Benefits 87
8. Unemployment Insurance Trust Fund Solvency and Employer Taxes 101
Appendixes
A: Study resolution 117
B: Research activities and methods 119
C: Estimated impacts of employment services provided by the Virginia
Employment Commission 136
D: Analysis of selected Virginia Employment Commission staff salaries 141
E: Prioritization of JLARC report recommendations 145
F: Other states’ oversight of unemployment insurance programs 155
G: Prioritized list of unemployment insurance communications to review 159
H: Work search activities and verification strategies 160
I: Unemployment insurance recipients and Virginia’s modern workforce 163
J: Agency responses 173
Summary: Operations and Performance of the
Virginia Employment Commission
WHAT WE FOUND
WHY WE DID THIS STUDY
COVID-19 pandemic had a substantial The Joint Legislative Audit and Review Commission
(JLARC) approved a study resolution that directed
negative impact on VEC operations JLARC staff to review the operations of the Virginia Em-
The rise in Virginia’s unemployment caused by COVID- ployment Commission (VEC). Staff were directed to
evaluate COVID-19’s impact on VEC and the effective-
19 led to a rapid increase in the demand for unemploy- ness of VEC’s response; VEC’s administration of the Un-
ment insurance (UI) benefits administered by the Vir- employment Insurance (UI) program, including over-
ginia Employment Commission (VEC). The number of payments, appeals, and customer service; VEC’s UI IT
UI claims increased at a much more rapid rate during system; the sufficiency of VEC staffing, funding, and
management; and UI benefits compared to other
COVID-19 than in previous recessions. New UI claims
states.
increased by a factor of 34 within the first two months
ABOUT VEC
of the pandemic, totaling 236,000 in April 2020. Con- The majority of VEC’s funding and staff support its ad-
tinued weekly claims increased by a factor of 13 within ministration of the UI program, which provides tempo-
this same time period, totaling 1.3 million. rary financial assistance to eligible individuals who have
lost their jobs. VEC employs more than 1,000 staff and
VEC staff worked over 191,000 hours of overtime be- received about $4.4 billion in funding in FY20. VEC is al-
tween March and December 2020 to handle the in- most entirely dependent on federal funding for its oper-
creased workload; this was a 1,600 percent increase com- ations and is subject to oversight by the U.S. Department
of Labor as well as Virginia’s secretary of labor in the ex-
pared with 2019 overtime and equivalent to 92 full-time ecutive branch of state government.
staff positions.
VEC temporarily closed multiple offices during
COVID-19 to help protect staff ’s health and safety and stopped providing in-person
assistance at most local offices. VEC closed some offices because of outbreaks of
COVID-19 infections among VEC staff.
Insufficient funding, staff, and information technology contributed to
VEC’s inability to operate effectively during the pandemic
Significant weaknesses in VEC’s operations—particularly its deficient staffing levels,
antiquated UI IT system, performance monitoring, and oversight—were revealed dur-
ing the COVID-19 pandemic. Staffing shortages prevented VEC from administering
UI claims in an accurate and timely manner. The delayed replacement of its outdated
IT system meant VEC was reliant on inefficient, paper-based processes that severely
hampered timely and satisfactory responses to claimants. More comprehensive perfor-
mance monitoring and prompt executive actions by VEC may have helped VEC re-
spond more effectively to these and other challenges.
Funding
VEC leadership attributes the agency’s underperformance to a lack of sufficient fund-
ing to administer the UI program. The federal government has provided insufficient
i
Summary: Operations and Performance of the Virginia Employment Commission
funding to states for UI program operations. Nevertheless, the total amount of fund-
ing Virginia received in 2019 was above the 50-state median, in total and per claim.
VEC receives less federal funding for UI operations than what DOL estimates it needs,
and this is partly due to VEC’s operational inefficiencies. The federal formula for allo-
cating this funding penalizes states that operate their UI programs less efficiently than
other states. In each of the five years preceding COVID-19, VEC reported lower op-
erational efficiency than other states for most core UI functions. VEC also has a rela-
tively high proportion of administrative staff compared with other states, which
DOL’s funding formula also penalizes. While DOL does not publish the specific
amount it penalizes VEC for its inefficiencies, a subject matter expert interviewed for
this study estimated it could be a relatively small portion of VEC’s total funding. Nev-
ertheless, because VEC relies almost exclusively on federal funding for operating the
state’s UI program, the agency should do all it can to maximize the amount of federal
funding it is eligible for and efficiently spend the funding it receives.
For federal fiscal year 2022, Virginia will receive at least $41.2 million in UI operational
funding. This amount is 20 percent higher than the amount DOL provided VEC at
the beginning of federal fiscal year 2021 and is driven by VEC’s higher workload dur-
ing the pandemic.
Staffing
Inadequate staffing has contributed to VEC’s mounting backlogs of UI claims for
intake and adjudication, the poor performance of VEC’s UI customer call center, un-
detected fraud, and the long-delayed replacement of VEC’s antiquated UI claims pro-
cessing IT system. The agency has experienced substantial fluctuations in staffing lev-
els, prolonged vacancies, high turnover, and insufficient numbers of supervisory staff.
VEC’s staffing challenges were particularly prominent during the COVID-19 pan-
demic but are not new. The agency had not maintained an adequate staffing level in
key UI functions for several years before the pandemic. VEC leadership attribute low
staffing levels to inadequate federal funding for UI operations.
Information Technology
VEC has been in the process of modernizing its UI IT system for 12 years and is eight
years behind schedule. VEC plans to launch the final phase of the project in Novem-
ber 2021 and to complete the project by June 2022. Like Virginia, many other states
were in the process of modernizing their UI IT systems during the pandemic, but
VEC’s UI modernization project has taken significantly longer than several other
states.
Delays in the UI modernization project have caused VEC customers and staff to rely
on outdated, manual UI claims processes that contributed to persistent inefficiencies
at VEC. VEC’s legacy system does not have a customer-facing portal or dashboard;
therefore, customers have had to rely on call centers and physical mail to check their
UI claim status and submit required documents. Additionally, VEC staff have had to
ii
Summary: Operations and Performance of the Virginia Employment Commission
manually process claims and build workarounds to overcome system limitations. The
legacy system also lacks certain automated data analytics, which increases the risk of
inaccurate or fraudulent benefit payments.
Insufficient staffing and ineffective project management have caused project delays.
Neither VEC nor the contractor have consistently dedicated enough staff to the UI
IT modernization project. VEC staff assigned to the project also indicated that the
prolonged timeline has detracted from their ability to focus on their primary respon-
sibilities at VEC. VEC’s UI modernization project has also been delayed by difficulties
converting claimants’ data from the legacy system to the new system, including data
on past claims, benefit payments, and personally identifiable information. The
COVID-19 pandemic also delayed the project. VEC paused the UI modernization
project for one year between May 2020 and May 2021 to focus on UI claims backlogs.
Significant UI claims backlogs accrued while VEC was slow to increase
staff for UI claims intake, adjudication, and appeals
VEC has experienced significant backlogs in all areas of UI claims processing: initial
intake, adjudications, and appeals. While backlogs in these areas did not exist prior to
the pandemic, VEC was underperforming some DOL performance metrics for claims
processing before 2020.
VEC had insufficient staff to process UI claims prior to the pandemic and did not act
quickly or effectively to increase staff during the pandemic. For example, VEC did not
hire
contractors to assist with initial claims intake until November 2020, well af-
ter large backlogs had accumulated;
contractors to help process a backlog of 580,000 employer separation re-
ports until August 2021;
employees for the majority of the newly created adjudication positions un-
til after January 2021; or
contractors to assist with adjudication until May 2021.
The backlogs of uncompleted claims at VEC will continue to grow. In May 2021, VEC
estimated that its staff had approximately 2 million UI claims “issues” still to review,
about 1 million of which may require adjudication. VEC’s updated estimate as of Oc-
tober 2021 indicated that approximately 440,000 UI claims issues still require review
to determine if adjudication is necessary. Some of the issues that are adjudicated will
eventually be appealed, adding to the appeals workload. Moreover, the over 580,000
employer separation reports that have not been reviewed will also add to adjudication
and appeals backlogs. In many cases, benefits have already been paid on these claims.
iii
Summary: Operations and Performance of the Virginia Employment Commission
Rate and cost of incorrect benefit payments have increased
substantially during COVID-19, estimated to exceed $1 billion
VEC may have incorrectly paid an estimated $930 million in 2020 in state UI benefits
and an additional estimated $322 million between January and June 2021. Almost all
of these incorrect payments are overpayments, which can occur because of mistakes
made by VEC, the claimant, the employer, or because of fraud. VEC may eventually
determine a portion of these overpayments are eligible for the federal Pandemic Un-
employment Assistance program, which could declassify them as overpayments or
transfer the financial liability from the state to the federal government. Nevertheless,
the volume and amount of overpayments is expected to be substantial, and VEC is
required by the federal government to try to recover overpayments for state and fed-
eral programs. Problems with the quality and accuracy of VEC’s UI determinations
are not new—VEC has not met the federal quality standard for most UI eligibility
determinations over the past decade.
During COVID-19, many incorrect payments may be attributable to practices VEC
implemented to pay benefits more quickly. These included not investigating certain
claims issues, discontinuing fact-finding interviews as part of the adjudication process,
and providing minimal training to new staff on how to accurately complete claims
intake and adjudication. Another key driver of incorrect payments before and during
COVID-19 is employers’ incomplete and delayed submission of reports describing
separation circumstances. Separation-related incorrect payments accounted for about
59 percent of VEC’s UI overpayments in 2020, and about 24 percent of overpayments
between 2016 and 2019. VEC is also not identifying many claimants who fail to meet
weekly work search requirements. VEC stopped its manual work search verification
process before 2020 because of staffing limitations.
VEC’s estimated overpayments attributable to fraud have increased significantly since
2020. VEC’s overall estimated fraud rate for the state UI program grew 440 percent from
1.4 percent in 2019 to 7.5 percent in 2020. At this rate, VEC has paid out an estimated
$70 million in fraudulent state UI benefits in 2020 and an additional estimated $29
million in the first quarter of 2021. VEC did not begin using some critical fraud pre-
vention and detection best practices until 2021, which likely would have reduced fraud-
ulent payments made during the pandemic. VEC’s confirmed fraud rates are much lower
than its estimates because at least 164,456 potentially fraudulent claims were backlogged
and awaiting VEC investigation as of October 2021.
VEC call centers did not sufficiently respond to increases in call
volume throughout the pandemic
VEC call centers have struggled to meet call demand throughout the pandemic and
continue to answer only a small percentage of total calls received. In June 2020, VEC
received approximately 3.3 million calls and answered only about 6 percent, with cus-
tomers who did get through waiting over one hour, on average, to speak with an
agent.
iv
Summary: Operations and Performance of the Virginia Employment Commission
In June 2021, VEC received approximately 3.4 million calls and answered about 4 per-
cent.
Several factors, including sustained high call volume and insufficient staffing levels,
have contributed to VEC’s poor call center performance. Between February 2020 and
April 2020, total call volume increased nearly 3,000 percent, from approximately
100,000 monthly calls to over 3 million. Call volume increased sharply to nearly 5 mil-
lion monthly calls in early 2021. VEC reports that only about 85 staff were responsible
for taking phone calls prior to the pandemic, which was insufficient to handle the
increased call volume.
VEC has only recently taken meaningful steps to increase call center staff and better
address customer service needs. The agency purchased a larger physical space for the
customer contact center and had almost 390 staff and contractors answering calls as
of July 2021. VEC has also recently contracted with an additional third-party vendor
who has experience managing high-volume call centers and has launched new cus-
tomer service technology solutions, including a virtual chat agent that can more effi-
ciently address customer inquiries. The third-party vendor allowed VEC to bring on
approximately 440 new agents through October 2021 with plans to add up to 200
additional agents by the end of November 2021. Because of these actions, VEC’s call
centers answered a higher percentage of total calls, blocked fewer callers, and im-
proved wait times in September 2021.
New UI IT system is expected to improve claimant experience and
increase operational efficiencies
VEC’s new UI benefits system includes several key functions that experts recommend
should be part of modernized UI IT systems. Most importantly, VEC’s new system
will have an online customer portal that will allow UI claimants to view their UI claim
status, notices VEC has sent them, information they still need to provide VEC, and
the total amount of weekly benefits they have received. These improvements should
reduce the number of calls VEC receives related to claim status inquiries. The new
system will also have guided workflows (automatic prompts that help claimants pro-
vide correct information) and pop-up prompts to help claimants understand specific
terms and steps in the UI application process.
Some functions recommended by experts will not be fully implemented as part of the
new system, including the ability to reset personal identification numbers (PINs) elec-
tronically or receive notifications by text regarding claim status. Additionally, given the
amount of time it has taken VEC to complete the modernization project, it is possible
that features of truly modern IT systems are not incorporated into the VEC system.
Finally, unaddressed deficiencies in the employer tax portion of the UI modernization
project (completed in 2015) suggests there will be challenges to address after the new
system’s final phase is implemented.
v
Summary: Operations and Performance of the Virginia Employment Commission
UI trust fund has been effectively managed, but VEC should take
steps to maximize trust fund revenues
UI benefits are paid out of Virginia’s UI trust fund, and Virginia has managed the trust
fund well. While Virginia needed to borrow money from the federal government to
pay UI benefits in the last two economic recessions, its loan amounts were lower than
other states, and Virginia paid back its loans faster than other states. However, Virginia
has not always rebuilt its trust fund back up as quickly as DOL recommends to be
prepared for future recessions.
VEC should improve its efforts to collect UI taxes owed by Virginia employers to
maximize revenue collection and rebuild the UI trust fund more quickly. The General
Assembly could also consider increasing employer UI taxes to build a larger trust fund
reserve to limit fluctuations in employer tax rates in response to recessions, but reve-
nue increases are not essential because Virginia’s tax structure is generally sound, and
the state can take federal loans to ensure solvency.
VEC may have responded more effectively to the pandemic with
stronger administration oversight and assistance and different
executive decisions—continued legislative oversight is needed
VEC and the administration made changes to the UI program to better respond to the
increase in demand for UI benefits during the pandemic. VEC leadership also ap-
peared to appropriately prioritize the health and safety of its own staff and provide
effective support to staff who faced exceedingly difficult personal and professional
demands during the pandemic.
However, some of the most impactful executive actions by VEC leadership that would
have helped VEC respond to the surge in UI claims were delayed over a year into the
pandemic. Taking certain actions earlier in the pandemic—especially those related to
staffing increases and IT system improvements—may have helped VEC respond more
effectively to the increased UI claims volume and program challenges.
VEC could also have benefited from additional oversight and assistance from the ad-
ministration and could have better availed itself of expertise and resources in other
areas of state government. Given VEC’s critical role during severe increases in unem-
ployment—and the operational challenges that arise from them—future administra-
tions and secretaries of labor need to provide strong oversight and assistance to VEC
during severe economic downturns or other relevant emergencies.
Moving forward, the volume and complexity of the actions that VEC needs to take to
improve its operation of the state’s UI Program, along with the still-unfolding effects
of the pandemic, necessitate continued oversight by the legislature.
vi
Summary: Operations and Performance of the Virginia Employment Commission
Virginia’s UI benefit levels are low relative to other states
Virginia’s UI benefits provide less income replacement than many other states. Experts
generally agree that UI benefits should replace roughly 50 percent of an individual’s
weekly wages. Virginia’s average 2019 replacement ratio was 34 percent, ranking 33rd
among other states. Virginia also has relatively low weekly benefit amounts compared
with other states. In 2019, Virginia’s maximum weekly benefit amount was $378, which
ranked 37th nationwide, and Virginia’s average weekly benefit was $316, which ranked
36th nationwide. Furthermore, Virginia’s standard state UI benefits cover less than
half of basic food, housing, and transportation costs for many individuals, particularly
those who qualify for lower benefits, live in expensive areas, or have dependents.
WHAT WE RECOMMEND
Legislative action
Create a subcommittee of the Commission on Unemployment Compensa-
tion to monitor VEC’s performance in eliminating backlogs, addressing in-
correct UI benefit payments, implementing and improving its new UI ben-
efits system, spending General Assembly-appropriated funds for UI
operations, and implementing JLARC’s recommendations.
Direct the Department of Human Resource Management to lead a
workgroup of agency leaders and human resources staff to examine the
feasibility of and policies and procedures necessary for granting agencies
exemptions from competitive hiring requirements and requiring staff from
selected state agencies to temporarily work for other state agencies in need
of staffing assistance during emergencies.
Require VEC to develop and maintain an unemployment insurance resili-
ency plan that describes how the agency would change its programs, staff-
ing, and communications during periods of high unemployment to ensure
efficient and effective administration of the UI program.
Require employers to provide information related to UI claims, such as
employer separation reports, to VEC electronically and to make unemploy-
ment insurance tax payments electronically.
Executive action
Conduct a comprehensive efficiency review of VEC’s UI operations using
a national firm with relevant expertise.
Cross-train staff from VEC’s workforce division to assist with UI claims
during future periods of high claims volume.
Develop a detailed plan and timeline for resolving the backlog of claims
that need to be adjudicated and the potentially fraudulent claims that need
to be investigated.
vii
Summary: Operations and Performance of the Virginia Employment Commission
Establish and maintain a dedicated quality monitoring team in the VEC
call centers, maintain an ongoing contract with a third party that provides
call center staff augmentation services, and establish call center perfor-
mance metrics that reflect industry standards.
Regularly collect feedback on the usability of the new UI benefits system,
make improvements to the system as necessary, issue a request for infor-
mation to identify additional features needed for the modernized UI claims
system that could be implemented by a contractor or VEC IT staff, and in-
corporate the features.
Conduct a pilot program to test the effectiveness of additional methods to
identify employers that are liable for—but not paying—UI taxes, imple-
ment a system to detect actions used by employers to avoid paying UI
taxes, modify employer audit policies to more effectively identify unpaid
employer taxes, and use the federal Treasury Offset Program to collect de-
linquent taxes.
POLICY OPTIONS FOR CONSIDERATION
Staff typically propose
Direct the Department of General Services and the Virginia Information
policy options rather Technologies Agency to assess agencies’ needs for call center staff aug-
than make recommen- mentation, ensure that contractual solutions to meet those needs are in
dations when (i) the ac- place, and report the steps taken and available solutions.
tion is a policy judgment
Increase the unemployment insurance taxable wage base to generate more
best made by elected of-
ficials—especially the
revenue for the UI trust fund.
General Assembly, (ii) evi- Increase the minimum and maximum base unemployment insurance tax
dence suggests action rate paid by employers.
could potentially be ben-
eficial, or (iii) a report Modify the UI benefits formula to automatically adjust UI benefits accord-
finding could be ad- ing to a statewide economic metric, such as the increase in average weekly
dressed in multiple ways. wages.
viii
Recommendations and Policy Options: Operations
and Performance of the Virginia Employment
Commission
JLARC staff typically make recommendations to address findings during reviews.
Staff also sometimes propose policy options rather than recommendations. The three
most common reasons staff propose policy options rather than recommendations are:
(1) the action proposed is a policy judgment best made by the General Assembly or
other elected officials, (2) the evidence indicates that addressing a report finding is not
necessarily required, but doing so could be beneficial, or (3) there are multiple ways in
which a report finding could be addressed and there is insufficient evidence of a single
best way to address the finding.
Recommendations
RECOMMENDATION 1
The secretary of labor should competitively procure a national firm with expertise in
evaluating the efficiency of an organization’s staffing structure, delegation of staff
duties, and work processes to conduct a comprehensive efficiency review of the un-
employment insurance (UI) operations of the Virginia Employment Commission to
(i) identify specific actions that could be taken to improve the efficiency of VEC’s UI
operations, including through more efficient and effective use of staff and technology,
(ii) recommend improvements to the agency’s staffing and workflows to most effec-
tively use existing federal funding for UI operations, and (iii) determine whether cur-
rent funding is adequate to ensure effective UI operations. (Chapter 3)
RECOMMENDATION 2
The Virginia Employment Commission should establish goals for the ratio of super-
visory staff to direct reports, particularly for key functions including call centers, ad-
judication and appeals centers, and fraud investigations. Agency leadership should reg-
ularly monitor the ratio of supervisory staff to direct reports relative to the goals, and
report performance in meeting these goals in the monthly commissioner’s perfor-
mance report. (Chapter 3)
ix
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 3
The General Assembly may wish to consider including language in the Appropriation
Act requiring the Virginia Department of Human Resource Management to lead a
multi-agency workgroup, comprising agency leaders and human resources staff from
state agencies most likely to be in need of staffing assistance during emergencies, to
examine the feasibility of and policies and procedures necessary for (i) granting agen-
cies exemptions from certain competitive hiring requirements during emergencies; (ii)
requiring selected state agency staff to temporarily support other agencies in need of
staffing assistance during emergencies through existing or new state initiatives; and (iii)
providing necessary funding to cover the associated costs. The workgroup should pro-
pose criteria to determine under what circumstances these emergency hiring practices
may be invoked and a process for invoking this authority as well as terminating it. The
workgroup should submit its findings to the secretary of administration, the chair of
the House Appropriations Committee, and the chair of the Senate Finance and Ap-
propriations Committee by June 30, 2022. (Chapter 3)
RECOMMENDATION 4
The Virginia Employment Commission should establish meaningful performance
goals for its call center operations and fraud investigations, and ensure it has goals for
effectively measuring performance in all other aspects of unemployment insurance
operations. Agency leadership should regularly monitor performance relative to the
goals and report goals and performance in the monthly commissioner’s performance
report. (Chapter 3)
RECOMMENDATION 5
The Virginia Employment Commission (VEC) should transfer the unemployment in-
surance quality assurance unit from the unemployment insurance division and have it
report directly to the VEC commissioner. (Chapter 3)
RECOMMENDATION 6
The Virginia Employment Commission (VEC) should require its unemployment in-
surance quality assurance unit to compile its findings and recommendations in a central
repository and routinely update VEC leadership on their status. (Chapter 3)
RECOMMENDATION 7
The General Assembly may wish to consider amending § 60.2-111 of the Code of
Virginia to require the Virginia Employment Commission to develop and maintain an
unemployment insurance resiliency plan that describes the specific actions the agency
would take, depending on the level of increase in unemployment insurance (UI) claims,
to address staffing, communications and other relevant aspects of operations to ensure
continued efficient and effective administration of the UI program. (Chapter 3)
x
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 8
The Virginia Employment Commission (VEC) commissioner should ensure that all
key policy or other significant changes that could affect the public, VEC, or VEC staff
are communicated clearly and expeditiously to all VEC staff, especially those in lead-
ership or positions communicating with the public. (Chapter 3)
RECOMMENDATION 9
The General Assembly may wish to consider including language in the Appropriation
Act or amending § 30-222 of the Code of Virginia to create a subcommittee of the
Commission on Unemployment Compensation to monitor the Virginia Employment
Commission’s: (1) key performance metrics related to UI backlogs; (2) efforts to iden-
tify, prevent, and recover incorrect UI benefits payments, including fraudulent pay-
ments; (3) project to modernize the UI IT system; (4) expenditure of state funds ap-
propriated for UI administration; and (5) implementation of JLARC
recommendations. The subcommittee should include individuals who can represent
the interests and experiences of claimants and employers. The subcommittee could
include members of the following General Assembly committees: Commission on
Unemployment Compensation, House Appropriations, Senate Finance and Appropri-
ations, House Labor and Commerce, and Senate Commerce and Labor. The subcom-
mittee should meet at least once quarterly and sunset on June 30, 2025. (Chapter 3)
RECOMMENDATION 10
The Virginia Employment Commission (VEC) should, as soon as possible, have staff
in its internal audit division review and revise documents and online resources to more
clearly describe and explain (i) eligibility criteria for Unemployment Insurance (UI), (ii)
how to navigate the UI claims and appeals process, and (iii) the status or outcome of
a claim. VEC should use examples from other states and input from VEC staff and
customers and should competitively procure a third party contractor with expertise in
UI and customer communications to assist with these efforts. (Chapter 4)
RECOMMENDATION 11
The Virginia Employment Commission should develop (i) a series of instructional,
short videos designed to help claimants better understand their potential eligibility for
unemployment insurance, the steps of the application process, and how to file a claim
and (ii) an interactive, online eligibility tool that enables claimants to better understand
their potential eligibility and benefits under the program. (Chapter 4)
RECOMMENDATION 12
The Virginia Employment Commission should build a reserve of staff to assist with
claims during periods of high claims volume by identifying workforce services division
staff whose time can practicably be reassigned to non-workforce activities during pe-
riods of high unemployment insurance claim volume. These staff should be cross-
trained on key unemployment insurance processes. (Chapter 4)
xi
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 13
The Virginia Employment Commission should formalize a policy for prioritizing and
assigning claims for adjudication during periods of high claims volume. This policy
should detail how prioritization may change in response to claims volume and clearly
state the expectation that VEC should generally prioritize resolving older claims.
(Chapter 4)
RECOMMENDATION 14
The Virginia Employment Commission (VEC) should develop a detailed plan that
includes specific actions and a timeline to resolve (i) outstanding adjudications and (ii)
all issues on claims that VEC bypassed in 2020 and 2021. The plan should quantify
the numbers and qualifications of new staff needed to resolve these claims, outline
the actions planned for hiring needed staff, and identify potential risks and mitigation
strategies. VEC should submit the plan to the House Labor and Commerce Commit-
tee, the Senate Commerce and Labor Committee, the Commission on Unemployment
Compensation, and the governor by November 1, 2021 and provide a status update to
each body quarterly in 2022. VEC should also publish the plan and updates on its
website. (Chapter 4)
RECOMMENDATION 15
The Virginia Employment Commission should maintain an ongoing staff augmenta-
tion contract with a provider that is experienced in providing call center services for
unemployment insurance programs and can quickly provide increased call center staff
when call volumes increase. (Chapter 4)
RECOMMENDATION 16
The Virginia Employment Commission (VEC) should provide a written quarterly up-
date on the performance of its call centers to the House Labor and Commerce Com-
mittee, the Senate Commerce and Labor Committee, the Commission on Unemploy-
ment Compensation, and the governor by December 31, 2021 and at the end of each
quarter in 2022. VEC should also publish these updates on its website. (Chapter 4)
RECOMMENDATION 17
The Virginia Employment Commission (VEC) should establish and maintain a dedi-
cated quality monitoring team composed of VEC staff from each customer contact
center. This team should use the recently procured quality monitoring software to reg-
ularly review and assess call quality and performance for all VEC call agents, and iden-
tify any additional training needs on an agent-by-agent basis through weekly monitor-
ing and assessment of at least three calls per agent. (Chapter 4)
xii
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 18
The General Assembly may wish to consider amending § 60.2-619 of the Code of
Virginia to specify that non-valid unemployment insurance claims resulting from mon-
etary ineligibility are ineligible for appeal through the Virginia Employment Commis-
sion’s (VEC’s) appeals division. (Chapter 4)
RECOMMENDATION 19
The Virginia Employment Commission should revise monetary determination notices
to clearly indicate if a claim is non-valid because of monetary ineligibility, and direct
claimants who disagree with their non-valid monetary determination to request a re-
determination from the monetary determination unit. (Chapter 4)
RECOMMENDATION 20
The General Assembly may wish to consider amending Article 2 of Chapter 1 of Title
60.2 of the Code of Virginia to direct the Virginia Employment Commission to create
an appeals ombudsman position to provide impartial information about the unem-
ployment insurance appeals process and help ensure that all parties are afforded due
process in such appeals. (Chapter 4)
RECOMMENDATION 21
The Virginia Employment Commission should develop a standardized training pro-
gram that explains how to conduct high quality unemployment insurance claims de-
terminations and that is administered by a dedicated training manager to all new and
existing adjudication staff. (Chapter 5)
RECOMMENDATION 22
The General Assembly may wish to consider amending §60.2-121.1 of the Code of
Virginia to require employers to electronically provide separation information when
requested to the Virginia Employment Commission unless they are granted a waiver
from providing this information electronically. (Chapter 5)
RECOMMENDATION 23
The Virginia Employment Commission should resume auditing a sample of UI claims
to verify compliance of claimants with the unemployment insurance program work
search requirement no later than December 1, 2021. (Chapter 5)
xiii
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 24
The Virginia Employment Commission (VEC) should develop a plan for investigating
the backlog of potentially fraudulent claims and establish a strategy for prioritizing its
investigations according to the potential dollar amount of fraudulent payments per
claim. This plan should include a strategy for hiring additional fraud investigators and
expediting training of new hires. This plan should be presented to the House Com-
mittee on Labor and Commerce, the Senate Committee on Commerce and Labor, the
Commission on Unemployment Compensation, and the governor by December 31,
2021. VEC should also publish these updates on its website. (Chapter 5)
RECOMMENDATION 25
The Virginia Employment Commission (VEC) should immediately resume overpay-
ment recovery activities for all finalized overpayments and initiate collections activities
for all future overpayments immediately after finalization. VEC should also create and
adhere to internal timeliness standards for processing all previously received and future
overpayment waiver applications to ensure overpayments are finalized and recovery
activities are initiated in a timely manner. (Chapter 5)
RECOMMENDATION 26
The Virginia Employment Commission (VEC) should regularly collect feedback on
the usability of the new Unemployment Insurance benefits information technology
system from claimants and employers and make regular improvements to the system,
as necessary, that address such feedback. VEC should provide a summary of user
feedback and planned and completed system changes to the House Committee on
Labor and Commerce, the Senate Committee on Commerce and Labor, the Commis-
sion on Unemployment Compensation, and the governor by March 31, 2022 and at
the end of each quarter in 2022. VEC should also publish this information on its
website. (Chapter 6)
RECOMMENDATION 27
The Virginia Employment Commission (VEC) should conduct a request for infor-
mation to identify additional features needed for a modernized unemployment insur-
ance IT system and hire a vendor to develop these features or develop them using
agency staff. (Chapter 6)
RECOMMENDATION 28
The Virginia Employment Commission should require its unemployment insurance
IT modernization contractor to develop a plan that includes specific actions and a
timeline for addressing all existing tax system problems and details (1) how each prob-
lem will be fixed, (2) deadlines for fixing each problem, and (3) any additional resources
needed to fix the problems. (Chapter 6)
xiv
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 29
The Virginia Employment Commission (VEC) should establish a plan with its unem-
ployment insurance modernization vendor to ensure VEC IT staff are sufficiently
trained to operate and modify the employer tax system. (Chapter 6)
RECOMMENDATION 30
The Virginia Employment Commission (VEC) should work with the Virginia Infor-
mation Technologies Agency (VITA) to facilitate an audit of VEC’s IT security sys-
tems and to identify any necessary IT security improvements. The audit should be
completed by a vendor approved by VITA. The audit should validate whether VEC’s
existing IT security systems meet the requirements issued by VITA. (Chapter 6)
RECOMMENDATION 31
The Virginia Employment Commission should fully transform all agency IT systems
and servers to the state’s central IT infrastructure as soon as possible. (Chapter 6)
RECOMMENDATION 32
The General Assembly may wish to consider amending section § 60.2 of the Code of
Virginia to require the Virginia Employment Commission (VEC) to annually calculate
average unemployment insurance (UI) benefit levels, the average income replacement
of UI benefits in Virginia, and the recipiency rate for UI benefits. VEC should provide
this information in its annual report to the Commission on Unemployment Compen-
sation. (Chapter 7)
RECOMMENDATION 33
The Virginia Employment Commission (VEC) should conduct a one-year pilot pro-
gram to identify employers who owe unemployment insurance taxes but are not regis-
tered with VEC by auditing employers who do not register with VEC after receiving
notifications of potential tax liability. VEC should assess the pilot program’s effective-
ness to decide whether to use this methodology on an ongoing basis. (Chapter 8)
RECOMMENDATION 34
The Virginia Employment Commission (VEC) should conduct a one-year pilot pro-
gram to identify employers who owe unemployment insurance taxes but are not regis-
tered with VEC by auditing a sample of employers who may be misclassifying workers
based on their 1099 tax filings. VEC should assess the pilot program’s effectiveness
and decide whether to use this methodology on an ongoing basis. (Chapter 8)
RECOMMENDATION 35
The Virginia Employment Commission should reinstate its State Unemployment Tax
Act dumping identification system no later than December 2022. (Chapter 8)
xv
Recommendations: Operations and Performance of the Virginia Employment Commission
RECOMMENDATION 36
The Virginia Employment Commission (VEC) should modify existing unemployment
insurance (UI) tax audit policies to require field tax auditors to conduct at least half
of their audits per year from a list of employers identified to be at-risk for UI tax
avoidance. VEC should define “at-risk” to include industry and employer-specific fac-
tors and establish a system for consistently identifying such employers. (Chapter 8)
RECOMMENDATION 37
The Virginia Employment Commission should begin using the federal Treasury Offset
Program for applicable delinquent taxes as soon as staff resources become available.
(Chapter 8)
RECOMMENDATION 38
The Virginia Employment Commission should provide quarterly reports to tax divi-
sion regional managers that list each employer with tax debt more than six months
past due and require the managers to use this information to ensure that tax field staff
are taking all reasonable steps to collect the debt. (Chapter 8)
RECOMMENDATION 39
The Virginia Employment Commission should designate customer service positions
in the tax division to handle basic employer communications and questions. (Chapter
8)
RECOMMENDATION 40
The Virginia Employment Commission should require employers to make unemploy-
ment insurance payments electronically starting in 2023, develop criteria that would
allow employers to be granted an exception to this requirement, and notify employers
of the criteria. (Chapter 8)
xvi
Recommendations: Operations and Performance of the Virginia Employment Commission
Policy Options to Consider
POLICY OPTION 1
The General Assembly could include language in the Appropriation Act directing the
Department of General Services (DGS) and the Virginia Information Technologies
Agency (VITA) to assess agencies’ need for call center staff augmentation, ensure that
contractual solutions to meet those needs are in place, and report steps taken and
available solutions to the House Appropriations Committee and the Senate Finance
and Appropriations Committee by December 31, 2022. (Chapter 4)
POLICY OPTION 2
The General Assembly could include language in the Appropriation Act establishing
a pilot program that would require a sample group of employers to proactively provide
a separation report to VEC and separated individuals for all employees who separate
from employment over a designated period of time and direct the Virginia Employ-
ment Commission to collect feedback from employers on the requirement’s potential
administrative burden and impact on unemployment insurance claim accuracy and
timeliness. (Chapter 5)
POLICY OPTION 3
The General Assembly could include language in the Appropriation Act to direct the
Virginia Employment Commission (VEC) to (i) review U.S. Department of Labor
guidance and model legislation regarding redesigned work search requirements, (ii)
evaluate the potential impacts that adopting DOL’s guidance would have on incorrect
payments and other aspects of VEC’s work (e.g., reemployment), and (iii) propose
changes to the state’s work search policies as needed. VEC should report the results
of this review and any proposed legislative changes to the House Committee on Labor
and Commerce, the Senate Committee on Commerce and Labor, the Commission on
Unemployment Compensation, and the governor by February 1, 2022. VEC should
also publish these results on its website. (Chapter 5)
POLICY OPTION 4
The General Assembly could amend section § 60.2-602 of the Code of Virginia to
modify the unemployment insurance benefits formula to automatically adjust unem-
ployment insurance benefit amounts annually based on a statewide economic metric.
(Chapter 7)
POLICY OPTION 5
The General Assembly could amend section § 60.2-602 of the Code of Virginia to
modify the unemployment insurance benefits formula to enact a one-time increase in
the maximum unemployment insurance benefit amount. (Chapter 7)
xvii
Recommendations: Operations and Performance of the Virginia Employment Commission
POLICY OPTION 6
The General Assembly could amend section § 60.2-602 of the Code of Virginia to
modify the unemployment insurance benefit formula to create a dependent allowance
that is tied to an economic metric or calculated as a portion of the individual’s weekly
benefit amount. (Chapter 7)
POLICY OPTION 7
The General Assembly could amend section § 60.2 of the Code of Virginia to author-
ize the Commission on Unemployment Compensation to convene an advisory com-
mittee comprising stakeholders and subject matter experts to (1) review UI benefits,
replacement ratios, and recipiency rates; (2) identify factors that affect UI benefits and
recipiency (e.g., design of UI benefit calculations or UI eligibility criteria); (3) assess
the advantages and disadvantages of potential changes to benefits; and (4) recommend
to the Commission options to change benefit levels when needed. (Chapter 7)
POLICY OPTION 8
The General Assembly could amend § 60.2-229 of the Code of Virginia to increase
the unemployment insurance taxable wage base. (Chapter 8)
POLICY OPTION 9
The General Assembly could amend § 60.2-531 of the Code of Virginia to increase
the minimum base unemployment insurance tax rate for all employers, to a new rate
between 0.01 percent and 0.07 percent. (Chapter 8)
POLICY OPTION 10
The General Assembly could amend § 60.2-531 of the Code of Virginia to increase
the maximum base unemployment insurance tax rate. (Chapter 8)
xviii
Overview of the Virginia Employment
1 Commission
The Joint Legislative Audit and Review Commission (JLARC) approved a study
resolution that directed JLARC staff to review the operations of the Virginia Em-
ployment Commission (VEC). As part of this review, staff were directed to eval-
uate COVID-19’s impact on VEC and the effectiveness of VEC’s response; VEC’s
administration of the Unemployment Insurance (UI) program, including overpay-
ments, appeals, and customer service; VEC’s UI IT system; the sufficiency of VEC
staffing, funding, and management; UI benefits compared to other states; and JLARC’s 2014 review of
the state’s workforce
VEC’s ability to connect job seekers with meaningful employment opportunities.
system included 30 rec-
(See Appendix A for study resolution.) This is JLARC’s first review of VEC, ommendations. Of these,
though staff previously reviewed Virginia’s workforce development system in both 22 were either fully or
2003 and 2014 (sidebar). partially implemented.
Eight recommendations
To address the study resolution, JLARC staff interviewed VEC staff; individuals have not yet been imple-
and employers that have participated in the UI program; subject matter experts mented.
including staff from the U.S. Department of Labor (DOL); other Virginia state
agencies with best practices; similar agencies in other states; researchers and con-
sultants; and various stakeholders such as groups representing Virginia claimants
and employers. JLARC staff surveyed VEC staff and employers for their feedback
on the UI claims process or UI taxes. JLARC staff also reviewed and analyzed data
on VEC funding and staffing, call center performance, UI claims timeliness and
accuracy, UI trust fund solvency, UI benefits, and employment services. (See Ap-
pendix B for a detailed description of research methods.)
VEC’s programs provide financial relief and job
placement assistance to unemployed Virginians
VEC administers two programs to assist Virginians who are unemployed and are
searching for work, as well as employers who are facing hiring challenges: unem-
ployment insurance and workforce services. Both of these programs are “cus-
tomer facing” and involve direct interactions between VEC staff and individuals
and/or employers. These programs are federally required, and VEC must provide
UI benefits and employment services in accordance with federal laws, regulations,
and performance standards. VEC is also responsible for monitoring the state’s UI
trust fund and administering UI employer taxes and benefits.
1
Chapter 1: Overview of the Virginia Employment Commission
One of VEC’s primary responsibilities is administering the state’s
unemployment insurance program
The UI program provides temporary financial assistance to eligible individuals
The Social Security Act
(Title 42, 1935) requires (“claimants”) who become unemployed (sidebar). Under federal law, individuals
states to establish unem- are eligible for UI if they meet minimum wage requirements, have lost work due
ployment insurance sys- to no fault of their own, and meet weekly eligibility requirements (e.g., demonstrate
tems to provide tempo-
they are actively searching for work). Virginia has outlined 11 distinct eligibility
rary, partial income
support for individuals criteria in state law that can be summarized in three broad categories—monetary
who were laid off eligibility, separation eligibility, and continuing or weekly eligibility (Figure 1-1).
through no fault of their Virginia has instituted a minimum earnings threshold (a combined total of $3,000
own. The Federal Unem-
in two of four quarters) claimants must meet to qualify for UI. To meet separation
ployment Tax Act (Title
26, Internal Revenue eligibility requirements, individuals must also be separated from their job through
Code) establishes most no fault of their own. Finally, to receive weekly benefits, individuals must continue
federal rules governing to file weekly claims certifying that they have applied for jobs and remain available
eligibility, UI taxes, and
to take work when offered. (See Chapter 7 for more information on Virginia’s UI
requirements for admin-
istering UI trust funds eligibility requirements.) Approximately 78,000 individuals were eligible for UI
and benefits. benefits in 2019 (prior to the COVID-19 pandemic), which was around 65 percent
of Virginia’s unemployed population that year.
FIGURE 1-1
Individuals must meet three categories of eligibility requirements to receive
UI benefits
SOURCE: Interviews with VEC staff.
The amount of UI benefits that claimants receive depends on their earnings before
their separation from employment and the length of time they worked for previous
employers. Under the traditional UI program, claimants can receive between $60
(minimum) and $378 (maximum) in UI benefits each week for up to 26 weeks
(Figure 1-2). Under the program’s design, claimants with higher previous earnings
are eligible for higher weekly benefit amounts, and claimants with more consistent
work histories are eligible to receive UI benefits for more weeks. (Practically, Vir-
ginia bases determinations of both weekly benefit amounts and length of time
claimants are eligible on prior earnings.) In 2019 (prior to the COVID-19 pan-
demic), claimants received an average of $316 in UI benefits each week for
2
Chapter 1: Overview of the Virginia Employment Commission
an average of nearly 14 weeks. UI benefits are paid out of the state’s
unemployment insurance trust fund and funded through UI taxes on employers.
Claimants apply for UI benefits through VEC’s multi-step claims process. Claim-
ants can file initial UI claims online through VEC’s website, by phone through
VEC’s call centers, or in person at 35 of the state’s 56 career centers (also known
as American Job Centers), where federal law requires that staff provide infor-
mation and assistance to individuals seeking to file a UI claim. UI claims are re-
viewed by VEC staff for eligibility. Some claims are relatively straightforward (e.g.,
the claimant was laid off) and require minimal follow up from VEC staff. Other
UI claims require detailed review (“adjudication”), where VEC staff collect addi-
tional information from the claimant and employer. VEC staff make two separate
eligibility determinations regarding whether a claimant is approved for benefits.
Staff issue a monetary determination on whether claimants’ prior wages meet the min-
imum eligibility threshold and make a separation determination on whether claimants
were separated from employment through no fault of their own. Claimants who
are determined to have met both the monetary and the separation criteria are ap-
proved for UI benefits. Claimants must file continuing claims and certify they meet
eligibility requirements each week until their benefit period ends.
Claimants and employers have the opportunity to appeal if they disagree with
VEC’s determinations. VEC processed approximately 136,000 initial UI claims,
986,000 weekly UI claims, and 13,000 UI appeals in 2019 (prior to the COVID-19
pandemic).
FIGURE 1-2
Claimants can earn up to $378 in UI benefits each week for up to 26 weeks
SOURCE: Code of Virginia, (§ 60.2-62) and interviews with VEC staff.
NOTE: A base period is used to determine which prior wages will be used to calculate the weekly benefit amount and dura-
tion of benefits. Virginia’s base period is the first four quarters of the five quarters before a claimant files a claim. Claimants
must file a claim within one year of their separation from employment. Figure reflects UI benefit levels for traditional state
UI. Additional UI funding can be available through state extended benefits programs during natural disasters or periods of
high unemployment. Federal COVID-19 UI programs increased UI benefits for certain claimants between March 2020 and
September 2021.
3
Chapter 1: Overview of the Virginia Employment Commission
VEC provides workforce services and is part of the state’s larger
workforce network
Federal Wagner-Peyser
Act requires VEC to offer VEC administers five workforce services programs, the largest of which is VEC’s
employment services as employment services program (Table 1-1). VEC is federally required to provide
part of Title III of the
employment services, which help individuals find employment. For example, indi-
Workforce Innovation
and Opportunity Act viduals can use self-assisted employment services, such as searching for job open-
(WIOA). These services ings on VEC’s job search website, or VEC staff-assisted employment services, such
are intended to minimize as receiving job search assistance, resume assistance, or work referrals. The major-
claimants’ potential to
ity of participants use self-assisted services, but there is some evidence that using
exhaust their UI benefits
and help them secure staff-assisted services has a greater positive impact on wages. Employment services
reemployment as quickly are free of charge and can be accessed online or at local career works centers where
as possible. VEC has staff.
TABLE 1-1
VEC oversees five of Virginia’s workforce programs
Participants Participants
Program Description (2019) (2020)
Helps individuals find jobs through job search 55,430 a 35,099 a
Employment services assistance and job referrals. Helps employers find
program qualified individuals through development of job
order requirements and job fairs.
Identifies UI beneficiaries likely to exhaust benefits 13,485 b 3,335 b
Reemployment
before becoming reemployed, assists them in
services and eligibility
developing reemployment plans, and provides them
assessment (RESEA)
with additional services such as resume assistance
program
and/or job search workshops.
Provides additional workforce services such as job 4,552 3,602
counseling and training to veterans with significant
Jobs for veterans state
barriers to employment (e.g., physical or mental
grant program
disabilities, homelessness). Helps employers hire
veterans.
Provides job search assistance, training, and 929 810
Trade adjustment
financial support to individuals who have lost or
assistance program
may lose jobs as a result of foreign trade.
Helps identify, plan for, or respond to layoffs and 12,705 11,494
dislocations, and minimizes their impacts on
Rapid response
individuals, businesses, and communities. Supports
program
individuals with filing UI claims and provides
reemployment-focused workshops and services.
SOURCE: JLARC staff review of VEC website and program participation data provided by VEC staff (2020).
NOTE: Participation in VEC’s workforce services programs was lower in 2020 during the COVID-19 pandemic be-
cause job seekers did not have access to in-person services at most local career centers between March 2020 and
July 2021. State work search requirements were also waived between March 2020 and May 2021, so many UI re-
cipients did not use workforce services during that time to find reemployment. The number of participants is not
representative of the total number of unique participants served as individuals can participate in multiple pro-
grams. a Counts reflect the sum of both job seekers and employers served by the program. b Counts reflects the
number of claimants scheduled for their first RESEA session.
4
Chapter 1: Overview of the Virginia Employment Commission
Employment services are available to help employers recruit qualified workers. For
example, employers can post job openings or hiring notices on VEC’s job search
website and can also request VEC staff assistance with filling specific positions.
VEC provided employment services to 47,780 individuals and 7,650 employers in
2019. This represented an estimated 40 percent of unemployed Virginians
(118,807) and 3 percent of Virginia employers (225,576) in 2019.
Some individuals may participate in both VEC’s UI and workforce services pro-
grams, though program participants are not always the same. VEC’s reemployment
services and eligibility assessment (RESEA) program specifically targets claimants
receiving UI benefits and helps them develop employment plans or attend work-
shops to gain employment before they exhaust their UI benefits. In addition, to
fulfill the federal work search requirement, claimants receiving UI benefits must
register in VEC’s Virginia Workforce Connection system and actively seek work
by connecting with at least two job contacts each week. Both requirements encour-
age claimants from the UI program to use VEC’s employment services.
VEC’s workforce services programs fit into a broader state workforce develop-
The Virginia Board of
ment system that includes various state and local partners. VEC works closely with Workforce Development
the Virginia Board of Workforce Development and multiple local workforce in- oversees Virginia’s work-
vestment boards to provide job placement and other services to individuals and force programs across
several agencies and ad-
employers (sidebar). Individuals and employers can also access training, education,
vises state leaders on
counseling, skill assessment services, and job placement services through several ways to meet state work-
other state agencies including the Virginia Community College System, the De- force needs. Board mem-
partment for Aging and Rehabilitative Services, the Department of Social Services, bership includes legisla-
tors, executive branch
and the Department of Veterans Services.
officials, higher educa-
tion institutions, employ-
VEC administers policies related to UI trust fund solvency, ers, and labor groups.
employer UI taxes, and UI benefits
Fourteen local work-
Key aspects of the UI program are established through federal and state laws,
force investment boards
including the funding formula for the UI trust fund and employer UI tax rates and set workforce policies,
UI benefit levels. Federal law requires states to have UI trust funds to fund UI oversee local career
benefits and sets broad parameters for the types of individuals who can qualify for works centers, and ad-
minister workforce ser-
UI benefits. The Code of Virginia establishes UI trust fund solvency policies (e.g.,
vices to jobseekers and
triggers for increased tax collections), state employer payroll tax rate schedules, employers. Board mem-
detailed UI eligibility criteria (e.g., types of eligible work separations), and the bership mostly includes
amount and duration of UI benefits. The General Assembly must change state law business representatives.
to alter UI trust fund solvency policies, employer UI tax rates, or UI benefit levels.
Although VEC does not establish the policies in these areas, it manages the trust
fund and administers employer UI taxes and UI benefits. VEC staff are responsi-
ble for tracking trust fund solvency, which is essential to determining which of the
UI employer payroll tax schedules will be applicable for the upcoming year and
whether an additional solvency tax is triggered. VEC also reviews claimants’ UI
5
Chapter 1: Overview of the Virginia Employment Commission
eligibility and calculates the amount of weekly UI benefits for which claimants
qualify based on their prior earnings and benefits previously received.
VEC employs more than 1,000 staff and received
~$4.4 billion in funding in FY20
VEC is a large state agency with relatively high staffing and funding levels. VEC is
led by a commissioner, a chief deputy commissioner, and two other deputy com-
missioners. VEC’s commissioner and chief deputy commissioner are both ap-
pointed by the governor. The commissioner is responsible for overseeing all
agency operations, while the chief deputy commissioner oversees VEC’s adminis-
trative functions (e.g., IT, human resources, and finance). VEC’s other deputy com-
missioners oversee the UI program and workforce services programs, respectively.
VEC staff work in 15 divisions and are located in VEC’s central or
local offices
As of September 2021, VEC had 1,135 full-time employees working across 15
VEC staffing levels were
lower prior to COVID-19. divisions (Figure 1-3) (sidebar). (VEC also had 109 part-time employees working
As of January 1, 2020, across 11 of these divisions during the same period.) Over half of full-time staff
VEC had 824 (677 full- (55 percent) work in divisions that process UI claims (UI division, call centers,
time and 147 part-time)
appeals division). The remainder work in divisions related to workforce services
staff.
(36 percent) or administrative support functions (10 percent) such as IT, finance,
and human resources.
Most VEC staff are in permanent positions, but approximately 21 percent of VEC
staff are in “restricted” positions that are full time but expire after a set time period
(typically two years). VEC uses restricted positions because positions may no
longer be needed when unemployment levels and staff ’s workloads decrease. The
majority of restricted positions work in VEC’s local call centers (41 percent) and
UI division (37 percent), though restricted positions also exist in VEC’s workforce
services and appeals divisions.
Just over one-third of VEC staff (36 percent) are located in VEC’s central office
in Henrico County; the rest of the staff work in local call centers (in South Boston
and Grundy), local adjudication centers (in Newport News and Charlottesville),
and the state’s local career centers.
6
Chapter 1: Overview of the Virginia Employment Commission
FIGURE 1-3
VEC is organized into 15 key divisions
States are prohibited by
DOL from hiring third-
party contractors for
certain functions includ-
ing conducting UI adju-
dications and UI appeals.
State employees must be
hired for those roles per
SOURCE: JLARC staff review of VEC organizational chart and Department of Human Resource Management federal law to assure
staffing data (2021). quality decision-making.
NOTE: Staffing counts reflect the number of full-time staff as of September 15, 2021. a VEC has multiple units Contractors can work in
within the unemployment insurance division, including a tax unit and a quality assurance unit, which are not support roles (e.g., cus-
shown separately in this figure. tomer call representa-
tives, IT staff). This re-
A large number of contract staff help support VEC programs and special projects. quirement was
temporarily waived in
Federal restrictions limit the UI claims processing responsibilities that contractors 2020 and 2021 during
can assist with, but restrictions were temporarily waived during the COVID-19 COVID-19.
pandemic (sidebar). The majority of VEC’s contractors assist with responding to
call center calls, working on the back end of UI claims (e.g., processing separation
VEC does not regularly
reports), and reviewing claims (adjudication). For example, VEC had at least 600 receive state general
hundred contract staff from three separate contractors assisting with calls and funds but did during
working on the back end of UI claims midway through 2021. Contractors also COVID-19. VEC was ap-
provide IT, fiscal, and administrative support to VEC. propriated $35 million in
general funds in FY22 for
UI overpayment waivers,
VEC’s funding is divided among UI benefits, UI operations, and UI IT system moderniza-
workforce services programs tion, and staffing support.
Virginia also directed
VEC received a total of $4.4 billion in FY20, $487 million of which was from $210 million in federal
regular funding sources. Most funding from regular funding sources ($350 million; CARES Act funds to the
72 percent) was used for UI benefit payments to claimants through the UI trust UI trust fund in FY21, and
fund (Figure 1-4). The remainder of VEC’s funding from regular funding sources $864 million in American
Rescue Plan funding to
covered costs associated with operating the UI program ($92 million; 19 percent) the UI trust fund in FY22.
and workforce services programs ($41 million; 8 percent). Virginia does not regu- VEC also received $74
larly provide general funds to support VEC’s programs or operations (sidebar). million in American Res-
cue Plan funding in FY22
for UI IT modernization
and claims processing.
7
Chapter 1: Overview of the Virginia Employment Commission
Most ($3.95 billion) of VEC’s funding in FY20 was one-time federal funding for
UI benefits and operations in FY20 during the COVID-19 pandemic. Nearly all
($3.9 billion) of the funding was used to provide UI benefits to individuals who
are not eligible for state UI benefits (e.g., through the federal Pandemic Unem-
ployment Assistance Program) and to increase the weekly UI benefit amount in-
dividuals could receive through state UI benefits (e.g., through the Pandemic
Emergency Unemployment Compensation program). Additionally, $50 million of
the funding was allocated to VEC to administer federal COVID-19 UI benefit
programs.
FIGURE 1-4
Most VEC funding supports UI benefits
SOURCE: Funding data provided by VEC and DOL quarterly data.
NOTE: Customer penalties include fines or interest charged to employers or claimants. UI benefits includes UI
tax revenue and UI trust fund interest.
VEC funding for UI benefits primarily comes from state employer UI taxes
and UI trust fund interest
State employer UI tax revenue is the primary funding source for UI benefits. Fund-
Taxes rose in FY21 be-
cause tax rates rose in
ing that VEC collects from employers through state UI taxes is deposited into
CY21. The low trust fund Virginia’s UI trust fund and used exclusively for UI benefits, as required by federal
solvency level (1) trig- law. The amount of employer taxes that VEC collects depends on the level of UI
gered a CY21 tax sched- trust fund solvency, with tax collections increasing when solvency is low. VEC col-
ule with a higher range of
base tax rates than the
lected $389 million in employer taxes for FY19 and $348 million in employer taxes
prior year and (2) acti- for FY20. (VEC collected $429 million in employer taxes in FY21 [sidebar].)
vated a 0.2% surcharge
tax. The governor’s Exec-
Interest earned from Virginia’s UI trust fund can also be used for UI benefits but
utive Order 74 reduced is a much smaller funding source than state employer UI taxes. VEC earned $5
base tax rates for em- million in interest from the UI trust fund in FY19 and $2 million in FY20. States
ployers by disregarding can generate more interest by maintaining higher trust fund balances. The U.S.
claims filed by their for-
Department of the Treasury maintains states’ UI trust funds and determines the
mer employees in April
through June 2020. interest rates.
8
Chapter 1: Overview of the Virginia Employment Commission
VEC funding for UI operations mostly comes from federal grants
VEC’s UI program operations are primarily funded through a federal administra-
tive grant from DOL. VEC received $36 million in UI funding from federal grants
in FY19 and $92 million in FY20. The amount of UI operational funding VEC
receives is determined by a formula that is based on historic funding levels and
anticipated staff workload (e.g., UI claim volume). The formula also accounts for
a state’s operational efficiency, staff allocation, and salary inflation. Federal grants
for UI operations decline when unemployment levels are low because staff work-
load is assumed to decrease when there is less demand for UI benefits. (See Chap-
ter 3 for more information on the UI operational funding VEC receives.)
VEC also funds a small portion of UI operations through revenue from penalties.
Penalties are charged against employers for actions such as paying taxes late, sub-
mitting hard-copy (instead of electronic) quarterly reports, or repeatedly failing to
respond to VEC information requests. Penalties are also charged against claimants
who submit fraudulent claims. VEC collected $5 million in penalties in FY20. Pen-
alties can be used to cover operational costs for UI or workforce services pro-
grams, but penalties are typically used for UI operations, according to VEC staff.
VEC funding for workforce services programs and operations comes from
federal grants
Federal grants are the sole source of funding for VEC’s workforce services pro-
grams, which include services for employers, services for workers, publication of
labor market information, and economic research. The amount of workforce ser-
vices funding VEC receives each year is determined by program-specific federal
formulas. For example, the employment services grant depends on a state’s civilian
labor force size and total unemployment rate, while the Jobs for Veterans grant
depends on a state’s share of veterans seeking employment. VEC received a total
of $33 million in FY19 and $41 million in FY20 for workforce services programs,
the largest portion of which (over 38 percent in FY20) funded the employment
services program.
VEC is subject to federal and state oversight
DOL oversees state UI programs and requires states to report on program perfor-
mance each year. DOL sets performance standards for the timeliness and accuracy
of UI claims determinations, UI appeals decisions, UI benefit payments, and em-
ployer state UI tax liability determinations. DOL can require states that underper-
form its standards to complete corrective action plans. DOL can also reduce the
operational funding that underperforming states receive. Financially penalizing
states for underperformance is extremely rare, according to DOL staff. While
VEC has had to complete corrective action plans, it has not been subject to finan-
cial penalties.
9
Chapter 1: Overview of the Virginia Employment Commission
DOL also oversees VEC’s workforce services programs. VEC submits annual
workforce plans to DOL to receive funding. DOL requires VEC to regularly re-
port program performance metrics for certain programs. For example, states re-
port to DOL quarterly on the percentage of workers re-employed in the second
and fourth quarters after receiving VEC employment services.
Prior to the General Assembly’s creation of the secretary of labor in 2021, VEC
State Auditor of Public
was overseen by the secretary of commerce and trade. The Code of Virginia di-
Accounts’s FY20 review
of VEC confirmed the ac- rects the secretary to “hold agency heads accountable for their administrative, fis-
curacy of VEC’s account- cal and program actions” and “direct the development of goals, objectives, policies
ing transactions but iden- and plans that are necessary to the effective and efficient operation of govern-
tified five administrative ment.” Other state entities have limited roles providing VEC oversight. The state
deficiencies, including
that VEC paused required
Auditor of Public Accounts conducts regular annual audits of VEC’s operating
reemployment services expenditures, UI trust fund’s solvency and expenditures, and IT system security,
for certain UI recipients and it can examine specific elements of VEC programs or operations as needed
without federal approval, (sidebar). The Virginia Board of Workforce Development recommends policies
and VEC did not deduct
federal income tax from
and strategies to help the state meet federal workforce services program require-
Pandemic Unemployment ments and state needs, some of which pertain to VEC’s workforce services and
Assistance programs. programs. Moreover, the legislative Commission on Unemployment Compensa-
FY20 and FY19 reviews tion is responsible for monitoring Virginia’s UI system, including the impact of
identified deficiencies
with VEC’s IT security re-
existing or proposed state laws on the UI trust fund.
lated to database security VEC has internal audit staff and quality assurance staff who regularly review
and IT governance.
agency performance and help ensure VEC complies with federal program require-
ments and standards. Each year, VEC’s internal audit staff conduct an agency risk-
assessment and complete several audits of agency processes. For example, internal
audit staff annually review VEC’s tax rate calculations and the security of fund
transfers between VEC and the Virginia Treasury. Internal audit staff have re-
viewed other areas of VEC’s operations when needed, such as the timeliness of
employer debt collection (2019) and VEC’s IT security (2020). VEC’s quality as-
surance staff regularly audit the timeliness and accuracy of a sample of UI claims
and employer UI taxes. The sample sizes and scope of these audits are set by DOL,
and audit results are submitted to DOL each quarter.
10
2 Impacts of COVID-19 on VEC
The COVID-19 pandemic created extraordinary challenges for the Virginia Employ-
ment Commission (VEC). Beginning in March 2020, COVID-19 increased state un-
employment levels quickly and on a larger scale than previous economic recessions,
causing a substantial increase in the number of unemployment insurance (UI) claims
VEC needed to process. VEC was also responsible for administering several new fed-
eral UI programs. COVID-19 also presented challenges to staff ’s health and safety,
requiring VEC to discontinue offering in-person assistance with UI claims and imple-
ment safety precautions for staff working in VEC offices.
COVID-19 pandemic had substantial negative
impact on VEC operations
The COVID-19 pandemic triggered an unprecedented increase in Virginia’s unem-
Claimants file an
ployment level, which led to a rapid increase in the demand for state unemployment initial UI claim with VEC
benefits. The number of unemployed individuals in Virginia increased from 117,294 to be approved for UI
(2.6 percent) in February 2020 to 482,111 (11 percent) in April 2020 (Figure 2-1). Many benefits. After receiving
approval, claimants must
of these individuals (“claimants”) applied for state UI benefits. Initial state UI claims
file continued claims
increased by a factor of 34 within two months, totaling 236,000 claims in April 2020 each week to
(sidebar). Continued state UI claims increased by a factor of 13 within two months, receive all UI benefits for
totaling 1.3 million claims in April 2020. Unemployment levels and UI claims typically which they are eligible.
increase during economic recessions but did so more gradually during the last reces-
sion in 2009.
Congress created six temporary federal UI programs for states to administer during
COVID-19, which significantly increased VEC’s workload. These programs extended
and expanded UI benefits between April 2020 and September 2021 (Table 2-1). Most
notably, the Pandemic Unemployment Assistance (PUA) program enabled previously
ineligible individuals, such as self-employed and “gig” workers, to receive UI benefits.
VEC received 375,581 initial PUA UI claims in 2020 and 51,418 initial PUA claims
from April through July 2021. Congress amended these temporary federal UI program
durations and requirements multiple times during 2020 and 2021. For example, Con-
gress extended the duration of the PUA program three additional months through the
Continued Assistance Act in December 2020, and instituted a new requirement that
PUA claimants provide documentation of previous employment or self-employment.
Congress again extended the PUA program, as well as the other pandemic programs,
through the American Rescue Plan Act in March 2021. This prolonged the effect that
federal programs had on all state UI agencies’ workloads and increased the complexity
of agencies’ administration of the programs.
11
Chapter 2: Impacts of COVID-19 on VEC
FIGURE 2-1
Unemployment and state UI claims reached unprecedented levels during
COVID-19
SOURCE: Claims data from U.S. Department of Labor Employment and Training Administration data (2006–2020).
Unemployment data from U.S. Bureau of Labor Statistics (2006–2020).
NOTE: Data for unemployed individuals reflects the total number of unemployed individuals in Virginia. The num-
ber of continuing weekly claims filed is higher than the number of unemployed individuals because individuals can
file a continued claim each week they qualify for unemployment insurance benefits.
VEC had to rapidly increase staffing levels to process the high volume of state and
Adjudication staff review
claims information, federal UI claims received during COVID-19. VEC staffing was at a 10-year low (677
gather additional infor- full-time staff) in January 2020 because of low unemployment and UI claims levels.
mation, and make deci- This made it challenging to quickly hire the large number of additional staff needed,
sions regarding claimant
particularly in areas with complex responsibilities such as UI adjudication and appeals
eligibility based on law
and policy. (sidebar), according to VEC leadership. VEC hired new staff (VEC staff and third-
Appeals staff conduct party contractors) and temporarily reassigned staff from the workforce services divi-
hearings and review in- sion to assist with UI claims, but they had to complete lengthy trainings to have the
formation to determine
skills needed to process claims. VEC had limited physical space to accommodate staff-
whether law and policy
was appropriately applied ing increases, which caused VEC to reopen a previously vacated building in Newport
in eligibility decisions. News in June 2020 for additional adjudication staff, open a new office for appeals staff
in September 2020, and move one of its two call centers to a larger building in March
2021.
12
Chapter 2: Impacts of COVID-19 on VEC
TABLE 2-1
Federal government created temporary federal UI programs during COVID-19
Program Description Time period
Additional 13 weeks of UI benefits for claimants who exhausted regular UI benefits 4/4/20 – 12/26/20
Pandemic Emergency
Extended by Continued Assistance Act to provide an additional 11 weeks of benefits 12/27/20 – 3/13/21
Unemployment
Compensation (PEUC) Extended by American Rescue Plan Act to provide up to 53 total weeks of additional
3/14/21 – 9/4/21
benefits.
Up to 39 weeks (reduced by any weeks of regular UI or extended benefits received) of
benefits to claimants who exhausted UI benefits or are ineligible for regular UI. Ex- 2/2/20 – 12/26/20
Pandemic Unemployment panded eligibility to certain previously excluded workers, including self-employed and
Assistance (PUA) part-time.
Program extended 11 weeks by the Continued Assistance Act. 12/27/20 – 3/13/21
Expanded duration to a maximum of 79 weeks by American Rescue Plan Act. 3/14/21 – 9/4/21
Initially increased weekly benefit amount by $600 per week for claimants collecting
Federal Pandemic 4/4/20 – 7/25/20
benefits under regular UI, PEUC, PUA, EB, or other existing programs.
Unemployment
Reauthorized at a lower benefit supplement amount of $300 by the Continued Assis-
Compensation (FPUC) 1/2/21 – 9/4/21
tance Act. Further extended at $300 amount through American Rescue Plan Act.
Provided an additional $300 per week to claimants who are eligible for at least $100
Lost Wages Assistance (LWA) 8/1/20 – 9/5/20
per week in benefits from regular UI, PEUC, PUA, or EB.
Provided an additional $100 each week to claimants with $5,000 or more in self-em-
Mixed Earners Unemployment ployment income in the previous tax year who are receiving unemployment benefits
1/2/21 – 9/4/21
Compensation (MEUC) from a program other than PUA. Created under Continued Assistance Act and ex-
tended under American Rescue Plan Act.
Triggered on in VA:
Provided additional 13 or 20 weeks of benefits to claimants who exhaust benefits in
5/31/20
Extended Benefits (EB) states with high unemployment levels. This was an existing program that was
Triggered off in VA:
triggered in many states during the pandemic.
11/21/20
NOTE: The PEUC and PUA programs had similar time periods but different purposes. PEUC extended the length of UI benefits for claimants who are
traditionally eligible for regular UI benefits. If claimants exhausted both regular UI benefits and PEUC benefits in fewer than 39 weeks, they were
potentially eligible for additional benefits through PUA for the remaining weeks in PUA’s 39-week period.
SOURCE: U.S. Department of Labor and VEC websites.
VEC also had to modify its UI IT system to handle state and federal UI claims during
COVID-19. VEC planned to finish modernizing its UI benefits system in June 2020
as part of a long-term UI IT modernization project. However, VEC paused UI mod-
ernization efforts in May 2020 because agency IT resources were needed to program
the new federal UI programs into its legacy UI IT system and assist with launching
new UI capabilities, such as an online UI application (Gov2Go) and live chat function.
VEC resumed modernizing the UI benefits system in May 2021 but had to adjust the
scope of the project to incorporate the federal UI programs and other additional ca-
pabilities into the new system. (See Chapter 6 for more information on VEC’s UI IT
modernization project.)
VEC temporarily shut down multiple offices during COVID-19 to help protect staff ’s
health and safety. VEC stopped providing customers with in-person assistance with
UI claims at local offices between March 2020 and June 2021. Multiple VEC offices—
including VEC’s central office and one of the call centers—were also temporarily
closed because of outbreaks of COVID-19 infections. Moreover, customers made
several serious threats against VEC staff ’s safety, prompting VEC leadership to hire
13
Chapter 2: Impacts of COVID-19 on VEC
security guards. These challenges had a negative impact on staff ’s health and were
disruptive to workflows.
Additionally, VEC made several changes to the UI claims process to streamline staff
Fact-finding interviews
are conducted by adjudi- reviews of state and federal UI claims and protect the health and safety of VEC em-
cators with both claim- ployees. At the start of COVID-19, VEC reduced the duration of fact-finding inter-
ants and employers to views (sidebar) conducted for UI claims from 30 minutes to 15 minutes and began
gather additional infor-
conducting all interviews by phone, with no option for in-person hearings. As of June
mation necessary to de-
termine a claimant’s eligi- 2020, VEC discontinued fact-finding interviews altogether and started relying solely
bility for benefits during on UI applications and other documents submitted to understand the circumstances
the adjudication process. of each claim. Additionally, VEC modified its UI IT system to automatically pay claim-
ants who had experienced delays before their claims were fully reviewed.
Changes to UI staffing, systems, and processes enabled VEC to process many UI
claims during COVID-19, but VEC is still experiencing significant delays and backlogs.
Between March 2020 and July 2021, VEC processed about 2.5 million initial UI claims,
200,000 adjudications, and 24,000 appeals—significantly more than in 2019 (Figure 2-
2).VEC staff worked over 193,000 hours of overtime agency wide in 2020 to handle
the increased workload, which is equivalent to 93 full-time staff positions and is a
1,600 percent increase from the amount of overtime worked in 2019. Despite the large
amount of work completed, VEC has not kept pace with UI demand and has accrued
backlogs in initial claims intake, adjudication, fraud investigations, and appeals. (See
Chapter 4 and Chapter 5 for additional information on UI claims backlogs.)
FIGURE 2-2
VEC processed significantly more UI claims, adjudications, and appeals in 2020
than in 2019
SOURCE: Federal ETA 5159 report for regular UI and PEUC claims, ETA 902P for PUA claims, ETA 207 report for ad-
judications, and ETA 5130 for appeals.
NOTE: The increase in initial claims between 2019 and 2020 was larger than the increase in adjudications between
2019 and 2020 because not all initial claims require an adjudication. Additionally, there are a substantial number of
potential claim issues that are awaiting adjudication and are not yet reflected in adjudication totals. a 2021 data is
January through June 2021.
Many customers and legislators have called for VEC to improve its processing of
UI claims. A large number of eligible claimants have complained about not receiving
14
Chapter 2: Impacts of COVID-19 on VEC
benefits in a timely manner and being unable to contact VEC staff to receive updates
on their UI claims. Over 40 state legislators wrote a letter to VEC in July 2020 com-
plaining about UI process delays and VEC’s unresponsiveness to customers. Two con-
gressional representatives sent letters to VEC and Virginia’s governor in July 2020 and
March 2021 with similar complaints. Moreover, the governor issued Executive Di-
rective 16 in May 2021, which directed VEC to improve the timeliness of UI claims
processing and finish modernizing its UI IT system by October 2021.
Several groups representing UI claimants filed a federal class-action lawsuit against
VEC in April 2021 because of VEC’s delayed processing of UI claims. The lawsuit
faulted VEC for not adjudicating UI claims within the federally required 21 days and
for cutting off UI benefits without sufficient justification. VEC entered a settlement
with the claimants in May 2021 and agreed to address the issues raised by meeting a
series of performance standards (Figure 2-3). VEC reported meeting the settlement
standards in August 2021, but claimant representatives expressed concern that addi-
tional UI claims were not being processed in a timely manner. The court ordered VEC
to meet with claimant representatives to draft a plan for resolving the remaining issues
and provide a status report in late September 2021.
FIGURE 2-3
Claimant representatives filed a class action lawsuit against VEC in April 2021
SOURCE: JLARC review of legal documents related to class action lawsuit filed against VEC.
VEC could have been better prepared for pandemic
with effective agency staffing, planning, processes,
and systems
All states experienced challenges with the unprecedented volume of UI claims during
COVID-19. A report issued by the U.S. Department of Labor’s (DOL) Office of the
Inspector General in May 2021 acknowledged shortcomings across states in prepar-
15
Chapter 2: Impacts of COVID-19 on VEC
edness for the drastic increase in UI claims volume, concluding that “states had diffi-
culty ensuring [federal UI] programs were implemented and claimants were paid
promptly.” The report cited several root causes for states’ underperformance, includ-
ing outdated UI IT systems, insufficient staffing, and poor guidance from DOL. In
particular, the report found that: “DOL’s guidance and oversight did not ensure states
implemented the programs and paid benefits promptly.”
Some states responded more effectively to challenges processing UI claims during
COVID-19. For example:
Utah largely avoided a UI claims backlog because it has a modernized UI
IT system that allows customers to upload required documents online and
check the status of UI claims without having to call a call center.
New Jersey improved responsiveness to customer calls by hiring over 200
third-party contractors to assist with its UI call center in June 2020.
North Carolina added 1,800 call center agents between April 2020 and May
2020, reducing average hold times to less than a minute. North Carolina
also increased overall agency staffing from about 500 employees to over
2,500 between March 2020 and May of 2020, allowing the agency to pro-
cess over 100,000 backlogged claims by September 2020.
Maryland was close to completing its project to modernize its UI IT system
when COVID-19 started. Rather than pausing the project, Maryland moved
forward with launching its new system in 2020, which allowed staff to add
new federal programs to the system and process UI claims more quickly.
A year and a half after the onset of COVID-19, VEC is still experiencing UI claims
backlogs and delays. VEC could have better handled increased UI claims during the
pandemic with more effective agency staffing, planning, processes, and systems. VEC
began the pandemic understaffed in key areas (e.g., call center representatives, adjudi-
cation) and lacked a clear plan for increasing staffing levels during recessions. VEC
also had a complex UI process that was unnecessarily inefficient in several areas and
heavily reliant on an outdated UI IT system. These challenges caused VEC to under-
perform several DOL performance metrics for UI claims processing prior to COVID-
19 and significantly exacerbated VEC’s challenges during COVID-19. Subsequent chap-
ters will detail how VEC could have been better prepared for a surge in UI claims and
how it can improve its operations to reduce current backlogs and be better prepared
for future economic downturns.
16
3 VEC’s Resources and Management
The Virginia Employment Commission (VEC) needs to be effectively funded, staffed,
managed, and overseen because its services are critical to Virginia’s citizens and em-
ployers and are important to the state’s economy. Public demands for VEC’s assis-
tance—especially unemployment insurance (UI) benefits—fluctuate with economic
conditions. Therefore, efficient operations, sufficient staffing, proactive planning, ef-
fective executive decisions, and adequate oversight and assistance are essential to
VEC’s ability to quickly respond to sudden changes in economic conditions such as a
recession.
VEC’s operational shortcomings may not be apparent during periods of low unem-
ployment, but they are especially problematic when demands for UI benefits escalate
rapidly. Significant weaknesses in VEC’s operations—particularly its deficient staffing
levels, antiquated UI benefits IT system, performance monitoring, and oversight—
were revealed during the COVID-19 pandemic. Staffing shortages prevented VEC
from administering UI claims in an accurate and timely manner. The delayed replace-
ment of its outdated IT system meant that VEC was reliant on inefficient, paper-based
processes that severely hampered timely and satisfactory responses to claimants. In
addition, inadequate performance monitoring and agency oversight hindered the
timely identification and remediation of underperformance.
Federal appropriations for UI operations fluctuate
over time, and funding formula penalizes VEC for its
inefficiencies VEC’s operational fund-
Similar to other state UI agencies, VEC depends on federal funding to cover the costs ing has been character-
ized as low relative to the
of its UI operations. VEC spends the majority of its operational funding on staff amount of federal UI
salaries and benefits (54 percent) followed by contracts (30 percent) and other ex- taxes that Virginia con-
penses (16 percent) (e.g., facilities, postage, miscellaneous). In 2019, VEC received $36 tributes to the federal
million in federal UI operational funding. This was the amount available to the agency pool of funding. However,
the amount states receive
for its UI operations in early 2020 prior to COVID-19. The total amount of federal from this UI operations
UI operational funding that VEC received in federal fiscal year 2019 was above the 50- pool is not related to the
state median. VEC also received more federal funding per claim than the national me- proportion of funds
dian; VEC received $258 per UI claim processed in federal fiscal year 2019 compared states contribute. There-
fore, the difference be-
with the 50-state median of $227 per UI claim (sidebar).
tween the two amounts is
The amount of federal UI operational funding VEC receives is determined by a com- not a valid indicator of
the sufficiency of VEC’s
plex federal formula. States submit UI workload and staffing information that the U.S.
federal funding.
Department of Labor (DOL) uses to estimate the base amount of federal funds each
17
Chapter 3: VEC’s Resources and Management
state needs to operate the UI program (sidebar). Funding amounts are largely driven
States receive a base by the amount of UI-related items (e.g., initial claims, continued claims, non-monetary
funding amount for UI
operations from DOL at
determinations, appeals, and tax/wage records) states processed the previous year.
the start of each fiscal States with higher workloads receive more funding. Additional adjustments are made
year. States can receive to account for the funding states need for staff salaries and benefits, quality assurance
additional contingency activities (e.g., UI audits), non-personnel services (e.g., facilities), and postage. The
funding for UI operations
from DOL if their UI work-
funding formula benefits states that process UI claims efficiently (fewer minutes spent
load increases beyond on each task) and use a smaller portion of administrative staff (e.g., IT programmers,
the amount assumed in mail services, etc.). Funding is ultimately divided among states. To prevent dramatic
DOL’s base funding cal- funding fluctuations, states cannot lose more than 5 percent or gain more than an
culations. This occurred
established percentage annually.
during the COVID-19
pandemic after UI claims
increased dramatically in Operational funding for the UI program fluctuates with economic
March 2020. conditions and does not always meet states’ needs
Federal funding for UI operations is unpredictable because it is counter cyclical with
the economy—funding increases when unemployment rates are high and UI workload
increases. Escalating unemployment rates increase states’ UI workload because more
unemployment insurance claims are filed. As UI workloads increase, states receive
more federal UI operational funding. When UI workloads decrease, federal funding
for UI operations decreases. From the end of the Great Recession to 2019, VEC’s UI
operational funding decreased by over one-third from $56 million to $36 million (Fig-
ure 3-1). UI operational funding more than doubled for VEC and almost doubled
nationwide between federal fiscal years 2019 and 2020 because of the COVID-19 pan-
demic. For federal fiscal year 2022, Virginia will receive at least $41.2 million in UI
operational funding. This amount—like the national total of UI operational funding—
is 20 percent higher than the starting amount DOL provided at the beginning of the
last federal fiscal year. Virginia could receive more federal funding through contin-
gency funding if its workload exceeds DOL’s prediction.
The amount of federal funding awarded for UI operations is not always adequate to
meet states’ needs, according to stakeholders. DOL’s formula for determining the total
amount of UI operational funding states need was outdated until a recent update in
2021. This hindered DOL from accurately estimating states’ funding needs, according
to subject matter experts. A 2019 DOL report acknowledged that insufficient opera-
tional funding “create[ed] a challenge for states to adequately staff their UI program
operations” and “significantly impact[ed] states’ ability to manage program integrity
operations that are staff intensive, such as being able to…conduct random work
search audits.” Similarly, a 2018 Upjohn Institute report described “inadequate” federal
funding causing “severe” problems for states, such as restricting UI automation.
18
Chapter 3: VEC’s Resources and Management
FIGURE 3-1
VEC’s UI operational funding changed over time with unemployment levels,
following the national trend
NOTE: Not adjusted for inflation. Limited to federal operational funding. Includes base and contingency federal UI
operational funding but excludes Reemployment Services and Eligibility Assessments (RESEA). Also excludes opera-
tional funding to assist state implementation of federally funded COVID UI programs. Percentage difference repre-
sents change from 2009 to 2019.
SOURCE: US. DOL data on operational grants to states.
Unpredictable and insufficient amounts of federal funding have limited VEC’s ability
to pay for important UI operational expenses such as essential staff positions, accord-
ing to VEC staff. For example, as explained in the next section on staffing, VEC lead-
ership report being understaffed in key functions such as adjudication in 2019 because
of insufficient funding. VEC staff also reported that funding constraints caused them
to stop using essential quality monitoring and workforce management software in the
call centers. This limited VEC’s ability to effectively evaluate the quality of staff ’s cus-
tomer service on calls and effectively monitor call center staffing levels. Many other
states also believe they have not received the amount of federal funding needed to
operate their UI programs. When asked about their federal UI operational funding,
the majority of states surveyed by the National Association of State Workforce Agen-
cies in 2018 reported facing “serious” or “critical” shortfalls.
VEC’s inefficient UI operations put it at a disadvantage in federal
funding formula and prevent it from effectively spending its funding
All states must make strategic decisions about how to use limited federal UI opera-
tional funding, especially during times of low unemployment. States have full discre-
tion to allocate the funding they receive as long as it is spent administering UI, and
DOL’s funding formula rewards states with efficient operations. Therefore, VEC’s op-
erational inefficiencies adversely affect both its federal funding levels and its ability to
efficiently spend the funding it receives.
VEC’s operational inefficiencies have resulted in it receiving a smaller portion of the
federal funding that DOL estimates VEC needs for UI operations. DOL’s formula for
allocating UI operational funding to states lowers the share of funding states receive
depending on their efficiency relative to other states. In each of the five years preced-
ing COVID-19, VEC reported notably lower operational efficiency than other states
19
Chapter 3: VEC’s Resources and Management
for most core UI functions (initial claims, continuing claims, non-monetary determi-
nations, appeals, and wage records). For example, in federal fiscal year 2019 VEC took
nine minutes longer than other states to process initial UI claims, on average, ranking
39th nationwide (Table 3-1). Because efficiency is only one of many factors that DOL
considers in its funding formula, a subject matter expert interviewed for this study
indicated that the penalties for inefficiency would represent a relatively small portion
of VEC’s total funding.
TABLE 3-1
VEC is less efficient than other states for most UI functions
VEC timeliness 50-state median VEC performance
UI function (minutes) timeliness (minutes) (per unit) VEC rank
Initial UI claims 38 29 +9 minutes (+33%) 39th
Continued UI claims 3 2 +1 minute (+45%) 39th
Non-monetary
determinations 80 53 +27 minutes (+50%) 44th
Appeals 286 233 +53 minutes (+23%) 36th
Wage records 0.09 0.05 +4 seconds (+88%) 37th
Employer taxes 36 49 -13 minutes (-27%) 8th
SOURCE: JLARC analysis of minutes per unit adjustment tables in U.S. DOL’s Unemployment Insurance Program
Letter 2-21.
NOTE: Rankings are scaled so the state in first place is the most efficient and 50th place is the least efficient. Data
reflects state operations in federal fiscal year 2019.
VEC also has a relatively high proportion of administrative staff compared with other
states, which counts against its efficiency. Virginia had the sixth highest portion (29
percent) of staff dedicated to administrative functions (such as mail services, printing,
“We are so heavily reliant and data entry) in federal fiscal year 2019. (The 50-state median was 21 percent.) Unlike
on paper…We have many other states, VEC has not yet finished modernizing its UI IT system and is reliant
paper in every nook and on manual, paper-based processes and administrative staff (sidebar). For example,
cranny.
staff have to manually type UI claim information into the UI system, even when ap-
”
– VEC staff
plications are submitted online. VEC spends more administrative resources than
should be required per UI claim processed, which not only reduces the portion of
needed funding it receives through the DOL formula, but also prevents it from direct-
ing more of its funding to priority UI expenses, such as adjudication staff positions
and IT investments.
Automating states’ UI processes is key to maximizing federal funding for operations,
according to the National Association of State Workforce Agencies. Recent and up-
coming automations of VEC’s UI processes are expected to improve efficiency. For
example, VEC’s new UI benefits system will automate certain tasks like linking UI
claims submitted online to accounts of responsible employers and enabling electronic
messages and document sharing with claimants. These processes have been entirely
manual and paper-based before and during the COVID-19 pandemic.
20
Chapter 3: VEC’s Resources and Management
Once the new UI IT system is in place, VEC will become less reliant on manual, paper-
based processes and will require fewer administrative staff. This will free up funding
for functions that have been under-resourced because of the need to direct funding to
the manual processing of UI claims. This greater efficiency will be reflected in the
funding allocated to VEC through DOL’s funding formula and allow the agency to
better prioritize spending.
Virginia does not supplement federal funding for UI operations with
state funds, unlike some other states
Virginia’s share of total UI operational funding from non-federal sources (5 percent)
was smaller than the 50-state median (10 percent) in federal fiscal year 2019. However,
Virginia is not the only state to rely almost completely on federal funding; 15 other
states—including Maryland and West Virginia—rely on federal funding to at least the
same extent as Virginia. Penalties on employers and claimants are typically VEC’s only
non-federal funding source for UI operations.
Some other states supplement federal funding for UI operations with state funding
generated through special employee or employer taxes. At least eight states (Ohio,
Florida, California, Hawaii, Idaho, Iowa, New Mexico, and South Dakota) appropri-
ated general funds for UI operations in federal fiscal year 2019. At least four other
states (New York, Louisiana, New Hampshire, and Rhode Island) and the District of
Columbia have established administrative taxes paid by employers to support UI op-
erations. These taxes are in addition to the employer-paid taxes that fund UI benefits.
Pennsylvania has an
For example, New York taxes 0.075 percent of employers’ taxable wages to fund UI employee tax that sup-
automation initiatives and UI staff positions. If Virginia had an additional employer ports UI operations. Em-
tax of 0.075 percent (the lowest among states with a known rate) in state fiscal year ployees are typically
2020, the tax would have generated $23 million in revenue. If Virginia had an employer taxed at 0.08 percent, but
the rate falls to 0.06 per-
tax of 0.4 percent (the highest among states with a known rate) in state fiscal year 2020, cent when the state has
the tax would have generated $120 million in revenue. (For reference, DOL provided outstanding UI debt. Sev-
VEC $92 million for regular state UI operations in state fiscal year 2020 and $36 mil- eral experts indicate that
lion in state fiscal year 2019.) In Pennsylvania, UI operational funding is collected from employee taxes are bene-
ficial because they in-
taxes on employees (sidebar). crease workers’ aware-
The General Assembly could consider appropriating state general funds or creating ness of a UI.
employers’ or employees’ UI taxes for VEC’s operations, but a general fund appropri-
ation may not be necessary. Implementation of the modernized UI IT system toward
the end of 2021 is expected to improve the efficiency of the UI program’s operations,
which should reduce VEC’s need for administrative staff to support UI operations.
Additionally, Virginia’s base UI operational funding for federal fiscal year 2022, is 20
percent higher than the base amount DOL provided at the beginning of the last fed-
eral fiscal year.
If the General Assembly wishes to appropriate state general funds or raise additional
revenue for VEC’s operations, it should prioritize funding for increasing VEC’s inter-
nal IT staff capacity because several IT programmers are eligible to retire. Additional
21
Chapter 3: VEC’s Resources and Management
funding could be used to recruit and compensate qualified IT staff to fill positions as
they become vacant, to add IT staff positions, or both. Having an adequately staffed
IT division is critical to the success of the UI modernization project.
If the General Assembly wishes to appropriate general funds for VEC operations be-
yond those needed for additional IT staff, it would be most prudent to wait until after
the modernized UI IT system is fully functioning in June 2022, and VEC has clearly
identified how it will spend its additional federal funds. In addition, VEC should first
undergo a comprehensive efficiency review. This review would identify the efficiencies
VEC has gained through recent automation of its UI IT system and processes. The
review should also identify any additional efficiencies VEC could pursue (e.g., opportu-
nities to automate employer and UI claims communications) to maximize the UI op-
erational funding it receives from DOL. The efficiency review findings should dictate
whether additional state funds are needed to adequately fund the VEC.
RECOMMENDATION 1
The secretary of labor should competitively procure a national firm with expertise in
evaluating the efficiency of an organization’s staffing structure, delegation of staff
duties, and work processes to conduct a comprehensive efficiency review of the un-
employment insurance (UI) operations of the Virginia Employment Commission to
(i) identify specific actions that could be taken to improve the efficiency of VEC’s UI
operations, including through more efficient and effective use of staff and technology,
(ii) recommend improvements to the agency’s staffing and workflows to most effec-
tively use existing federal funding for UI operations, and (iii) determine whether cur-
rent funding is adequate to ensure effective UI operations.
VEC has not maintained sufficient staffing in key
functions
Many of the shortcomings in VEC’s UI program administration and operations during
the COVID-19 pandemic were because too few staff were assigned to critical agency
functions. VEC has experienced substantial fluctuations in staffing levels, prolonged
vacancies, high turnover, and insufficient numbers of supervisory staff. Insufficient
staffing has contributed to the poor performance of VEC’s UI customer call center,
mounting backlogs of UI claims for intake and adjudication, undetected fraud, and
the long-delayed replacement of VEC’s antiquated UI claims processing system.
VEC’s staffing challenges were particularly prominent during the COVID-19 pan-
demic but are not new. The agency had not maintained an adequate staffing level in
key UI functions for several years prior to the pandemic. VEC staff attribute this to
receiving insufficient funding for its UI operations from DOL.
22
Chapter 3: VEC’s Resources and Management
VEC staffing levels have fluctuated significantly over time
VEC’s staffing levels have fluctuated over time with unemployment levels. Staffing
levels decrease when unemployment and the number of UI claims are low because VEC created over 1,000
state UI agencies receive less UI operational funding from the federal government. new full-time staff posi-
During the pandemic, VEC’s staff positions more than doubled due to unprecedented tions during COVID-19
increases in unemployment levels and UI claims. VEC had 677 full-time agency staff (March 2020 – September
2021) to handle higher UI
positions in January 2020 when the state’s unemployment rate was 2.5 percent. VEC claims volume. According
had 1,063 full-time staff positions by the end of June 2020 when the unemployment to staff, more positions
rate was 8.8 percent, and 1,733 staff positions by the end of June 2021. (VEC staffing were created than
levels remained high in June 2021 even though unemployment had decreased to 4.3 needed in anticipation of
increasing workloads. Ad-
percent because staff were still processing large volumes of backlogged UI claims.)
ditionally, VEC could not
Staffing levels increased more slowly than the unemployment level and the number of fill all newly created posi-
tions because of funding
UI claims partly because VEC had to create and fill new positions (sidebar). Addition-
limitations.
ally, as discussed in Chapters 4 and 5, VEC could have been more proactive and timely
in filling positions.
VEC has experienced relatively high staff vacancy and turnover rates
VEC’s vacancy rate for staff positions has been relatively high in recent years, with
many positions remaining vacant for multiple months. VEC’s vacancy rate ranged from
13 to 25 percent of full-time staff positions between 2015 and 2019 and was consist-
ently higher than the average vacancy rate across Virginia state agencies. Some of
VEC’s positions were needed but deliberately held vacant because of insufficient fund-
ing, according to agency leadership. Other positions were vacant because they were
not needed. VEC does not have records that distinguish needed vacant positions from
unneeded ones but VEC leadership indicated the agency was appropriately staffed in
2014 when 750 out of 892 full-time positions were filled.
VEC’s vacancy rate increased during COVID-19, reaching a high of 46 percent of full-
time staff positions vacant in September 2020. (The average vacancy rate for full-time
staff positions across all Virginia state agencies was 14 percent.) One of the reasons
that the proportion of vacancies was so high is that VEC created over 1,000 new full-
time positions to handle increased workloads during COVID-19. One year later, in
September 2021, VEC’s vacancy rate was 38 percent with a total of 697 vacant full-
time staff positions unfilled, most of which were concentrated in the agency’s call
center, adjudication, UI benefits, and appeals functions. Positions were vacant for 226
days, on average. Several key positions were vacant for longer than one year, including
positions for UI field tax staff, adjudication staff, appeals staff, fraud investigators, and
call center staff. VEC had difficulty filling new positions in a timely manner because
of certain state hiring requirements and challenges attracting and retaining new hires.
VEC staff turnover has historically been comparable to other state agencies, but turn-
over increased significantly during COVID-19. VEC’s annual turnover rate for full-
time agency staff was 10 percent in FY19, which was lower than the average across
23
Chapter 3: VEC’s Resources and Management
similar Virginia state agencies (15 percent). However, VEC’s turnover rate for agency
Turnover among VEC’s
contract staff has been staff increased to 24 percent during COVID-19 (March 2020–September 2021). (An-
high during the COVID- nual turnover also reportedly increased among VEC’s third-party contractors [side-
19 pandemic. VEC does bar].) VEC had over 250 separations of full-time staff, many of which occurred in
not currently track turno-
VEC’s UI-related functions, including adjudication.
ver rates for third-party
contractors, but many Several key factors contributed to high VEC staff turnover during COVID-19, includ-
contractors in adjudica-
ing increased staff workloads, health concerns, and staff salaries. Agency-wide, VEC
tion and call center roles
have left after several staff worked over 191,000 overtime hours between March and December 2020 to keep
months, according to up with unprecedented UI claims volume. This was equivalent to 92 full-time staff and
multiple VEC staff. was a 1,600 percent increase from staff ’s 2019 overtime levels. Many staff were re-
quired to work in-person, risking COVID-19 exposure and infection. Dissatisfaction
with pay also factored into VEC staff turnover; nearly half of VEC staff who re-
JLARC surveyed VEC sponded to JLARC’s survey (sidebar) disagreed their salaries were reasonable, and over
staff in April 2021 about
their perceptions of their
half of former VEC staff who recently left VEC and completed an exit survey cited
job, VEC as an employer, salary as a reason for leaving. An analysis of VEC staff salaries compared with salaries
IT systems and security, at other Virginia state agencies and private-sector entities confirmed that VEC staff
and agency leadership. salaries for several key positions are low; specifically, adjudication staff, call center staff,
JLARC received responses
from 789 VEC staff, for an
and appeals staff. (See Appendix D for more information on JLARC staff ’s salary
overall response rate of analysis.)
70 percent. The survey in-
cluded both full-time and
Despite high levels of staff vacancies and turnover, most VEC staff are generally sat-
part-time agency staff. isfied working at VEC. Three-quarters of VEC staff who responded to a JLARC sur-
Contract staff were not vey indicated they were satisfied with VEC as an employer. The level of satisfaction
included in the survey. was slightly lower for staff in UI-related roles (67 percent) but still represented a ma-
(See Appendix B for more
information.)
jority of UI staff. VEC staff ’s average tenure was seven years in September 2021.
VEC has too few supervisors to effectively manage staff in key UI
roles
The number of supervisors an agency should have largely depends on the type of role
they are overseeing; however, experts generally agree that supervisors should have no
more than eight direct reports for skilled functions (e.g., program administration, IT
programming) and no more than 15 direct reports for task-based functions (e.g., facil-
ities maintenance, administrative support).
VEC has a small number of supervisory staff in several UI functions. Twenty-seven
of VEC’s 171 supervisors have 20 or more full-time staff reporting directly to them,
with several having over 40 full-time direct staff reports. The largest supervisor-to-
staff ratios are in VEC’s call centers, where five supervisors each oversee between 40
and 60 full-time staff. Supervisor-to-staff ratios are also relatively large for other key
UI functions, with one appeals supervisor overseeing 41 full-time staff, one fraud in-
vestigations supervisor overseeing 32 full-time staff, and one adjudication supervisor
overseeing 29 full-time staff. VEC’s number of supervisory staff is insufficient in part
because supervisory roles did not increase at the same rate as new positions created
and filled during the pandemic. However, important UI functions including call
24
Chapter 3: VEC’s Resources and Management
centers and adjudication centers, had an insufficient number of supervisory staff
before the pandemic, according to VEC staff.
VEC’s insufficient number of supervisory staff has made it difficult for the agency to
effectively monitor UI staff performance. For example, seven local call center super-
visors were responsible for managing over 300 VEC call center representatives as of
September 2021. These supervisors were not able to actively monitor call quality for
all of their staff, especially because call monitoring had to be done in person given
VEC’s lack of quality monitoring software. During COVID-19, at least five call center
supervisors were pulled away from their regular roles temporarily to help recruit and
train new call center staff, further exacerbating the supervisory staff shortage.
To ensure VEC supervisors are able to sufficiently oversee all staff who report to
VEC’s commissioner
them, VEC should establish goals for the ratio of supervisory staff to direct reports, receives a monthly
particularly for key functions including call centers, adjudication and appeals sections, performance report that
and the fraud investigations section. Supervisory staff ratio goals may vary based on includes descriptive infor-
mation about Virginia’s
the nature of different UI functions. Agency leadership should regularly monitor the
labor force, UI benefit re-
ratio of supervisory staff to direct reports and include the results in the monthly com- cipients and claims, UI
missioner’s performance report (sidebar). This would help VEC leadership identify determinations and ap-
areas with too few supervisory staff and prompt the agency to hire additional super- peals, and various tax and
visors where needed. VEC should take steps as soon as possible to either increase the financial metrics. The re-
port does not include in-
number of supervisors in its call centers, adjudication and appeals sections, and fraud formation about UI claim
investigations section, or improve supervisors’ effectiveness where increasing the quality or timeliness or
number of supervisors is not practicable. call center responsive-
ness.
RECOMMENDATION 2
The Virginia Employment Commission should establish goals for the ratio of super-
visory staff to direct reports, particularly for key functions including call centers, adju-
dication and appeals centers, and fraud investigations. Agency leadership should reg-
ularly monitor the ratio of supervisory staff to direct reports relative to the goals, and
report performance in meeting these goals in the monthly commissioner’s perfor-
mance report.
State hiring policies should be reviewed and revised to help agencies
meet staffing needs during emergencies
State law, through the Virginia Personnel Act, requires state agencies to use a compet-
itive hiring process to fill vacant state employee positions. The Department of Human
Resource Management (DHRM) has established the components of a competitive hir-
ing process for agencies to follow. For example, agencies must interview individuals
being considered for classified positions before they are hired. Competitive hiring re-
quirements apply to all full-time state classified positions, meaning that wage positions
cannot be converted to full-time positions without competitive hiring.
25
Chapter 3: VEC’s Resources and Management
The governor issued two executive orders in 2019 recognizing that exceptions to tra-
ditional, competitive hiring may need to be made during staffing emergencies. Specif-
ically, executive order 41 (2019) created the adjunct emergency workforce and execu-
tive order 42 (2019) created the Virginia emergency support team. These initiatives
allow state employees to support other agencies during emergencies and assist with
understaffed functions. To date, temporary staffing reassignments through these pro-
grams have largely been used on a voluntary basis and were not used to assist VEC.
VEC did try to obtain hiring flexibilities and staffing assistance from other agencies
but was mostly unsuccessful. VEC leadership requested an exemption from state hir-
ing requirements from cabinet officials in April 2020, but this request was not granted.
Consequently, VEC could not simply convert existing wage staff to full-time staff and
instead had to have wage staff apply for full-time positions. This hindered VEC’s abil-
ity to quickly increase call center staff in particular because VEC had many wage staff
in call center positions. (DHRM did allow VEC to streamline parts of the competitive
hiring process to make hiring as efficient as possible; for example, hiring panels were
not required in all cases.) VEC leadership also worked with DHRM to request that
other state agency staff be temporarily assigned to VEC (including former VEC staff),
but no staff from other state agencies were willing to work at VEC, and executive
branch officials did not require them to do so. Moreover, VEC requested assistance
from the National Guard to help process UI claims and adjudications, but the request
was not approved due to the federal government’s limitations on the use of the Na-
tional Guard.
DHRM, VEC, and cabinet officials met to discuss several potential strategies to help
The governor issued
Executive Directive 16 in VEC fill needed staffing positions in May 2021 to respond to an executive directive
May 2021 directing VEC issued by the governor (sidebar). One strategy discussed was the creation of 100 pro-
to “continue to hire staff” gram support positions that would be filled by employees from different state agencies.
and “coordinate with the
Employees would be assigned to VEC each week in groups of 20 staff. Another strat-
Virginia Department of
Human Resource Man- egy was to direct agencies with investigator positions to make those staff available to
agement to identify em- support VEC. Both of these strategies and several others were not pursued, though
ployees across Virginia’s some would have provided VEC with additional staff resources during COVID-19.
state agencies who can
temporarily serve as VEC VEC would likely have been able to increase staffing levels more quickly during
adjudicators, program COVID-19 if it had received temporary help from other state agencies or been fully
support and administra-
exempt from competitive hiring requirements when converting wage positions to full-
tive staff, or fraud investi-
gators.” time employees. However, implementation of these strategies had not fully been
planned, and their complexities and possible unintentional consequences were a deter-
rent to using them. To ensure that state agencies can maximize the use of their own
staff and staff in other agencies during emergencies that require rapid staffing in-
creases, DHRM staff should work with human resources staff in other state agencies
to propose policies (including legislation) and procedures for:
26
Chapter 3: VEC’s Resources and Management
granting agencies exemptions from certain competitive hiring requirements
during emergencies, including the circumstances under which exemptions
would be granted and the guidelines that would be needed to ensure agen-
cies make prudent hiring decisions;
requiring selected state agency staff to temporarily support other agencies
in need of staffing assistance during emergencies, including through exist-
ing state initiatives like the adjunct emergency workforce; and
providing necessary funding to cover the costs of these actions, particu-
larly converting part-time staff positions to full-time staff positions and
temporarily assigning staff from selected agencies to agencies in need of
staffing assistance.
RECOMMENDATION 3
The General Assembly may wish to consider including language in the Appropriation
Act requiring the Virginia Department of Human Resource Management to lead a
multi-agency workgroup, comprising agency leaders and human resources staff from
state agencies most likely to be in need of staffing assistance during emergencies, to
examine the feasibility of and policies and procedures necessary for (i) granting agen-
cies exemptions from certain competitive hiring requirements during emergencies; (ii)
requiring selected state agency staff to temporarily support other agencies in need of
staffing assistance during emergencies through existing or new state initiatives; and (iii)
providing necessary funding to cover the associated costs. The workgroup should pro-
pose criteria to determine under what circumstances these emergency hiring practices
may be invoked and a process for invoking this authority as well as terminating it. The
workgroup should submit its findings to the secretary of administration, the chair of
the House Appropriations Committee, and the chair of the Senate Finance and Ap-
propriations Committee by June 30, 2022.
VEC’s UI IT modernization project has been
significantly delayed
Continued reliance on an outdated UI IT system to perform one of the agency’s core
functions was, along with inadequate staffing, a key reason for VEC’s inability to pro-
cess UI claims in a timely, accurate, and secure manner. Particularly during the
COVID-19 pandemic, VEC’s legacy system was a key root cause of VEC’s inability to
more successfully manage the unprecedented influx of UI claims, interact effectively
with customers, and detect and prevent potential fraud.
VEC has been in the process of modernizing its UI IT system for 12 years and is eight
years behind schedule. The project was originally scheduled to be completed by May
2013 but has faced multiple delays. The final phase of the project (benefits system) is
currently expected to go live in November 2021 with the project close-out planned for
June 2022 (Figure 3-2).
27
Chapter 3: VEC’s Resources and Management
FIGURE 3-2
UI modernization will have partial go-live in November 2021, and conclude in
June 2022, more than 8 years past original deadline
SOURCE: VEC project management documents and interviews with VEC staff.
NOTE: Figure does not include one year “warranty period” following project close-out. HCL is responsible for provid-
ing continued support to VEC to maintain the system until June 2023, or one year after the project close-out.
Insufficient staffing, poor contract management, and data conversion
problems contributed to project delays
IV&V reviews of VEC’s UI
Neither VEC nor HCL dedicated enough staff time to the UI modernization project,
modernization project which contributed to delays. Staffing was cited as a key risk in a November 2017 inde-
conducted in 2010, 2012, pendent verification and validation (IV&V) report (sidebar). The number of staff as-
2013, 2014, and 2017 signed to the project has decreased over time, from 79 in October 2013 to 37 in July
found that both VEC and
2021. This decreased number of staff has been insufficient to write and test programs
HCL faced challenges
with staffing the project. for the new system, as many of these staff have additional responsibilities outside of
The 2017 report stated, the project. Similarly, VEC currently has one lead project manager and one contract
“both VEC and HCL have manager dedicated to the project, and both have other VEC responsibilities. HCL
lost staff members over
staffing levels have also been insufficient, and the contractor has experienced high
the course of the project
resulting in a loss of in- levels of turnover. HCL initially assigned 25 FTEs to the project, but indicated as many
stitutional and project as 40 FTEs worked on the project at one point. However, there were only 10 core
knowledge.” Reviews HCL staff assigned to the project as of July 2021. Turnover in HCL staff caused
also found that VEC did
further delays to the project, as the new staff lacked institutional knowledge or exper-
not clearly specify its
contract requirements. tise, according to VEC and the IV&V reports.
VEC has not managed the project contract effectively and has not clearly documented
contractual requirements. For example, a recent contractual change to the UI benefits
system included only high-level milestones, did not clearly define specific functions to
be included, and included incorrect dates. The document outlining the contract
changes stated the UI benefits system would be deployed in April 2022, rather than
VEC’s stated go-live date in October 2021. Concerns about documenting require-
ments were cited in multiple third-party IV&V reports as far back as 2010. For exam-
ple, the 2010 IV&V report recommended that VEC “consider fully documenting com-
plete detailed requirements,” and the 2014 report recommended that VEC
28
Chapter 3: VEC’s Resources and Management
"documentation tasks and resources at a more granular level." VEC also did not
formally document performance failures or use available contractual tools, such as
penalties or cure letters, to address prolonged delays and system defects. In March
2020, VEC removed a per-formance bond from their contract that would have
required HCL to pay 25 percent of the total contract value for poor performance.
While ineffective contract manage-ment may not have had direct or even significant
impacts on the pace or quality of the project, VEC missed opportunities to hold the
vendor financially accountable for poor performance, to establish clear expectations
for future high quality performance, and to convey VEC’s intent to enforce the
contract’s terms.
VEC signed a change
The COVID-19 pandemic also delayed the UI modernization project. Although request with HCL in May
the project was near completion in early 2020, VEC leadership determined that 2021 to expand the
converting to a new system at the start of the pandemic was too risky and paused the modernized UI benefits
system to include new
project for one year between May 2020 and May 2021 to focus on UI claims
federal CARES Act pro-
backlogs. HCL con-tinued some work activities (e.g., running stress tests and grams. The request
preparing to add new federal UI programs), but minimal progress was made on added 10,000 hours of
developing the new system during this time. UI program changes during COVID-19 work for HCL to com-
plete the CARES Act pro-
required VEC to develop additional system functions that further strained the
grams as well as incor-
project timeline. For example, VEC had to build eight new federal programs (e.g., porate additional
Pandemic Unemployment Assistance) into the old benefits system on short notice, functions into the system
which required additional hours of programming (sidebar). (e.g., identity verifica-
tion).
VEC’s UI modernization project has taken significantly longer than other states.
A large UI modernization project should typically take between three and five years
to complete, according to experts. Several other states completed their UI IT
moderni-zation projects in five years or less. Utah, a state that modernized its IT
system in house, completed its project in five years. Other states that used third-
party vendors, including Minnesota, Pennsylvania, Washington, and Arkansas,
completed their pro-jects in three years or less. Arkansas had the shortest project
duration (two years) but modernized different portions of its system concurrently.
However, many states’ UI IT modernization projects have exceeded their budget
or timeline, and some failed altogether.
Project delays required VEC to continue to rely on manual processes
and made it difficult to process influx of COVID claims
Delays in the UI modernization project have had substantial negative impacts
on VEC’s UI processes and staff. Claimants have been largely reliant on physical mail
and VEC’s call center to complete UI claims. VEC staff have had to manually
process claims and build workarounds to overcome system limitations. VEC staff
have also had to dedicate a significant amount of staff time to help design and test
functions of the new system, which detracted from their ability to focus on their
primary responsi-bilities at VEC.
Additional information and recommendations related to VEC’s ongoing UI modern-
ization efforts are included in Chapter 6 of this report.
29
Chapter 3: VEC’s Resources and Management
VEC has not actively monitored key areas of UI
performance or adequately planned for recessions
Large customer-facing programs like UI require regular performance monitoring and
quality improvement by agency leadership to ensure effective operations. DOL guid-
ance emphasizes the importance of regularly monitoring UI performance to identify
areas of underperformance and needed operational changes. Performance monitoring
is most effective when agencies establish clear goals for acceptable performance levels
and regularly track agency performance relative to those goals. When issues are iden-
tified, agency management must take action to address deficiencies to ensure that per-
formance is improved over time.
VEC has no performance expectations for UI call center or fraud
investigations, despite their importance for effectively responding to
escalating unemployment levels
VEC leadership has not established performance goals for several important aspects
of the UI program. Currently, this is a significant concern for VEC’s call centers, which
have been a major obstacle and source of frustration for the public and legislators
during the COVID-19 pandemic. DOL does not have metrics or standards related to
UI call centers, so states must establish their own. This is not unusual for federal pro-
grams; for example, the Department of Medical Assistance Services sets performance
measures for its Medicaid call center even though Medicaid is a federal program. VEC
measures certain aspects of call center performance, including the percentage of calls
answered and average call wait time. However, no performance expectations have been
set. Without clear call center performance goals, underperformance cannot be
promptly identified, documented, and corrected. For example, VEC leadership did not
make necessary adjustments to call center systems or staffing to improve performance
until many months after the start of the pandemic.
Establishing call center performance goals is a common industry practice for all types
of call centers. For example, Oregon’s Employment Department set a goal for its UI
call center to answer 90 percent of calls in under five minutes in December 2021.
Several Virginia state agencies with call centers also have goals, including the Depart-
ment of Medical Assistance Services (answer 90 percent of calls in 90 seconds) and
the Virginia Department of Taxation (answer 88 percent of calls overall).
VEC also has not established internal performance goals for timely UI fraud investi-
gations. Prompt fraud investigations are crucial to minimize the amount of trust fund
money lost from making incorrect payments and to minimize the time that eligible
individuals must wait to receive benefits. DOL does not have metrics or standards
related to the timeliness of fraud investigations, and VEC staff do not routinely track
the duration of fraud investigations. This lack of information limits VEC leadership’s
awareness of and ability to address slow fraud investigations. Fraud investigation
time-liness has become particularly important during COVID-19 because of the
30
Chapter 3: VEC’s Resources and Management
substantial increase in cases flagged for potential fraud and VEC’s backlog of 136,000
potentially fraudulent claims awaiting investigation.
VEC should establish clear performance goals for key UI operations that currently
lack goals and regularly monitor agency performance relative to these goals. These
areas should include, but not be limited to, call center timeliness and quality and UI
fraud investigation timeliness. These goals and VEC’s progress toward meeting them
should be regularly reported to the VEC commissioner as part of the existing monthly
commissioner’s performance report.
RECOMMENDATION 4
The Virginia Employment Commission should establish meaningful performance
goals for its call center operations and fraud investigations, and ensure it has goals for
effectively measuring performance in all other aspects of unemployment insurance
operations. Agency leadership should regularly monitor performance relative to the
goals and report goals and performance in the monthly commissioner’s performance
report.
VEC has not systematically addressed findings from DOL-required UI
quality assurance audits
VEC management has not systematically tracked or addressed audit findings from
VEC’s quality assurance
VEC’s UI quality assurance unit. As described in Chapter 1, VEC leadership regularly unit conducts federally
receives audit findings from two VEC units: internal audit and quality assurance (side- required periodic reviews
bar). VEC maintains a centralized repository of the internal audit unit’s findings and of randomly sampled UI
activities, including the
the status of its recommendations, but no equivalent repository exists for the quality
accuracy of benefit eligi-
assurance unit’s findings and recommendations. As a result, VEC leadership has not bility decisions and em-
systematically tracked or addressed all deficiencies related to UI. For example, in 2017 ployer tax records. It also
the quality assurance unit found that VEC was not fully verifying whether certain identifies incorrect pay-
ments through cross-
claimants had returned to work before stopping their payments, which resulted in
matches of all benefit
some claimants being incorrectly denied benefits. Quality assurance staff recom- claims and assesses the
mended that VEC update agency procedures to include additional eligibility checks accuracy of certain data
before payments are stopped, including confirming claimants’ work status with em- reported to the U.S. DOL.
ployers. This recommendation was not implemented by VEC leadership.
The quality assurance unit’s position in VEC’s organizational structure partially ex-
plains why its audit findings are not prioritized by agency leadership. VEC’s quality
assurance director reports to the UI assistant director, who reports to the UI director,
who reports to the UI deputy commissioner. Federal regulations require the organiza-
tional location of a quality assurance unit to “maximize its objectivity” and be “inde-
pendent” of units subject to its audits. Placement within the UI division limits the
visibility of the quality assurance unit’s audit findings and VEC’s follow-through on its
recommendations, according to staff.
31
Chapter 3: VEC’s Resources and Management
The quality assurance unit should be removed from the UI division and should report
directly to VEC’s commissioner to better ensure audit findings are independent and
are known to VEC leadership. For example, the District of Columbia’s Bureau of
Compliance and Independent Auditing (which includes the group equivalent to VEC’s
quality assurance unit) reports directly to the UI agency head.
In addition, the findings and recommendations produced by the quality assurance unit
should be formally compiled in a central repository, and the status of the unit’s findings
and recommendations should be routinely updated and reported to VEC leadership.
VEC could use the existing central repository for internal audit recommendations for
this purpose.
RECOMMENDATION 5
The Virginia Employment Commission (VEC) should transfer the unemployment in-
surance quality assurance unit from the unemployment insurance division and have it
report directly to the VEC commissioner.
RECOMMENDATION 6
The Virginia Employment Commission (VEC) should require its unemployment in-
surance quality assurance unit to compile its findings and recommendations in a central
repository and routinely update VEC leadership on their status.
VEC has not effectively planned for periods of high unemployment
State agencies like VEC that experience large increases in workflows and provide time-
The Federal Emergency
Management Agency
sensitive services need a plan to ensure effective operations during emergencies (some-
publishes guidance on re- times called a “resiliency plan”). Resiliency plans can improve the speed with which
siliency planning. Portions agencies are able to increase staff and make other operational adjustments in response
of the guidance are rele- to economic recessions. The Federal Emergency Management Agency (FEMA) rec-
vant to state UI programs.
For example, guidance di-
ommends regular resiliency planning by government agencies and provides guidance
rects entities to plan how relevant to state UI agencies (sidebar). Virginia’s Department of Emergency Manage-
mission-critical services ment also recommends resiliency planning and emphasizes its importance for ensuring
would continue to be ad- the continuity of operations during emergencies. Strong resiliency planning includes
ministered during differ-
identifying potential threats, predicting their impact on agency operations, defining
ent types of emergencies.
Ohio used FEMA guid- highest-priority agency activities, and considering steps to mitigate disruption to those
ance to develop a UI re- activities.
siliency plan for staffing.
VEC has completed most mandatory agency plans, but these plans did not include
actions needed for effective and efficient operations during periods of high UI claims
volume. As required of all Virginia state agencies, VEC submits a continuity of oper-
ations plan to the Department of General Services. VEC’s most recent plan covers
leadership succession and primarily addresses incidents that disrupt operations but do
not increase program demand (e.g., closing local offices). In its most recent mandatory
biennial strategic plan submitted to the Department of Planning and Budget, VEC
acknowledges the risks of economic recessions to agency operations and notes the
32
Chapter 3: VEC’s Resources and Management
importance of having staff augmentation contracts, but VEC did not have pre-nego-
tiated staff augmentation contracts prior to COVID-19. None of VEC’s plans (side- Other plans required of
bar) outline specific strategies or steps VEC will take to modify staffing levels or pro- VEC include: a workforce
programs plan (coordi-
cesses in response to incidents that increase UI program demand. nated with other state
VEC’s existing plans also do not outline a strategy for clearly communicating key pro- agencies) that is federally
required; a state emer-
gram changes to customers. Insufficient communication caused widespread claimant gency plan as required by
frustration and confusion during COVID-19. UI program eligibility rules and benefits executive order; and a bi-
changed frequently during COVID-19. Recognizing the potential for confusion, DOL ennial IT strategic plan
advised states to provide “current and accurate” messaging to the public about UI submitted to VITA.
programs. However, VEC did not provide clear and timely notice about UI program
changes. For example, federal law required claimants to be denied regular state UI
benefits before they could qualify for Pandemic Unemployment Assistance (PUA), but
VEC did not update its denial letters to explain this requirement. Many claimants who
were denied regular state UI benefits, and who could have qualified for PUA, pursued
appeals or gave up.
VEC would have been better prepared for COVID-19 if it had developed a compre-
hensive resiliency plan. VEC’s resiliency plan should describe agency actions that
should be taken under various economic scenarios and levels of demand for UI ben-
efits, including:
how existing staff would be re-allocated to high-priority functions (e.g.,
shifting existing staff to claims processing);
how the hiring process would be streamlined to fill key vacant positions
(e.g. adjudication and appeals staff);
how VEC’s policies and procedures would be modified in response to high
demands on its services;
a strategy for communicating important UI information to VEC staff, the
public, and the General Assembly; and
other tactical actions to be taken to ensure the continuity of UI claims pro-
cessing and customer service.
VEC should incorporate its resiliency plan for the UI program into an existing plan,
such as the agency’s biennial strategic plan or annual continuity of operations plan.
(The strategic plan template already has a section for documenting agency risks where
VEC could include a resiliency plan. The continuity of operations plan template covers
operational changes but is primarily geared towards declared emergencies.)
Ohio and Oregon have implemented best practices for UI resiliency planning. Ohio’s
UI agency established a staffing plan for varying levels of UI workload volume. For
example, the plan covers several scenarios, including normal seasonal upswings
prompting mandatory staff overtime and a major recession prompting use of third-
party staff augmentation contracts and increased local UI assistance services. Similarly,
Oregon has a plan that describes how it will change public communications about UI
33
Chapter 3: VEC’s Resources and Management
during economic recessions. Specifically, the plan indicates which staff will be respon-
sible for different types of communications, and it includes several communications
goals, such as clearly conveying UI program and policy changes.
RECOMMENDATION 7
The General Assembly may wish to consider amending § 60.2-111 of the Code of
Virginia to require the Virginia Employment Commission to develop and maintain an
unemployment insurance resiliency plan that describes the specific actions the agency
would take, depending on the level of increase in unemployment insurance (UI) claims,
to address staffing, communications and other relevant aspects of operations to ensure
continued efficient and effective administration of the UI program.
VEC management did not keep key staff sufficiently
informed during the pandemic
VEC’s internal communications hindered staff ’s awareness of important program de-
velopments during the pandemic. Staff with responsibility for communicating with
“ Claimants and the news claimants and employers especially need to understand policy changes to convey accu-
media would hear about rate information. At VEC, such staff include public relations personnel, legislative li-
problems and updates aisons, traditional and social media staff, customer service representatives, the web-
before it was announced
master, and staff in local workforce offices.
to the local office,
” During the pandemic, important VEC executive decisions were not shared internally
in a timely or comprehensive manner, so staff responsible for interfacing with the
“There needs to be a public were not always able to provide helpful or accurate answers (sidebar). Internal
more coordinated effort
to combine the resources
communications were particularly challenging when information had to be shared
at VEC as far as across divisions or among the central and local offices. Several VEC staff described
communication… only learning of program changes from outside sources. Staff attribute insufficient
Everything has gotten so communications to VEC leadership having an ad hoc and sometimes limited approach
disorganized with the
to sharing information about key program and process changes.
influx of claims.…We
need to have a VEC should improve the timeliness, accuracy, and reach of communications to VEC
communications
staff. Specifically, VEC’s commissioner should establish clear processes to ensure that
strategy that is followed
and that we adhere to, important programmatic changes are relayed to all relevant staff. This will require con-
” sideration of effective methods and timelines to share management decisions and im-
– VEC staff portant external developments (e.g., new federal guidance) with staff. Priority should
be given to ensuring that accurate and clear information reaches staff in local offices
and line-level staff interacting with customers and the media in a timely manner.
RECOMMENDATION 8
The Virginia Employment Commission (VEC) commissioner should ensure that all
key policy or other significant changes that could affect the public, VEC, or VEC staff
are communicated clearly and expeditiously to all VEC staff, especially those in lead-
ership or positions communicating with the public.
34
Chapter 3: VEC’s Resources and Management
VEC may have responded more effectively to the
pandemic with stronger administration oversight
and assistance and different executive decisions
Demand for UI benefits can increase quickly during economic recessions and emer-
gencies that adversely affect employment. Prompt executive decisions on staffing lev-
els, claims prioritization, and other process changes are needed to ensure that VEC
awards benefits to eligible individuals accurately and in a timely manner.
VEC and the administration made changes to the UI program to better respond to the
increase in demand for UI benefits during the pandemic. VEC leadership also ap-
peared to appropriately prioritize the health and safety of its own staff and provide
effective support to staff who faced exceedingly difficult personal and professional
demands during the pandemic. However, some of the most impactful actions that
would have helped VEC respond to the surge in UI claims were delayed over a year
into the pandemic, as described in this chapter and chapters 4, 5, and 6.
VEC leadership could not have fully understood the magnitude and duration of
COVID-19 or its impacts at the start of the pandemic, and decisions were made using
the best available information. However, taking certain actions earlier in the pan-
demic—especially those related to staffing increases and IT system improvements—
may have helped VEC respond more effectively to the increased UI claims volume
and program challenges.
Future administrations need to ensure VEC accountability and provide
assistance when able, especially during economic downturns
Future administrations need to provide additional oversight and assistance to VEC
during severe economic downturns or other relevant emergencies. Each administra-
tion is responsible for the effective performance of its agencies, including VEC. The
Code of Virginia grants the governor responsibility “for the formulation and admin-
istration” of policy. The Code of Virginia also gives cabinet secretaries the authority
to “hold agency heads accountable for their administrative, fiscal and program ac-
tions.”
Given VEC’s critical role during severe increases in unemployment—and the opera-
tional challenges that arise from them—future secretaries of labor must effectively
fulfill their role to ensure the agency is performing adequately. Effective, regular, and
proactive oversight would help to ensure that significant performance issues are
quickly identified and plans developed to address them.
In addition to providing oversight, future secretaries of labor need to identify ways
they can use the power and access of their office to assist VEC during challenging
periods. The secretary is in a position, as part of the governor’s collective cabinet, to
identify resources or solutions for VEC that have been used successfully in other func-
tions of the executive branch. VEC could have benefited from assistance with hiring
35
Chapter 3: VEC’s Resources and Management
staff and better availed itself of expertise and resources in other areas of state gov-
ernment.
Existing legislative commission could be tasked with monitoring
VEC’s post-pandemic performance
In 2021, JLARC staff have been reviewing VEC’s performance through its authority
as the General Assembly’s oversight agency. Information about VEC’s performance
was presented to JLARC at the May, July, September, and finally, the November meet-
ings. JLARC began making recommendations to VEC at the September meeting and
prior to that provided VEC leadership with insights and observations intended to en-
courage improvements. This final report includes 40 recommendations that will help
VEC improve its performance issues. As part of its existing recommendation tracking
process, JLARC staff will periodically ask VEC to report progress in implementing
recommendations and provide status reports to JLARC.
Moving forward, though, the volume and complexity of the actions that VEC needs
Appendix F of this report
describes approaches to take to improve its operation of the state’s UI program, along with the still-unfold-
taken by seven other ing effects of the pandemic, necessitate continued oversight. Virginia has a legislative
states to provide either Commission on Unemployment Compensation that is tasked with monitoring the
legislative or executive
state’s UI program (sidebar). State law directs the commission to meet at least twice
branch oversight for their
Unemployment Insurance annually and gives its members the authority to evaluate the impacts of UI legislation,
programs. All seven states examine ways to enhance the effectiveness of Virginia’s UI system, monitor the state
include legislators in these UI trust fund, and annually report findings to the General Assembly and governor.
oversight structures.
The General Assembly should create a temporary, subcommittee of this commission
to monitor VEC’s management of the UI program as it continues to address the chal-
lenges created by the COVID-19 pandemic. The subcommittee should be responsible
for monitoring VEC’s:
key performance metrics related to UI backlogs;
efforts to identify, prevent, and recover incorrect UI benefits payments, in-
cluding fraudulent payments;
project to modernize the UI IT system and subsequent efforts to improve
functionality;
expenditure of state funds appropriated for UI administration; and
implementation of JLARC recommendations.
The subcommittee should meet at least once quarterly through 2025. Membership
should include employee stakeholder representatives, such as a representative from the
Legal Aid Justice Center or the Southern Poverty Law Center, and employer repre-
sentatives, such as a representative from the Virginia Chamber of Commerce. The
subcommittee could also include a member of the Commission on Unemployment
Compensation and one member each from four legislative committees: the House Ap-
propriations Committee, the Senate Finance and Appropriations Committee, the
36
Chapter 3: VEC’s Resources and Management
House Labor and Commerce Committee, and the Senate Commerce and Labor Com-
mittee.
RECOMMENDATION 9
The General Assembly may wish to consider including language in the Appropriation
Act or amending § 30-222 of the Code of Virginia to create a subcommittee of the
Commission on Unemployment Compensation to monitor the Virginia Employment
Commission’s: (1) key performance metrics related to UI backlogs; (2) efforts to iden-
tify, prevent, and recover incorrect UI benefits payments, including fraudulent pay-
ments; (3) project to modernize the UI IT system; (4) expenditure of state funds ap-
propriated for UI administration; and (5) implementation of JLARC
recommendations. The subcommittee should include individuals who can represent
the interests and experiences of claimants and employers. The subcommittee could
include members of the following General Assembly committees: Commission on Un-
employment Compensation, House Appropriations, Senate Finance and Appropria-
tions, House Labor and Commerce, and Senate Commerce and Labor. The subcom-
mittee should meet at least once quarterly and sunset on June 30, 2025.
37
Chapter 3: VEC’s Resources and Management
38
Unemployment Insurance Claims and
4 Appeals Process
The goal of the federal unemployment insurance (UI) system is to help stabilize the
economy during times of economic hardship by providing temporary financial assis-
tance to individuals who lost work through no fault of their own. State workforce
agencies, like the Virginia Employment Commission (VEC) are responsible for admin-
istering UI benefits directly to claimants. The majority of VEC’s resources are dedi-
cated to the UI program. Federal and state laws and regulations and guidance from the
U.S. Department of Labor (DOL) establish requirements states must meet for pro-
cessing UI claims and issuing benefit payments, but states have flexibility in how they
operationalize those requirements.
Federal law requires states to provide UI benefits to eligible claimants as quickly as ad-
ministratively feasible. To fulfill this requirement, VEC should clearly explain the UI
program so that unemployed individuals are aware of their potential eligibility for ben-
efits; make the application process as simple as possible to facilitate speedy and accu-
rate applications for benefits; expediently and thoroughly review claims and make ap-
propriate decisions regarding eligibility; and issue benefit payments as quickly as
possible. DOL has established performance standards for several parts of the UI
claims process to assess whether state workforce agencies like VEC meet expectations.
UI claims process includes several eligibility
decisions and grew more complex during COVID-19
Claims for UI benefits are subject to a multi-step review process. Claimants file their
initial UI claims online or by phone through VEC’s customer contact centers (Figure
4-1). VEC staff process the application and make two determinations—a monetary
eligibility determination and a separation determination—based on wage records and
information that claimants and employers provide. Claimants who meet criteria for
both determinations are deemed eligible for UI benefits; however, they must file
weekly UI claims and continue to meet weekly eligibility criteria to receive UI benefit
payments.
At any point during the initial or weekly claims process, VEC staff may detect an
“issue” concerning the claimant’s eligibility. Issues are flagged for further review
through VEC’s adjudication process. Common issues requiring adjudication include
when VEC must determine if a person was terminated for misconduct rather than laid
off, if a person was physically able and available to work during a certain week, or if a
person refused a suitable job offer. After investigating the issue, VEC staff make a
determination regarding whether the claimant is eligible to receive UI benefits.
39
FIGURE 4-1
VEC’s UI claims process involves multiple steps and determinations of eligibility for UI benefits
SOURCE: JLARC analysis of VEC external and internal documents and interviews with VEC staff.
NOTE: Challenges to monetary determinations are currently addressed through appeals or redeterminations by VEC’s monetary unit.
40
Claimants found ineligible for UI benefits through this process may be required to
repay any UI benefits collected prior to the determination. Individuals who disagree
with VEC’s claims decisions have the right to appeal determinations in a two-step
process.
Several temporary federal UI programs were created during the pandemic that con-
tributed to claimants’ confusion and VEC’s workload. Most federal programs required
claimants to complete an additional application to demonstrate their eligibility for the
program. For example, claimants were required to demonstrate they had exhausted
traditional state UI benefits before they could receive additional weeks of benefits
under the Pandemic Emergency Unemployment Compensation (PEUC) program. For
the Pandemic Unemployment Assistance (PUA) program, claimants first had to apply
for regular UI benefits, receive a denial, and then file a separate PUA application. (See
Chapter 2 for additional information about federal UI programs.)
VEC’s antiquated IT system, existing staff shortages, and inefficient workflows made
the agency unprepared for the surge in claims it received during the pandemic. These
problems created backlogs in each step of the claims processing during the pan-
demic—claims intake, adjudication of eligibility issues, and appeals. In addition, the
complexity of the UI process made it difficult to increase and train staff quickly to
help address backlogs in any of these areas. UI processes are inter-related; therefore,
delays and quality issues with one step in the process create challenges for other steps
in the process.
VEC has not adequately explained UI application
and eligibility requirements
While most unemployed people are aware of the UI program (sidebar), many have
difficulty understanding how the UI program works and how to file a claim. VEC staff, The Census Bureau
collects data on UI
employer representatives, legal aid clinic attorneys, and unemployed individuals them-
awareness through a
selves have all reported that the UI claims process is difficult to understand and navi- supplement to the
gate for those attempting to access benefits. Many Virginians do not understand the Current Population
UI program’s “able and available to work” eligibility criterion, which requires that Survey. The supplement
was sent to unemployed
claimants be ready to work to qualify for UI. For example, claimants may report that
individuals who did not
they were both able and available to work in a given week, even if they were injured file for UI in 2018 and
and unable to report for any job offers they may have received. In addition, many found that only 7 per-
claimants do not understand how to complete VEC’s identity verification require- cent in Virginia did not
apply for UI due to lack
ments, which involves: creating an account with a third-party system; submitting doc-
of awareness. See Ap-
uments, photographs, and personal information; and consenting to share this infor- pendix B for more infor-
mation with VEC. If these claimants had received clear information about the “able mation.
and available to work” requirement and identity verification requirements, some of
VEC’s existing adjudication backlog and call volume tied to these issues could have
been avoided.
41
Chapter 4: Unemployment Insurance Claims and Appeals Process
“I get daily questions from Providing clear, thorough information about the UI program and its application re-
people about what it quirements would improve claimants’ understanding and ability to access benefits.
means to have an out-
standing issue on their
Currently, many VEC forms, notices, instructions, and guidelines are unclear and do
claim, why the issue is not emphasize the most important information. For example, after a claim is approved,
there, and how it can be VEC sends the claimant a letter that is intended to provide the information they need
resolved…Most people to begin receiving benefits. However, the letter is eight pages long, has sections written
do not know what UI
program they are on.
at or above a college reading level, and directs claimants to review excerpts from the
The packet from VEC Code of Virginia on VEC’s website. The most pertinent information, such as how to
tells them, but they may file a weekly claim, is near the end of the letter.
not necessarily read or
Other VEC documents are also unclear. VEC’s monetary determination letter includes
understand it.” an estimated benefit amount but does not clearly explain that agency staff have not
– VEC staff yet officially determined claimants’ eligibility. Therefore, claimants may presume they
will receive this amount even though their eligibility is subject to further review. In
VEC launched 22 auto-
addition, the denial letters claimants received for the traditional state UI program did
mated texting and not clearly articulate that claimants denied for traditional state UI may be eligible for
phone campaigns in PUA benefits. As a result, some claimants incorrectly believed that VEC had deemed
2020 and 2021 to direct them ineligible for all UI programs and filed appeals. This unnecessarily increased
specific claimants (e.g.,
those who had been de-
VEC’s appeals workload. While VEC attempted to reach out to claimants using auto-
nied from traditional UI mated texting and phone campaigns and also used third-party expertise to clarify some
but were eligible for website language (sidebars), it is unclear whether these efforts improved claimant un-
PUA) to VEC’s website or derstanding. Many claimants continued to report high levels of confusion and misun-
the online claims filing
page for more infor-
derstanding about the program and how to file a claim.
mation. Data indicates VEC should formally review the forms, notices, instructions, and guidelines it issues
messages were deliv-
ered, but it is unclear
to the public to identify opportunities to streamline and clarify their contents. VEC’s
how many claimants internal audit division should conduct this review with assistance from an external
read and understood the third party with UI expertise that is competitively procured (sidebar). As part of the
messages or took action review, VEC staff and customers (individual UI claimants and employers) should pro-
on their claims.
vide input on the specific topics and communications that cause the most confusion.
Examples of other states’ communications should be collected during the review and
VEC hired a third-party used to inform improvements to VEC’s communications. VEC should then revise rel-
vendor (Capital Results) evant communications to ensure greater understanding of the UI program, eligibility
in 2020 to make design
and language changes to
criteria, and the application process. New Jersey did this by creating infographics with
its website, but basic UI plain language aimed at helping claimants understand the difference between UI pro-
information is still diffi- grams (federal and state) and the state’s temporary disability and family leave insurance
cult to find and under- programs after receiving feedback about frequent confusion.
stand. For example,
claimants click through A near-term review and revision of all VEC UI communications would be difficult
four pages to find a because of VEC’s UI claim backlogs and limited staff resources. Therefore, in the near
detailed description of
eligibility criteria, and
term, VEC should prioritize revising documents and online resources that tell claim-
they file claims with little ants how to navigate the UI claims and appeals process (e.g., initial letter sent to claim-
to no explanation during ants outlining benefit rights and responsibilities) and notify claimants about the status
the process. or outcome of their claim (e.g., all determination and decision letters). (A prioritized
list of items in need of revision is included in Appendix G.) VEC staff should
42
Chapter 4: Unemployment Insurance Claims and Appeals Process
improve these communications as soon as possible. VEC should receive assistance
from a third-party contractor with relevant expertise, but VEC should not wait to
begin this effort until a third party is hired. Over the longer term, after VEC reduces
UI claims backlogs and its newly modernized UI IT system is fully implemented,
staff should develop a process for regularly reviewing and revising all guidance
documents and online re-sources.
RECOMMENDATION 10
The Virginia Employment Commission (VEC) should, as soon as possible, have staff
in its internal audit division review and revise documents and online resources to more
clearly describe and explain (i) eligibility criteria for Unemployment Insurance (UI), (ii)
how to navigate the UI claims and appeals process, and (iii) the status or outcome of
a claim. VEC should use examples from other states and input from VEC staff and
customers and should competitively procure a third party contractor with expertise in
UI and customer communications to assist with these efforts.
VEC should also develop several new tools to help claimants better understand UI
eligibility criteria, the claims process (including differences between UI programs), and
how to file UI claims. Several other states convey this information through helpful
online videos, simplified one-page summaries, and infographics. For example, Mary-
land, North Carolina, and Texas have videos and other promotional materials that
clearly explain the UI program, eligibility criteria, and the steps for filing a claim. New
Jersey has a series of infographics and visual one-page summaries that cover frequently
asked questions about the traditional state and new federal COVID-19 UI programs.
New Jersey also has an interactive tool that helps unemployed individuals understand
whether they may be eligible for UI, the program they may be eligible for, and the level
of benefits they could expect to receive. To date, VEC staff, working with a third party
contractor, have developed one video aimed at explaining UI eligibility and the basic
components of the claims process. The video, which has not been published on the
agency’s social media channels, does not explain in simple language terms that tend to
be the most confusing for claimants, such as the “able and available to work” eligibility
criterion.
RECOMMENDATION 11
The Virginia Employment Commission should develop (i) a series of instructional,
short videos designed to help claimants better understand their potential eligibility for
unemployment insurance, the steps of the application process, and how to file a claim
and (ii) an interactive, online eligibility tool that enables claimants to better understand
their potential eligibility and benefits under the program.
43
Chapter 4: Unemployment Insurance Claims and Appeals Process
UI claims intake has been significantly backlogged
and understaffed
VEC had a substantial backlog of initial UI claims awaiting intake from March 2020
to November 2020. The backlog grew from 179,000 claims (March) to a high of
716,000 claims (June) during this time period. VEC reported that they completely
cleared this backlog of initial claims in December 2020, but smaller backlogs accrued
throughout 2021. As of October 2021, VEC reported less than 500 backlogged initial
claims. Backlogs in initial claims intake caused some claimants to experience delays in
their benefit payments while VEC staff entered their claims into the system. These
backlogs, while large, represented a small percentage of the over 2.2 million initial
claims that VEC reported completing since March 2020.
Once claimants submit an application for UI benefits, VEC staff must conduct several
intake activities before eligibility decisions can be made, including issuing requests for
additional information. One key request for additional information is the separation
report, which is used to help verify claimants’ eligibility for UI benefits. Separation re-
ports are sent to claimants’ previous employers, who are asked to provide information
regarding the claimants’ previous wages and reasons for separation from employment.
Once returned by employers, VEC staff must review the report, enter information
into the claims system, and identify issues requiring further review. Claimants are able
to receive UI benefit payments while waiting for VEC staff to review employer sepa-
ration reports, but some claimants’ payments may be paused if review of the separa-
tion report finds potential eligibility issues that require adjudication. Claimants found
ineligible during the adjudication may be required to repay UI benefits previously re-
ceived.
VEC was still reviewing employer separation reports submitted for nearly 580,000 UI
claims as of August 2021. The oldest employer separation reports awaiting review
were approximately 12 months old.
VEC was slow to increase UI claims intake staff, allowing significant
backlogs to accrue
Backlogs in UI claims intake were largely caused by insufficient staffing levels. Prior to
the pandemic, VEC had only seven customer contact center staff members dedicated
to initial claims intake, which was insufficient to keep up with VEC’s workload during
the pandemic. Between March and June 2020, VEC received an average of 279,000
initial claims per month. In response, VEC increased the number of customer contact
center staff assigned to initial claims intake from seven to 55 mostly by reassigning
existing VEC staff to this function. However, staffing remained insufficient, and UI
claims backlogs quickly accrued (Figure 4-2). VEC did not hire contractors to assist
with initial claims intake until November 2020, well after large backlogs had accumu-
lated.
44
Chapter 4: Unemployment Insurance Claims and Appeals Process
FIGURE 4-2
Increases in intake staff lagged peak in UI claims intake backlog by several
months
SOURCE: VEC data on claim intake staffing levels and backlogs (January 2020 – July 2021).
NOTE: Staffing levels decreased in early 2021 as most staff VEC who had been temporarily reassigned to assist with
UI claims intake returned to their original functions.
Insufficient staffing also contributed to significant backlogs in separation report pro-
cessing. Prior to the pandemic, only five VEC customer contact center staff were ded-
icated to processing separation reports. VEC began receiving tens of thousands of
separation reports each month mid-2020; however, between July 2020 and November
2020, only 20 VEC staff were assigned to this function, many of whom had been
reassigned from other VEC functions. As a result, a backlog of approximately 465,000
separation reports accrued by November 2020, grew to over 580,000 by January, and
persisted at this level through August 2021. VEC assigned 35 contractors to process
separation reports in August 2021 and increased the staff assigned to this function to
263 staff as of October 2021.
To enable VEC to increase staffing levels quickly and minimize the risk of future back-
logs in UI claims intake (as well as other parts of claims processing), VEC should cross
train workforce services division staff on UI claims processing. Workforce division
personnel make up nearly half of VEC’s staff and have a basic understanding of the
UI program. During periods of high UI claim volume, selected workforce staff should
be temporarily reassigned to assist with claims processing, as long as demand for their
traditional workforce responsibilities allows. VEC used this strategy to a limited extent
during COVID-19. To minimize time spent training staff during crises, VEC should
identify workforce division staff who may have relatively lower workloads and less
urgent responsibilities during periods of high claim volume and can therefore be prac-
ticably redirected. These staff should be cross-trained to process initial UI claims and
review employer separation reports. Training could be incorporated into
45
Chapter 4: Unemployment Insurance Claims and Appeals Process
“I feel that if the VEC orientation for new workforce division staff and completed as part of ongoing
would empower their training for existing workforce division staff. Several staff have indicated this type
seasoned staff with of cross-training would be helpful (sidebar). VEC-equivalent agencies in Oregon and
training and access to Washing-ton have developed policies for cross-training their workforce staff so they
assist with the complex
and overwhelming
can quickly be reassigned to assist with UI claims when claim volume increases.
unemployment claims
this would help in
RECOMMENDATION 12
reducing the number of
customers being
The Virginia Employment Commission should build a reserve of staff to assist with
dissatisfied with our claims during periods of high claims volume by identifying workforce services
services and benefits division staff whose time can practicably be reassigned to non-workforce activities
being administered in a during pe-riods of high unemployment insurance claim volume. These staff
timely manner. should be cross-trained on key unemployment insurance processes.
“We have been asked to” Inefficient and confusing UI IT system also contributed to backlogs in
take on responsibilities
(post COVID) for which initial UI claims
we received absolutely
NO training. We have
The antiquated IT system was another root cause of VEC’s backlogs in initial claims
had to learn UI, intake and separation report processing. VEC’s legacy UI IT system requires staff to
essentially from the manually (1) review, verify, and enter claimant information from internet UI claim ap-
ground floor, in a plications into the system; (2) identify relevant employers and link them to each UI
pandemic environment.
claim; (3) enter information from employer separation reports into the system; and (4)
– VEC workforce staff
” review, key, or resolve issue codes generated by separation report responses. Moreover,
the system does not allow electronic document submission, so VEC staff must mail
forms or call claimants and employers to gather additional claim information. These
manual and paper-based activities require a significant amount of VEC staff time and
prevent many claimants from receiving their full UI benefits in a timely manner.
VEC staff expect some of the challenges caused by its outdated UI IT system to be
resolved after the launch of its new UI IT benefits system. For example, information
from online applications will be automatically added to the system, employers will be
automatically linked to UI claims, and claimants will be able to electronically upload
claims-related documents. (See Chapter 6 for more information about VEC’s new UI
benefits system.)
Major improvements needed to improve timeliness
and eliminate backlog of UI claims determinations
States are required to administer UI benefits in a timely manner to qualify for federal
funding for the UI program. Specifically, the Social Security Act requires each state to
administer benefits to eligible claimants “when due.” The Supreme Court and U.S.
Department of Labor (DOL) have interpreted this to mean as close to the nearest
payday following termination as possible. DOL has established several standards for
benefit payment timeliness in federal regulations and monitors compliance with these
standards. States that do not comply risk losing federal administrative funding for UI
46
Chapter 4: Unemployment Insurance Claims and Appeals Process
and a federal employer tax credit, which reduces federal UI tax rates for state employ-
ers.
VEC’s first UI payments are not timely for most claimants, and many
subsequent payments have been paused during pandemic
VEC has underperformed the federal standard for first payment timeliness since the
beginning of the COVID-19 pandemic (Figure 4-3). The DOL standard for first pay-
ment timeliness is that 87 percent of all first payments are made within 21 days. Be-
ginning in April 2020, VEC’s first payment timeliness decreased because of unprece-
dented UI claim volume and insufficient staff to process claims. VEC issued
approximately two-thirds of all first payments within 21 days—more than 36 other
states—but some first payments took significantly longer. Between July 2020 and
March 2021, approximately 18 percent of first payments took 70 days or longer to
issue. Recent decreases in first payment timeliness are the result of VEC’s recent pri-
oritization of reducing backlogs of adjudications. For example, beginning in May 2021,
VEC reassigned 15 customer contact center staff from initial claims intake to adjudi-
cation assistance and claims correction roles.
Figure 4-3
Timeliness of first UI payments has decreased drastically
SOURCE: DOL Benefit: Timeliness and Quality Reports (2016–2021).
NOTE: 2021 Q3 is through August 2021.
Many claimants who have received first payments have had subsequent payments
paused by VEC. VEC may pause payments to claimants for several reasons, including
when an issue is discovered on their initial claims application, separation report, or
continued weekly claim application. As of August 12, 2021, at least 50,000 claims that
had received a first payment since March 2020 later had payments paused because
VEC discovered issues that required adjudication.
47
Chapter 4: Unemployment Insurance Claims and Appeals Process
VEC has struggled to quickly adjudicate claims issues, resulting in large
backlogs and delayed payments
DOL expects states to quickly investigate eligibility issues that arise during the claims
process so that eligible claimants receive initial and weekly benefits in a timely manner.
The process of investigating potential eligibility issues is called adjudication, and the
written decision that VEC issues upon completion of the investigation is called a de-
termination. DOL’s standard for the adjudication process is that 80 percent of adjudi-
cations be completed and determinations made within 21 days of issue detection.
VEC has not met the federal standard for adjudication timeliness in several years, and
timeliness decreased significantly during COVID-19 (Figure 4-4). VEC last met the
DOL standard for adjudication timeliness in 2017, when staff issued 86 percent of
determinations within 21 days. Since 2017, performance has varied but decreased dra-
matically after the pandemic’s onset. VEC went from issuing 75 percent of determi-
nations within 21 days in the first quarter of calendar year 2020 to less than 15 percent
in the second quarter. Performance continued to decrease in the first two quarters of
2021, falling to less than 3 percent of adjudications completed within 21 days. The
majority of claims (82 percent) were awaiting adjudication for more than 70 days. VEC
has ranked last or second-to-last in the country on this measure for the past five quar-
ters.
Figure 4-4
VEC has not adjudicated UI eligibility issues in a timely manner
UI claimant representa-
tives filed a federal class
action lawsuit against
VEC in April 2021 in re-
sponse to 92,000 delayed
adjudications. A settle-
ment was reached in May
2021 that directed VEC to
increase its weekly adju-
dications to 20,000 by
August 1, 2021 and re-
solve at least 95 percent
of unpaid claims awaiting SOURCE: DOL Benefits: Timeline and Quality Reports and ETA 207 Nonmonetary Determinations Activities report.
NOTE: a 2021 represents totals and timeliness for January through June.
adjudication by Septem-
ber 6, 2021. (See Chapter
2 for more information Significant backlogs of claims awaiting adjudication continue to accrue. In May 2021,
about the lawsuit and
VEC reported a backlog of over 92,000 UI claims awaiting adjudication that remained
settlement.)
unpaid. In response to a federal court order (sidebar), VEC prioritized and resolved
48
Chapter 4: Unemployment Insurance Claims and Appeals Process
this specific backlog of unpaid claims. However, additional claims requiring adjudica-
tion accumulated while VEC was addressing cases related to the lawsuit. Similarly,
claims that received at least one payment but later had an issue that required adjudica-
tion accrued in a separate backlog. As of October 2021, VEC reported that 61,800
total claims (regular state UI and federal pandemic program claims) were awaiting ad-
judication.
VEC has not been able to hire enough adjudication staff
VEC had an insufficient number of adjudication staff prior to the pandemic to meet
demand, according to VEC leadership. Fifty-five staff were responsible for adjudicat-
ing claims prior to the pandemic. Staff were unable to process adjudications in a timely
manner at this staffing level and recorded approximately 3,780 hours of overtime in
the 12 months before the pandemic (equivalent to 2 full-time staff). Five adjudication
positions were held vacant because VEC staff believed they lacked sufficient adminis-
trative funding to fill them. (See Chapter 3 for more information on VEC’s staffing
and administrative funding.)
VEC was unable to hire enough adjudication staff to keep pace with UI claims during
Adjudication training
the pandemic because of high staff turnover and lengthy training requirements. VEC covers UI claims intake,
hired 65 agency adjudication staff between January 2020 and July 2021. However, 70 UI laws and regulations,
adjudication staff left VEC during the same time period. Nearly half of VEC’s adju- and a large volume of
previous decisions. Train-
dication positions were vacant as of July 2021 and had been so for a median of 136
ees must also learn how
days. Adjudication staff that VEC did hire had to complete training lasting between to navigate VEC’s legacy
six weeks and three months before being able to independently conduct adjudications UI IT system, which re-
(sidebar). quires learning an out-
dated programming code
Moreover, VEC’s hiring efforts for adjudication staff were slow and insufficient. VEC language.
created over 200 new adjudication positions during COVID-19, but the majority (61
percent) were created after January 2021. The number of new VEC adjudication staff
increased slowly, reaching 137 staff in August 2021 (Figure 4-5). VEC did not begin
hiring third-party contractors to assist with adjudication until May 2021. This was be-
cause VEC was focusing on hiring agency staff, according to VEC leadership. Approx-
imately 206 contractors were assisting with adjudications as of August 2021.
49
Chapter 4: Unemployment Insurance Claims and Appeals Process
Figure 4-5
VEC has been slow to hire adjudication staff
SOURCE: Adjudication staffing data provided by VEC (January 2020 – August 2021).
VEC should establish a strategy for quickly increasing adjudication staffing during
times of high claims volume. This strategy should address how training for adjudica-
tion staff can be streamlined to allow new hires to be productive as quickly as possible.
The strategy should also detail when and how third-party contractors will be used,
including specifying which functions they will perform in the adjudication process.
(Federal staffing requirements typically restrict contractors from making official adju-
dication decisions. However, VEC is able to use contractors to assist with other parts
of the adjudication process until an official determination is necessary.) The need for
a staffing strategy is not limited to adjudication staff, but the adjudication function is
critical to ensuring benefits are paid promptly and accurately during times of high
claims volume (Recommendation 7, Chapter 3).
VEC’s UI IT system also contributed to adjudication delays
Manual, time-intensive processes required by VEC’s legacy UI IT system also contrib-
uted to delays in adjudications. For example, VEC staff had to call claimants and em-
ployers to collect additional information about UI claims—called fact-finding inter-
views—and request documents through fax or mail because the IT system was unable
to accept electronic communications. VEC’s modernized UI IT system will automate
key communications, including fact-finding and electronic notifications. (See Chapter
6 for more information and recommendations on VEC’s UI IT system.)
Lack of clear prioritization strategy initially slowed adjudications
Prior to the pandemic, VEC had no formal policy outlining how claims should be
prioritized and assigned to staff during times of high claims volume. This lack of
strategy negatively affected adjudication efficiency in the months following the start
of the pandemic. VEC traditionally relied on a “first in, first out” strategy, with one
50
Chapter 4: Unemployment Insurance Claims and Appeals Process
adjudicator tasked with resolving all issues on a single claim, but this strategy became Other states established
infeasible during the pandemic. In response, VEC explored several different strategies, formal strategies for pri-
including prioritizing certain types of claims and assigning different issues on the same oritizing and assigning
claim to different staff members so that a single claim could be adjudicated more claims earlier in the pan-
demic. For example,
quickly. North Carolina and Utah
VEC should use lessons learned from the pandemic to develop and formalize a policy prioritized older claims
and created a team of
for prioritizing and assigning claims during periods of high claims volume. The policy
experienced staff to ad-
should prioritize older claims and should detail how claims should be assigned to ad- dress the most compli-
judicators based on experience and skill level (sidebar). The development and formal- cated claims. Utah also
ization of this policy should be incorporated into VEC’s resiliency planning process had one staff member
working all issues on a
(Recommendation 7, Chapter 3).
claim rather than assign-
ing different issues to
RECOMMENDATION 13 different staff.
The Virginia Employment Commission should formalize a policy for prioritizing and
assigning claims for adjudication during periods of high claims volume. This policy
should detail how prioritization may change in response to claims volume and clearly
state the expectation that VEC should generally prioritize resolving older claims.
Many additional claims that have received payments may require
adjudication
In addition to current adjudication backlogs, VEC had over 2 million UI claim issues
that staff initially bypassed during COVID-19 to review as of May 2021. Staff had
estimated that approximately 1 million of these bypassed issues would require adjudi-
cation. Beginning in March 2020, VEC programmed its UI system to automatically
pay out benefits for certain types of claims before staff reviewed all potential eligibility
issues. In total, 19 different types of issues were bypassed. For example, issues about
claimants’ ability and availability to work or partial unemployment were bypassed for
more than 12 months, from March 24, 2020 to April 9, 2021. Other issues were by-
passed for shorter periods of time, such as separations where claimants had voluntarily
quit from March 31, 2020 to April 22, 2020. As of October 2021, VEC had made
progress reviewing previously bypassed UI claims issues, but approximately 440,000
issues still needed review to determine if adjudication is necessary.
Bypassing claims issues allowed VEC to more quickly issue payments to claimants;
however, payments were likely made to ineligible claimants. DOL is requiring VEC
and other states to review all bypassed issues to comply with federal claims processing
standards. Any issues requiring adjudication identified during reviews of these approx-
imately 2 million bypassed issues will be added to VEC’s existing adjudication backlog.
If adjudications identify ineligible claimants, VEC will have to notify these claimants
and attempt to collect overpayments. Overpayments not identified and recovered will
reduce the amount of funds available in the state’s UI trust fund, which is used to pay
UI benefits. Lower trust fund levels may raise employers’ UI tax rates.
51
Chapter 4: Unemployment Insurance Claims and Appeals Process
Federal regulations
Given the size of VEC’s current adjudication backlog and likelihood it will increase,
require that most claims VEC should develop a written plan for staff to complete claims reviews and adjudica-
determination functions tions. The plan should outline the total volume of claims issues/items requiring re-
be performed by merit view; identify the number and qualifications of adjudication staff needed to conduct
staff. Exceptions made
the reviews and the actions planned for hiring needed staff; and include a timeline for
during the pandemic to
allow contractors to per- completing reviews of all issues that were bypassed. The plan should also describe
form adjudication func- potential risks that could further delay adjudications, including the loss of contractors’
tions expired September ability to conduct adjudications (sidebar) and strategies to mitigate the risks. VEC
4, 2021. VEC and other
should submit the plan to the House Labor and Commerce Committee, the Senate
state workforce agencies
have requested exten- Commerce and Labor Committee, the Commission on Unemployment Compensa-
sions of these excep- tion, and the governor by November 1, 2021 (sidebar) and provide a status update to
tions. each body quarterly in 2022.
RECOMMENDATION 14
Several JLARC
recommendations have The Virginia Employment Commission (VEC) should develop a detailed plan that
a November 1, 2021 includes specific actions and a timeline to resolve (i) outstanding adjudications and (ii)
completion date all issues on claims that VEC bypassed in 2020 and 2021. The plan should quantify
because they were pub- the numbers and qualifications of new staff needed to resolve these claims, outline
lished during a briefing
the actions planned for hiring needed staff, and identify potential risks and mitigation
to the Joint Legislative
Audit Review Commis-
strategies. VEC should submit the plan to the House Labor and Commerce Commit-
sion on September 20, tee, the Senate Commerce and Labor Committee, the Commission on Unemployment
2021 and are high-prior- Compensation, and the governor by November 1, 2021 and provide a status update to
ity recommendations to each body quarterly in 2022. VEC should also publish the plan and updates on its
implement in the near website.
term.
VEC’s call centers have not adequately met customer
needs
Individuals call VEC for several reasons, including filing UI claims, inquiring about the
status of their ongoing claim, or asking questions about the claims process. Calls are
first routed to an automated system where claimants can file weekly UI claims; hear
limited information regarding the status of their claim, appeal, or payment; or hear
basic information about the UI claims process. For example, claimants may be able to
hear that they have an issue on their claim through the automated system, but are
unable to hear more detailed information about the reason for the issue or how to
resolve it. This has been the case prior to and throughout the pandemic. To learn more
about specific claims issues and other needs or inquiries, individuals must speak with
a call center representative. Individuals who need to file initial or weekly claims for
CARES Act programs, like PUA or PEUC, are directed by the automated system to
call a separate number for VEC’s third-party call center.
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Chapter 4: Unemployment Insurance Claims and Appeals Process
VEC call centers did not sufficiently respond to increases in call
volume throughout the pandemic
VEC call centers have struggled to meet call demand throughout the pandemic and
continue to answer only a small percentage of total calls 18 months into the pandemic.
In June 2020, VEC received approximately 3.3 million calls and answered only about
6 percent, with customers waiting over one hour, on average, to speak with an agent
(Figure 4-6). In June 2021, VEC received approximately 3.4 million calls and answered
about 4 percent. Many callers heard a message that all agents were busy and were dis-
connected, and other callers waited long periods of time to hear back from VEC (Fig-
ure 4-7).
FIGURE 4-6
VEC has answered a very small percentage of total calls
SOURCE: VEC call center performance data.
NOTE: Calls not answered include calls that were blocked or otherwise disconnected from the automated IVR system.
A small percentage of calls that disconnected from the automated IVR system may have received an automated
answer that satisfied their inquiry. Calls answered include callbacks to claimants from VEC after the claimant entered
the callback queue.
VEC’s call center performance challenges have been driven by several factors including
sustained high call volume, insufficient staffing levels, an outdated UI IT system, lim-
ited physical space, and several policy changes. Between February 2020 and April 2020,
total call volume increased nearly 3,000 percent, from approximately 100,000 monthly
calls (pre-pandemic) to over 3 million. Over the next 10 months, total call volume
fluctuated between about 1.7 million and 3.5 million monthly calls, before spiking to
nearly 5 million monthly calls in the early months of 2021. VEC reports that only
about 85 staff were responsible for taking phone calls prior to the pandemic, which
was insufficient to handle the increased call volume.
53
Chapter 4: Unemployment Insurance Claims and Appeals Process
FIGURE 4-7
Small percentage of callers who were not blocked experienced long wait times
SOURCE: VEC call center performance data.
NOTE: Calls not answered or blocked include those disconnected from the automated IVR system. A small percentage
of calls that disconnected from the automated IVR system may have received an automated answer that satisfied
their inquiry. Calls answered include callbacks to claimants from VEC after the claimant entered the callback queue.
VEC has only recently taken meaningful steps to increase call center staff and better
address customer service needs. The agency purchased a larger physical space for the
customer contact center and had almost 390 staff and contractors answering calls as
of July 2021. VEC has also recently contracted with an additional third-party vendor
who has experience in managing high-volume call centers and has launched new cus-
tomer service technology solutions, including a virtual chat agent that can more effi-
ciently address customer inquiries. This contract allowed VEC to bring on approxi-
mately 440 new staff through October 2021 with plans to add up to 200 additional
staff by the end of November 2021. As a result of these actions, call center perfor-
mance improved in September 2021, with VEC answering approximately 12 percent
of the 1.3 million total calls presented and blocking approximately 71,000 calls. Aver-
age wait times also improved slightly in September 2021 and then dropped to under
20 minutes in October 2021. VEC’s call centers are also now better able to identify
repeat callers and callers who abandon calls before entering the queue to speak with
an agent.
54
Chapter 4: Unemployment Insurance Claims and Appeals Process
Several challenges may have partially impeded VEC’s efforts to add additional call cen-
VEC’s modernized UI IT
ter staff. The need to complete procurement for staffing contracts, physical space con- system has the potential
straints, and training and onboarding challenges impeded VEC’s ability to quickly scale to simplify the call center
up call center staffing. In particular, not enough supervisory staff, evolving health and training process and re-
duce overall call volume
safety protocols, and complex, outdated IT systems (sidebar) made it difficult to
by providing claimants
quickly onboard and train large numbers of new agents at once. For example, the more detailed claims in-
complexity of VEC’s current IT system required new staff to receive access to nine formation through their
different computer systems, which requires significant time and agency resources. This online accounts. The sys-
tem is scheduled to
created a bottleneck that limited the number of new staff that could be added to
launch in November
VEC’s systems, even once staff or contractors were hired. 2021.
VEC could benefit from having standing call center staffing augmentation contracts
in place ahead of future economic downturns. VEC had no staffing augmentation
contracts prior to the pandemic and had to complete a time-intensive procurement
process to significantly increase contract staff. VEC should proactively contract with
a third party that provides call center staff augmentation services to allow the agency
to quickly increase staffing in response to significant increases in call volume. The
contractor should have experience providing call center services for UI programs, as
these services are relatively complex. VEC should design the contract so that call cen-
ter staffing can be quickly scaled up or down as needed in response to changing call
volumes.
RECOMMENDATION 15
The Virginia Employment Commission should maintain an ongoing staff augmenta-
tion contract with a provider that is experienced in providing call center services for
unemployment insurance programs and can quickly provide increased call center staff
when call volumes increase.
Several other state agencies, including the Department of Medical Assistance Services
and the Department of Social Services, also operate call centers that may benefit from
a standing call center staffing augmentation contract. Such a contract may also benefit
the Virginia Department of Health. A standing statewide call center staffing contract
would reduce the time it takes state agencies to hire additional staff, provide the flexi-
bility to reduce the number of staff when demand has subsided, and allow Virginia
agencies to be more responsive to major shifts in customer demand. The General As-
sembly could direct the Department of General Services (DGS) and the Virginia In-
formation Technologies Agency (VITA) to work together to fully assess state agencies’
call center staffing needs and identify the best way to meet those needs. VEC could
use the contractual solution identified by DGS and VITA to reduce the time and staff
resources needed to procure an ongoing call center staff augmentation contract (Rec-
ommendation 15).
55
Chapter 4: Unemployment Insurance Claims and Appeals Process
POLICY OPTION 1
Policy options for con-
The General Assembly could include language in the Appropriation Act directing the
sideration. Staff typically
propose policy options
Department of General Services (DGS) and the Virginia Information Technologies
rather than make recom-
Agency (VITA) to assess agencies’ need for call center staff augmentation, ensure that
mendations when (i) the
contractual solutions to meet those needs are in place, and report steps taken and
action is a policy judg-
available solutions to the House Appropriations Committee and the Senate Finance
ment best made by
and Appropriations Committee by December 31, 2022.
elected officials—espe-
cially the General Assem-
VEC’s call centers did not meet customer needs or employ key tools
bly, (ii) evidence suggests
action could potentially
and practices, even prior to the pandemic
be beneficial, or (iii) a re- VEC’s call center performance appears to have lagged industry standards even prior
port finding could be ad- to COVID-19. VEC did not meet a common call center industry benchmark of an-
dressed in multiple ways. swering 80 percent of calls in 20 seconds or less or an abandoned call rate of 5 percent
to 8 percent. Of the calls answered by VEC staff in 2019, only about 50 percent were
answered in 5 minutes or less—far below the common benchmark of 80 percent of
calls in 20 seconds or less. The average monthly abandoned call rate was 10 percent
during this period, higher than the 5 percent to 8 percent benchmark. Furthermore, in
2019, VEC answered an average of only 37 percent of the total calls presented each
month.
VEC has not adequately monitored call center performance, which affected its opera-
tions both before and during the pandemic. Best practices suggest call center staffing
decisions should be based on call volume and the nature of customer inquiries. To
make these decisions, VEC must actively monitor both overall call center performance
through metrics like wait times and percentage of calls answered in a certain amount
of time, as well as individual call quality. VEC has not established internal benchmarks
for overall call center performance, including acceptable percentages of calls an-
swered, average wait times, or call resolution rates. (See Chapter 3 for additional infor-
mation on agency performance monitoring and metrics.)
Given the ongoing challenges with call center performance, insufficient history of
monitoring, and recent actions taken to increase call center capacity, VEC should reg-
ularly update the legislature and governor on call center performance for the next sev-
eral quarters and publish the performance updates on VEC’s website.
RECOMMENDATION 16
The Virginia Employment Commission (VEC) should provide a written quarterly up-
date on the performance of its call centers to the House Labor and Commerce Com-
mittee, the Senate Commerce and Labor Committee, the Commission on Unemploy-
ment Compensation, and the governor by December 31, 2021 and at the end of each
quarter in 2022. VEC should also publish these updates on its website.
56
Chapter 4: Unemployment Insurance Claims and Appeals Process
VEC also does not efficiently or effectively monitor call quality and agent performance
Call quality is commonly
(sidebar). Currently, call quality is manually reviewed and assessed by Customer Con- assessed by reviewing
tact Center supervisors, who are each responsible for monitoring 30 to 40 agents in calls and scoring agents’
addition to other management responsibilities. A common practice among call centers performance on a variety
of criteria, such as follow-
is to establish a dedicated quality monitoring team and equip them with quality moni-
ing scripts and resolution
toring software that allows them to remotely record, review, and assess call quality. rates. Monitoring call
VEC indicated that they previously used quality monitoring software, but discontinued quality allows call centers
its use because of budget limitations. VEC recently procured new quality monitoring to identify agent training
needs, improve the qual-
software, which was implemented in October 2021.
ity of information pro-
The Virginia Tax Department uses a dedicated quality monitoring team for its call vided to callers and cus-
tomer satisfaction, and
center, and TAX staff indicate that regular agent quality monitoring by this team is
reduce repeat callers.
critical to meeting customer needs. VEC should adopt this model and establish a ded-
icated team of VEC call center staff responsible for monitoring call quality. This team
should use VEC’s recently procured quality monitoring software to regularly review
and assess call quality and agent performance, and identify additional training needs
on an agent-by-agent basis. Developing a dedicated agent quality monitoring team can
help reduce overall call volume, particularly from repeat callers, reduce the workload
of overextended call center supervisors, and improve the overall efficiency and quality
of VEC customer service.
RECOMMENDATION 17
The Virginia Employment Commission (VEC) should establish and maintain a dedi-
cated quality monitoring team composed of VEC staff from each customer contact
center. This team should use the recently procured quality monitoring software to reg-
ularly review and assess call quality and performance for all VEC call agents, and iden-
tify any additional training needs on an agent-by-agent basis through weekly monitor-
ing and assessment of at least three calls per agent.
VEC recently made progress implementing this recommendation by establishing a
customer service Quality Assurance (QA) team within the Customer Contact Centers
and filling several positions to staff this team beginning October 25, 2021. VEC
should maintain this dedicated quality monitoring function on an ongoing basis to help
ensure quality customer service. Additional funding may be necessary to maintain
these positions and quality monitoring software in the future.
Significant appeals backlog has developed and is
likely to grow Two-tiered UI appeals
systems exist in 47
All of VEC staff ’s UI claims determinations (e.g., monetary determination, separation states. Three states (Ha-
determination, and weekly eligibility determination) are subject to appeal through a waii, Minnesota, and Ne-
two-tiered system (sidebar). Both claimants and employers can submit appeals. For a braska) and Washington,
D.C. have a single-tiered
first-tier (first-level) appeal, VEC staff conduct a hearing where the claimants,
UI appeals system.
employer, and other witnesses can provide testimony and submit information. VEC
57
Chapter 4: Unemployment Insurance Claims and Appeals Process
staff issue a decision on whether to uphold VEC’s original determination. If the
claimant or employer disagrees with the first-level appeals decision, they can file a
second tier (commission-level) appeal. No additional testimony or evidence is
accepted for most commission-level appeals; VEC staff decide whether to uphold
the first-level appeal determination based on information from the first-level appeal.
Claimants or employ-ers who disagree with VEC staff ’s commission-level appeals
decision can pursue their case in circuit court.
Similar to UI claims, VEC’s UI appeals volume increases during periods of high un-
employment and decreases when unemployment decreases. Changes in appeals vol-
ume typically lag changes in UI claims volume because appeals are the last step in
VEC’s UI claims process. Most VEC appeals (86 percent of all appeals filed) only go
to the first tier (first level) of VEC’s appeals system, and about 14 percent also go
through the second tier (commission level) for additional consideration by different
appeals staff. The majority of VEC appeals are initiated by claimants instead of em-
ployers.
The number of UI appeals decided by VEC peaked in 2011 following the Great Re-
cession but increased in 2020 (Figure 4-8). An average of 23,027 appeals of VEC
determinations were decided annually between 2010 and 2019. In 2020, VEC decided
approximately 14,600 appeals, a 13 percent increase over the 12,900 decisions in 2019.
Through July 2021, VEC was on pace to decide approximately 19,300 appeals in 2021.
This represents a 32 percent growth in appeals decisions over 2020.
VEC already has a backlog of appeals, which is expected to grow. Currently, VEC has
a backlog of just over 76,000 appeals waiting to be heard. The number of appeals filed
is expected to increase further and remain elevated for several years as VEC processes
backlogs of UI claims that may lead to appeals.
FIGURE 4-8
Appeals decisions increased in 2020 and are expected to grow for several years
SOURCE: DOL Benefit Appeals Report.
NOTE: High appeal volume in 2009–2012 was driven by Great Recession claims volumes. 2021 totals only include
appeals decided through July 2021.
58
Chapter 4: Unemployment Insurance Claims and Appeals Process
Appeals determinations became significantly delayed during COVID-
19 because of inefficient workflows and staffing challenges
VEC is required by federal law to provide claimants and employers with the oppor-
tunity to appeal UI claims determinations in a fair hearing. DOL has established a
standard that appeals hearings be “simple, speedy, and inexpensive.” The DOL stand-
ard is that pending first-level appeals be resolved within an average of 30 days or less
from the day of filing, and commission level appeals be resolved within an average of
40 days or less.
VEC has met the DOL standard for appeals timeliness over the past several years, but VEC’s average age of
first-level appeals began to be significantly delayed in 2020 (sidebar). In the first quarter commission level
of 2020, the average age of VEC’s first-level appeals was just under six days but has appeals is currently
steadily increased to approximately 275 days in the second quarter of 2021 (Figure 4- within acceptable limits
(less than 40 days) with
9). Delays have been seen throughout the country, but VEC’s delays have been more
minimal backlogs. VEC
than double the U.S. average and are expected to increase as VEC processes the back- staff expect delays in
log of over 76,000 first-level appeals that are awaiting a decision. commission appeals to
begin in the next several
months, as claims and
FIGURE 4-9 first-level appeals back-
First-level appeals have experienced significant delays over the past year logs are processed.
SOURCE: DOL State Rankings of Core Measures.
Insufficient staffing and recruitment and training challenges have prevented VEC
from adequately responding to the increase in appeals. Prior to the pandemic, VEC
had 14 full-time appeals examiners able to conduct six to eight hearings a day. As of
August 2021, VEC had added 12 full-time positions, for a total of 26. At this staffing
level it will take at least 300 business days for VEC staff to clear the current backlog.
VEC staff indicate they are working to hire an additional 30 appeals examiners by
March 2022, but staff believe it will be difficult to recruit and retain qualified appeals
examiners because of low salaries. JLARC staff analysis of state salary data suggests
59
Chapter 4: Unemployment Insurance Claims and Appeals Process
that VEC appeals examiner median salaries are 15 percent lower than salaries for sim-
ilar positions in other state agencies. In addition, VEC requires new appeal examiners
to undergo a two- to three-month training program before they are able to issue deci-
sions on their own. In turn, managers and experienced appeals examiners spend time
training new examiners, which prevents them from conducting appeals full time. (Ad-
ditional discussion of VEC’s staffing challenges and recommendations are included in
Chapter 3.)
Inefficient workflows have also contributed to delays processing appeals. Currently,
Monetary determina-
tions indicate the claimants who receive a monetary determination (sidebar) that results in a denial of
amount of benefits a benefits because of insufficient prior wages are considered to have non-valid claims.
claimant may receive and These claimants are allowed to file an appeal if they believe the wage information used
how long they may col-
to make the monetary determination is incorrect or incomplete. However, these claim-
lect them based on
wages previously earned ants do not actually qualify for an appeal hearing because they have a non-valid claim. (Claim-
by the claimant. Mone- ants who have sufficient wages but disagree with other aspects of their monetary de-
tary determinations do termination, such as the date VEC determined they became eligible for benefits, do
not confirm eligibility but
qualify for an appeal hearing.) Appeals that do not qualify for a hearing are remanded
state the amount and
duration of benefits a back to VEC’s monetary determination unit for further review and clarification of
claimant may receive if wage information.
they are eligible. Mone-
tary determinations can The process of reviewing these appeals of monetary determinations and remanding
include denials of eligi- them back to the monetary determination unit is an inefficient use of appeals staff
bility if claimants do not and hinders their ability to conduct hearings and issue decisions for other bona fide
have sufficient wages on appeals in a timely manner. VEC appeals staff indicate that they have received tens of
record to qualify for ben-
efits.
thousands of appeals of monetary determinations over the past year that will not qual-
ify for an appeals hearing, which resulted in substantial processing backlogs that pre-
vented appeals staff from meeting timeliness standards for other appeals.
VEC’s appeals workflow could be more efficient if claimants filed requests for reviews
or redeterminations of their monetary determinations directly to VEC’s monetary de-
termination unit instead of filing appeals. VEC staff believe this change could reduce
VEC’s appeals workload by 30 to 40 percent. Making this change would require a
change to state law to allow non-valid claims (those that are denied benefits because
of insufficient wages) to go directly to the monetary determination unit. State law
currently requires that all VEC determinations are eligible for appeal, including deter-
minations of monetary ineligibility that are not eligible for an appeals hearing. This
requires VEC’s appeals staff to review and process all appeals of monetary determina-
tions, even if it is clear they should be remanded to the monetary determination unit.
Claimants with valid claims would retain the right to an appeals hearing regarding
monetary determination issues. In addition, VEC’s monetary determination notices
and related communications should be updated to instruct claimants who disagree
with their monetary determination to request a review or redetermination directly
from the monetary determination unit.
Some states, including North Carolina, do not allow claimants to appeal monetary
determinations, including non-valid claims. Other states, including Maryland and
60
Chapter 4: Unemployment Insurance Claims and Appeals Process
UTah direct claimants who disagree with their monetary determination to submit
protests or requests for redeterminations of their determination to their respective
claim centers or monetary determination unit for reconsideration, rather than filing
an appeal. Staff in Utah report that this limits the number of appeals of monetary
determinations filed that have to be remanded back to the monetary determinations
unit without a hearing.
RECOMMENDATION 18
The General Assembly may wish to consider amending § 60.2-619 of the Code of
Virginia to specify that non-valid unemployment insurance claims resulting from
mon-etary ineligibility are ineligible for appeal through the Virginia Employment
Commis-sion’s (VEC’s) appeals division.
RECOMMENDATION 19
The Virginia Employment Commission should revise monetary determination notices
to clearly indicate if a claim is non-valid because of monetary ineligibility, and direct
claimants who disagree with their non-valid monetary determination to request a re-
determination from the monetary determination unit.
Appeals determinations meet quality standards and process is fair, but
claimants do not understand the process
JLARC staff surveyed a
VEC’s federal quality scores for appeals, appeal reversal rates, and employer opinions limited group of employ-
suggest that the appeals process affords sufficient due process. DOL requires states to ers regarding their expe-
riences with VEC. The
conduct quality evaluations of first-level appeals decisions, requiring 80 percent of survey was disseminated
appeals to have quality scores of at least 85 percent. All VEC first-level appeals have by several employer
met quality score requirements each year since 2011, including during COVID-19. Ad- groups at JLARC’s re-
ditionally, over the past five years, about one-fourth of first-level appeals and 14 per- quest, and 49 businesses
responded.
cent of commission level appeals reversed previous determinations. In a limited survey
and interviews of employers and employer groups conducted by JLARC staff (side-
bar), employers were generally positive about the fairness of the appeals process. “The claimants are pretty
much only given the
However, VEC needs to ensure that all claimants understand the appeals process and statutory language,
their rights, because some claimants do not fully understand them or how to effectively which is utterly
meaningless to them.
present their case. According to federal standards, appeals are supposed to be easy to They don’t know what
navigate for claimants without representation. VEC’s appeals notices and appeals to focus on and what
rights information contain highly technical language that can be difficult to understand not to. They have no
(sidebar). Additionally, VEC’s notices and communications do not effectively explain idea how to question
someone…. The VEC
the information claimants are expected to provide or discuss during appeals hearings. simply does not know
For example, in JLARC observations of appeals hearings, several claimants did not how to give notices to
understand which determination the hearing was regarding or the types of information people that are
they were allowed, or expected, to discuss. meaningful…”. ”
Claimants prevailed in only 16 percent of VEC appeals they filed between 2016 and – Claimant
2020, half the rate at which they prevailed nationally. While the reason for this dis- representative
crepancy is not fully known, it is possible that claimant lack of understanding regarding
61
Chapter 4: Unemployment Insurance Claims and Appeals Process
the appeals process contributes to lower rates of claimant success in Virginia. As part
of the review and revision of communications in Recommendation 10, VEC should
review and revise its information regarding appeals, including notices of appeal, no-
tices of hearings, and the UI handbook for claimants, to clarify the role and rights of
claimants in appeals hearings. This review should be conducted in coordination with
input from stakeholders, including claimants and claimant representatives.
Additionally, the General Assembly could direct the VEC to create an ombudsman
A similar ombudsman
position was created by position to help parties navigate the appeals process and understand their rights. This
the Virginia Workers’ ombudsman should serve as an impartial source of information regarding the UI ap-
Compensation Commis- peals process, including both claimants’ and employers’ rights and responsibilities in
sion in response to a
the process (sidebar). Additional clarity in communications (Recommendation 10) will
previous JLARC recom-
mendation. The goal of help parties better understand their rights and the appeals process, but the complicated
this position is to provide nature of UI law and regulations makes the appeals system inherently challenging to
impartial information to navigate. The system is particularly difficult to navigate for parties without legal rep-
unrepresented parties so
resentation. The ombudsman can serve as a source of free, impartial information that
that all parties are able
to make educated deci-
can help ensure both claimants and employers are able to make educated decisions as
sions while navigating they navigate the UI appeal process. Information regarding the role and services of
the workers’ compensa- the ombudsman should be added to the UI Handbook for claimants and provided
tion system. again to all individuals who file an appeal. Funding would also need to be appropriated
in the state budget to create and fund this position.
RECOMMENDATION 20
The General Assembly may wish to consider amending Article 2 of Chapter 1 of Title
60.2 of the Code of Virginia to direct the Virginia Employment Commission to create
an appeals ombudsman position to provide impartial information about the unem-
ployment insurance appeals process and help ensure that all parties are afforded due
process in such appeals.
62
Quality and Accuracy of Claims
5 Determinations
In addition to administering unemployment insurance (UI) benefits in a timely man-
ner, state workforce agencies like the Virginia Employment Commission (VEC) are
expected to make thorough and accurate decisions regarding claimant eligibility and
UI benefit payments. To make high quality eligibility determinations, state workforce
agencies must gather all necessary information about UI claims, thoroughly review the
information, adhere to federal and state requirements, and calculate accurate benefit
payments. State workforce agencies must balance the need to produce quality claims
determinations with the need for timeliness and getting payments to eligible individuals
as quickly as possible.
Making accurate UI claims determinations has been an ongoing challenge for VEC,
but it was particularly difficult for the agency during the pandemic. The creation and
implementation of new federal UI programs, record levels of claims, and evolving
health and safety protocols created new challenges across states. However, VEC strug-
gled more than many other states to make high quality decisions and accurate payments
during COVID-19 because of its staffing shortages, insufficient staff training, and
antiquated IT systems.
UI determination quality and payment accuracy was
poor over past decade and worsened during COVID
Federal law requires states to obtain and review sufficient information to ensure that
UI eligibility determinations are high quality and benefit payments are accurate. The
quality of determinations can influence the accuracy of payments, but quality and ac-
curacy are assessed and monitored separately by the U.S. Department of Labor (DOL).
High quality determinations involve gathering necessary information, appropriately
applying laws and regulations, and writing clear and understandable determinations.
Accurate UI payments involve paying the correct amount of benefits to eligible indi-
viduals. Meeting both quality and accuracy standards is critical to ensuring eligible in-
dividuals can access UI benefits and the correct employer is held liable for the cost,
though it can be difficult to achieve when balancing timeliness. DOL requires states to
regularly review and report on the quality of determinations and accuracy of pay-
ments.
VEC underperformed quality standards for UI determinations for
more than a decade
DOL evaluates state agencies’ adherence to UI determination quality standards
through the benefits timeliness and quality review process and requires at least 75
63
Chapter 5: Quality and Accuracy of Claims Determinations
UI determinations are
percent of all determinations to meet this quality standard (sidebar). To complete de-
the formal, written deci- termination quality reviews, VEC quality assurance staff randomly sample 60 deter-
sions regarding a claim- minations each quarter and evaluate the quality of the adjudication process and written
ant’s eligibility made by decision using a scoring system based on claims determination standards. This process
the state workforce
includes reviewing the information gathered by adjudicators, assessing whether they
agency. Examples include
monetary determinations made sufficient efforts to gather all necessary information, determining whether law
and eligibility determina- and policy were correctly applied in the decisions, and evaluating the clarity of the
tions related to a claim- written decisions provided to customers. The types of determinations sampled and
ant’s separation from
scored are broken into two categories: separation and non-separation determinations. Sep-
work.
aration decisions, such as whether an employee was laid off, account for 70 percent of
all determinations. Non-separation decisions pertain to other eligibility requirements,
such as being able and available to work, account for the remaining 30 percent.
VEC has not met the federal quality standard for determinations over the past decade.
DOL suspended quality
monitoring require- VEC met the 75 percent standard for separation determinations only once since 2011,
ments during the first and quality has been poor since 2016 (Figure 5-1). Virginia ranked 44th or worse in
two quarters of 2020 so comparison with other states on this measure between 2016 and 2019. Determination
states could devote more
quality reviews were temporarily suspended by DOL during COVID-19 (sidebar), but
resources to claims pro-
cessing. VEC staff say that VEC underperformed federal quality standards for separation determinations in late
quality scores were likely 2020 and early 2021.
low during this period
because inexperienced
new hires were conduct- FIGURE 5-1
ing determinations, and VEC has consistently underperformed the federal standard for separation
VEC streamlined the de- determination quality
termination processes.
SOURCE: DOL Benefits Timelines and Quality reports.
NOTE: Separation determinations pertain to issues related to an individual’s separation from employment, including
quits and discharges. Nonseparation determinations pertain to other eligibility issues, such as whether an individual
was able and available to work during a particular week.
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Chapter 5: Quality and Accuracy of Claims Determinations
Poor determination quality is largely driven by training and staffing challenges. New “Training with this
adjudication staff currently receive some formal training, but few ongoing training agency when new
opportunities exist for adjudicators who have been on the job more than one year. people arrive really
needs to be addressed.
Multiple VEC managers and staff have identified a need for additional training for Everyone should have
adjudication staff. Over 30 percent of UI benefits staff who responded to a JLARC the proper training by a
survey indicated they were dissatisfied with the job training opportunities they received training group instead
(sidebar). The retirements of several skilled adjudication staff also contributed to poor of having staff take time
away from their job
determination quality, according to VEC leadership.
duties to train new staff.
VEC should develop a standardized training program for adjudication staff that em- ”
phasizes high-quality claims processing and determinations. Current training for adju- “There have been no job
dicators is primarily provided on the job by supervisors, with little standardization. As training opportunities
since becoming a
described in Chapter 3, the adjudication section has too few supervisors relative to the certified employee. I
number of employees, so reliance on supervisor-provided training may not ensure wish the agency had a
quality or timely training. The new training curriculum should be developed using the training
federal standards for quality determinations and input from VEC’s quality assurance department/team
instead of just sending
team and adjudication managers. A dedicated training manager should oversee the emails about
training and ensure it is provided to all new adjudication staff during orientation and information and
to all existing adjudication staff every three years. The training could be provided more expecting you to learn
frequently when poor determination quality is identified through determination quality that way.
reviews. – VEC UI staff”
RECOMMENDATION 21
The Virginia Employment Commission should develop a standardized training pro- Incorrect payments
gram that explains how to conduct high quality unemployment insurance claims de- (or “improper payments”)
are payments that should
terminations and that is administered by a dedicated training manager to all new and
not have been made or
existing adjudication staff. that had an incorrect
amount. They can be
caused by errors or mis-
Rate and cost of incorrect benefit payments have increased representation by individ-
substantially during COVID-19, estimated to exceed $1 billion uals, employers, or state
agencies. Most of VEC’s
Federal law requires states to protect against incorrect UI payments (sidebar). Specifi- incorrect payments are
cally, states are required to estimate, detect, and attempt to recover benefits incorrectly overpayments.
paid because of errors by the state agency, individuals, or employers. DOL has estab-
lished standards for these efforts, requiring states to identify and attempt to recover at The Benefit Accuracy
least 50 percent of the estimated incorrect payments and limit their estimated incorrect Measurement (BAM)
payment rate to 10 percent or less. States estimate and report their incorrect payments program is used by
states to estimate the ac-
and common causes of incorrect payments quarterly through the benefit accuracy
curacy of UI benefit pay-
measurement program (BAM) (sidebar). Incorrect payments add to VEC staff ’s work- ments. VEC staff ran-
load and create financial burdens for individuals who are asked to repay incorrect pay- domly sample 480 paid
ments, employers that are temporarily charged for incorrect payments, and the UI trust claims a year, investigate
fund that covers the cost of unrecovered incorrect payments. the claims process, and
determine the accuracy of
payments and causes of
errors. Results are used to
estimate the accuracy of
all paid claims in the state
UI program.
65
Chapter 5: Quality and Accuracy of Claims Determinations
VEC has not been detecting the federally required 50 percent of incorrect payments
(specifically overpayments) for several years. In the three-year period prior to the pan-
demic, ending March 2020, VEC detected, on average, about 37 percent of overpay-
ments estimated by BAM, a lower percentage than 48 other states. The proportion of
A portion of state UI overpayments detected declined during COVID-19, falling to approximately 11 per-
overpayments may have
been paid to claimants
cent for the three-year period ending June, 30, 2021. This decline in detection of over-
who actually qualify to re- payments means that VEC is likely unaware of a large portion of incorrect payments,
ceive benefits under a which prevents staff from stopping these payments and initiating collection efforts.
federal pandemic pro-
gram, such as PUA. VEC is VEC’s annual estimated incorrect payment rate has also exceeded the federal 10 per-
working to determine cent limit. VEC’s annual incorrect payment slightly exceeded the federal standard in
how many claimants in- four of five years between 2016 and 2019, averaging approximately 12 percent (Figure
correctly received state UI
5-2). Incorrect payment reviews were temporarily suspended by DOL during the sec-
instead of federal bene-
fits. In those instances, ond quarter of 2020, but VEC’s estimated incorrect payment rate increased signifi-
federal program funds cantly in 2020. VEC’s most recent incorrect payment rate estimate is 60 percent (2021,
may be used to pay back second quarter). Based on these estimates, VEC may have incorrectly paid an esti-
overpayments paid from
mated $930 million in 2020 from the state program, and an additional estimated $322
the state UI trust fund.
million in 2021 from the state program (through June 2021) (sidebar).
Figure 5-2
Estimated incorrect payment rate and cost increased significantly in 2020 for
state UI
SOURCE: DOL Unemployment Insurance Payment Accuracy data.
NOTE: The estimated incorrect payment rate and dollar values in this figure pertain only to the state UI program.
Federal pandemic UI programs are not included in these estimates.
During COVID, many incorrect payments were likely attributable to practices VEC
implemented to streamline the UI claims process. For example, VEC bypassed inves-
tigating certain claims issues (e.g., able and available to work, failure to accept work),
which may have reduced the accuracy of those claims’ benefit payments. In
66
Chapter 5: Quality and Accuracy of Claims Determinations
addition, VEC staff discontinued fact-finding interviews in the adjudication process
to increase the speed of determinations. Instead of conducting these interviews, VEC
relied solely on written information provided by claimants and employers, which
limited the information used to inform decisions to pay or deny benefits. VEC also
hired many new staff to complete claims intake and adjudication, who received only
minimal training on how to accurately complete these processes.
Another key driver of incorrect payments before and during COVID-19 is incomplete
SIDES and SIDES E-Re-
and delayed submission of employer separation reports. Separation-related incorrect sponse is a free tool cre-
payments are a leading cause of overpayments and are estimated to account for about ated and maintained by
59 percent of VEC’s UI overpayments in 2020 and about 24 percent of overpayments DOL and the National As-
between 2016 and 2019. Requiring employers to submit separation reports electroni- sociation of State Work-
force Agencies (NASWA)
cally through the State Information Data Exchange System (SIDES) can improve the that allows employers
timeliness and accuracy of these reports (sidebar). A 2017 study by the DOL’s Office and third-party adminis-
of the Inspector General found a significant reduction in incorrect payments related trators to receive and re-
to separation issues when claims were processed through SIDES. Utah, where the spond electronically to UI
information requests.
majority of employers use SIDES, cites SIDES as a key reason for its low incorrect
payment rate.
Fewer than 10 percent of Virginia employers participate in SIDES. Requiring Virginia
employers to participate in SIDES would help reduce VEC’s total overpayments and
allow VEC to better identify overpayments for recovery. Requiring employer partici-
pation is likely necessary because marketing and outreach efforts are generally unsuc-
cessful in encouraging employer participation in SIDES, according to DOL. However,
employers could be allowed to seek a waiver from participating.
VEC indicates that employers will eventually be able to submit separation information
through the Employer Self-Service portal in the modernized VUIS system. Once this
capability is fully functional, employers could be given the option to submit separation
information electronically through this portal rather than SIDES.
RECOMMENDATION 22
The General Assembly may wish to consider amending §60.2-121.1 of the Code of
Virginia to require employers to electronically provide separation information when
requested to the Virginia Employment Commission unless they are granted a waiver
from providing this information electronically.
Virginia could also consider requiring employers to proactively provide a separation
report to VEC shortly after an employee’s separation from employment, as well as
provide a copy to the separated employee. These proactive reports should be provided
to VEC electronically, either through SIDES or VEC’s Employer Self-Service portal.
If a separated individual then files a claim for UI benefits, the employee would submit
the employer’s separation report with the UI application for validation with the em-
ployer-submitted report.
67
Chapter 5: Quality and Accuracy of Claims Determinations
Proactive separation reports could improve the accuracy of claims decisions and
streamline the claims process by reducing the need for VEC to request separation
information from employers after claimants file a UI claim. Requiring employers to
submit proactive separation reports to VEC would allow the agency to compare newly
filed claims against separation records to assess the validity of claims. This would be
similar to the process of checking claims against wage records or the new hire database
and would help prevent fraudulent claims from being paid. Moreover, the notices pro-
vided to newly separated individuals could increase awareness by informing them
about UI and how to file a claim. A potential drawback of proactive separation reports
is the additional burden they would place on some employers because employers would
be required to complete reports for all separated individuals rather than just the subset
who file UI claims.
To assess the impacts of this practice, the state could first pilot this requirement with
a diverse sample of employers. VEC could solicit feedback from the employers on the
requirement’s feasibility and determine whether the requirement helped reduce incor-
rect payments. Tennessee requires employers to proactively provide separation reports
to both the state UI agency and employees when they are separated from employment.
However, Tennessee state UI agency staff indicate that many employers do not comply
Policy options for con- with this requirement. An enforcement mechanism or incentives may be required to
sideration. Staff typically encourage employer compliance. When employers fail to provide the separation report
propose policy options proactively, VEC would still be able to request the information be provided through
rather than make recom- SIDES. The proactive separation report could be closely modeled after the SIDES
mendations when (i) the separation report template to maintain consistency across requests for information
action is a policy judg-
from employers.
ment best made by
elected officials—espe-
cially the General Assem- POLICY OPTION 2
bly, (ii) evidence suggests The General Assembly could include language in the Appropriation Act establishing
action could potentially a pilot program that would require a sample group of employers to proactively provide
be beneficial, or (iii) a re- a separation report to VEC and separated individuals for all employees who separate
port finding could be ad- from employment over a designated period of time and direct the Virginia Employ-
dressed in multiple ways. ment Commission to collect feedback from employers on the requirement’s potential
administrative burden and impact on unemployment insurance claim accuracy and
timeliness.
Work search require-
ments were temporarily Another common driver of incorrect payments is work search issues. On average, be-
suspended by executive tween 2016 and 2019, BAM estimates indicate that about 27 percent of overpaid dol-
order from March 2020
lars were attributable to work search issues each year. Federal law requires that individ-
through May 2021. Be-
ginning the week ending uals actively search for work to be eligible for benefits. In Virginia, claimants must
May 30th 2021, claimants make at least two job contacts per week to satisfy this requirement (sidebar). If claim-
were once again required ants do not make these contacts in any given week, they are considered ineligible to
to make an active search
receive benefits for that week, and any payment they receive for that week would be
for work each week.
an overpayment. Claimants are asked to report the full name of each employer they
68
Chapter 5: Quality and Accuracy of Claims Determinations
contacted that week when filing their weekly benefit claimants and are directed to
maintain records of their contacts, which are subject to random verification by VEC.
Currently, VEC conducts very limited verification of job contacts. VEC indicates that
they previously verified about 3 percent of job contacts reported in the weekly claims
filing process, similar to the amount verified in other states. Verification was primarily
a manual process in which VEC would request records of job contacts from claimants,
review the records, and reach out to employers to verify the contact had taken place.
However, VEC reports that this function was stopped before 2020 because of staffing
limitations. As a result, the only claims currently subject to work search verification are
the roughly 30 claims sampled each month as part of the BAM survey. This is equiv-
alent to less than one-tenth of a percent of all weekly claims filed in 2019. As a result,
VEC is likely not identifying claimants who fail to meet weekly work search require-
ments.
VEC should immediately resume verification of at least 3 percent of job contacts
submitted in weekly claim filings. While it is infeasible to verify compliance with work
search requirements for every claim filing, the current absence of any verification of
work searches likely reduces many claimants’ incentive to comply with this require-
ment. Randomly reviewing a portion of job contacts weekly would allow VEC to at
least detect a portion of claimants who were not meeting this requirement and thus
are incorrectly being paid. Recovery of the incorrect payments could then be pursued
and recovered amounts could be returned to the trust fund.
RECOMMENDATION 23
The Virginia Employment Commission should resume auditing a sample of UI claims
to verify compliance of claimants with the unemployment insurance program work
search requirement no later than December 1, 2021.
Additionally, Virginia’s current work search requirements do not fully align with best
practices for reducing work search related incorrect payments and promoting
reemployment. In February 2020, DOL issued guidance to states that outlined a tem-
plate to better support claimants’ ability to meet their work search requirements in the
modern labor market. Virginia’s current definition of acceptable work search activities
is narrower than the proposed list of activities included in DOL’s guidance and model
legislation. (Additional detail regarding these activities is available in Appendix H.)
Fully implementing the proposed model legislation would represent a significant shift
in Virginia’s work search policies. However, DOL suggests that adopting this proposed
legislation can help states lower incorrect payment rates related to work search require-
ments. The General Assembly could direct the VEC to review DOL’s guidance and
model legislation, evaluate the potential impacts that adopting DOL’s guidance would
have on incorrect payments and other aspects of VEC’s work (e.g., reemployment),
and propose changes to the state’s work search policies as needed. VEC could report
69
Chapter 5: Quality and Accuracy of Claims Determinations
the results of the review, and any proposed changes to Virginia statute, to the General
Assembly by February 2022 and post the results of the review on its website.
POLICY OPTION 3
The General Assembly could include language in the Appropriation Act to direct the
Virginia Employment Commission (VEC) to (i) review U.S. Department of Labor
guidance and model legislation regarding redesigned work search requirements, (ii)
evaluate the potential impacts that adopting DOL’s guidance would have on incorrect
payments and other aspects of VEC’s work (e.g., reemployment), and (iii) propose
changes to the state’s work search policies as needed. VEC should report the results
of this review and any proposed legislative changes to the House Committee on Labor
and Commerce, the Senate Committee on Commerce and Labor, the Commission on
Unemployment Compensation, and the governor by February 1, 2022. VEC should
also publish these results on its website.
Incorrect payments attributable to UI fraud have increased during
COVID-19 and cost the state an estimated $100 million
States are required to prevent, detect, investigate, and recover fraudulent overpay-
ments. While each state defines fraud differently, any benefit paid as a result of willful
misrepresentation is typically considered fraudulent. Common examples of fraud in-
clude an individual returning to work and continuing to collect benefits, individuals
not reporting earnings when filing weekly claims, or individuals otherwise providing
false information to secure or increase UI benefits (Case Study 5-1). Additionally, im-
poster fraud can occur when a claim is filed using the information of a victim of
identity theft (Case Study 5-2). Fraudulent overpayments are included in the overall
incorrect payment rate and reported to DOL quarterly through VEC’s BAM program.
VEC’s fraud rate is an estimate that reflects the level of fraud detected in a representa-
tive sample of UI claims.
CASE STUDY 5-1
Prisoner fraud schemes
In February 2021, VEC reported paying out over $40 million in state and fed-
eral funds to individuals who had submitted claims on behalf of prison in-
mates through various schemes. Prisoners are categorically ineligible for UI
benefits because they are not able and available to work while incarcerated.
After this fraud was detected, VEC worked with police and federal prosecu-
tors to prosecute the fraudulent actors. In one scheme, 24 fraudulent actors
were indicted for filing fraudulent claims for 37 individuals. The main con-
spirator agreed to repay $499,000 to VEC through a plea agreement. Similar
schemes involving prisoners have targeted various states throughout the
pandemic.
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Chapter 5: Quality and Accuracy of Claims Determinations
CASE STUDY 5-2
Bank account fraud
In April 2021, VEC suspended online filing of initial UI claims in response to
a claims “hijacking” scheme. Through this scheme, fraudsters were able to
change the bank account information of eligible individuals who had filed UI
claims. This resulted in UI benefits being paid to the wrong accounts. VEC
has not yet been able to identify how many claims may have been affected
by this scheme; however, VEC has since programmed their application sys-
tem to stop payments on claims in which certain information was changed.
VEC’s estimated overpayments attributable to fraud have increased significantly since
Fraud rates in other
2020. VEC’s overall estimated fraud rate for the state UI program grew 440 percent from states also increased sig-
1.4 percent in 2019 to 7.5 percent in 2020 (sidebar). At this rate, VEC paid out an nificantly during COVID-
estimated $70 million in fraudulent state UI benefits in 2020, representing about 3.3 19. The U.S. median fraud
rate increased from about
percent of total state benefits paid. VEC’s confirmed fraudulent payments are much
2 percent in 2019 to over
lower than its estimates, with $1.6 million in confirmed fraud for January through Au- 3 percent in 2020. Other
gust 2021 compared with an estimated $29 million for the first quarter alone. VEC’s states and DOL have
confirmed fraud is significantly lower than the estimated fraudulent payments because acknowledged that states
faced unprecedented
at least 164,500 potentially fraudulent claims were backlogged and awaiting VEC in-
fraud threats because of
vestigation as of October 2021. This could yield an additional 9,900 fraudulent claims enhanced benefit
based on previous fraud rates. amounts, new programs,
and sophisticated bad ac-
The federal Pandemic Unemployment Assistance (PUA) program has been particularly tors.
susceptible to fraud because self-employed individuals have fewer records to prove
their eligibility than state UI recipients. As of September 2021, VEC reported approx-
imately $117 million in confirmed PUA overpayments, of which $54 million was to
fraudulent claimants. VEC’s reported PUA overpayment rate is approximately 2.5 per-
cent, which is much lower than the state UI incorrect payment rate. PUA overpayment
rates are likely similar to the overall U.S. incorrect payment rate (~10 percent), accord-
ing to DOL’s Office of the Inspector General. Consequently, VEC could have paid
out as much as $475 million in total PUA overpayments, of which half is likely fraud-
ulent. PUA benefits are financed by federal funds rather than taxes on Virginia em-
ployers and do not directly affect Virginia’s UI trust fund. However, states are respon-
sible for maintaining the same program integrity standards for federal programs as
regular state UI to conform to federal law, according to DOL guidance.
VEC currently meets all mandatory fraud prevention and detection requirements but
did not begin using some critical fraud prevention and detection best practices until
2021. VEC has used these new processes to retroactively evaluate all claims submitted
since March 2020. However, having these fraud-identifying processes in place likely
would have reduced fraudulent payments made during the pandemic. This year
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Chapter 5: Quality and Accuracy of Claims Determinations
VEC began submitting claims to UI Integrity Center’s Integrity Data Hub
(IDH), which provides a risk score for each claim that helps states flag po-
tentially fraudulent claims and prioritize them for investigation;
VEC cross-matches filed claims with state and local jail incarceration data
to help identify claims that were filed fraudulently; and
VEC implemented a new database tool to help identify patterns in internal
claims data that indicate potential fraud, such as repeat physical addresses.
Many potentially fraudulent claims still await investigation because of insufficient
staffing in VEC’s benefit payment control unit. When a claim is identified as potentially
fraudulent, payments are paused and each claim is investigated by a VEC fraud inves-
tigator. As of October 2021, VEC had a backlog of approximately 164,500 claims
awaiting fraud investigation. Turnover of experienced staff and limited capacity of
new staff have contributed to these backlogs. VEC currently has 29 fraud investiga-
tors, 24 of whom were hired after March 2020. Eight experienced investigators have
left VEC since March 2020. VEC’s newest fraud investigators have limited ability to
conduct investigations; new investigators often require six to 12 months of training
before they are able to independently investigate claims.
VEC should investigate the backlog of potentially fraudulent claims as quickly as pos-
sible so that payments for non-fraudulent claims are resumed, and collections are ini-
tiated for confirmed fraudulent claims. To quickly investigate these claims, VEC needs
to increase staffing in the benefit payment control unit and expedite training for new
investigators. VEC should develop a plan for investigating current backlogs in poten-
tially fraudulent claims and establish a strategy for prioritizing potentially fraudulent
claims according to the dollar amount. VEC should prioritize fraudulent claims against
the regular state UI program over federal pandemic programs because of the direct
impact of state UI claims to the UI trust fund. Additionally, this plan should include
a strategy for hiring additional fraud investigators. According to VEC leadership, at
least 15 to 20 additional fraud investigators are needed to handle the current volume
of fraud investigations. The plan should also include strategies for expediting training
to ensure new investigators can conduct independent investigations as quickly as pos-
sible. This plan should be developed and presented to the General Assembly no later
than December 31, 2021. VEC should also post this plan on its website.
RECOMMENDATION 24
The Virginia Employment Commission (VEC) should develop a plan for investigating
the backlog of potentially fraudulent claims and establish a strategy for prioritizing its
investigations according to the potential dollar amount of fraudulent payments per
claim. This plan should include a strategy for hiring additional fraud investigators and
expediting training of new hires. This plan should be presented to the House Com-
mittee on Labor and Commerce, the Senate Committee on Commerce and Labor, the
Commission on Unemployment Compensation, and the governor by December 31,
2021. VEC should also publish these updates on its website.
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Chapter 5: Quality and Accuracy of Claims Determinations
Incorrect payments increase funds VEC must recoup through
collections and can negatively affect UI trust fund
Federal and state law require individuals to repay any incorrect UI payments they re-
ceived and tasks VEC with trying to recover the payments. VEC pursues several col-
lections actions, including wage garnishments, for unpaid overpayments. Unpaid over-
payment debt is also subject to interest, and overpayments due to fraud are assessed a
15 percent penalty. Payments that are recovered are repaid to the state UI trust fund
or federal government. Payments that are not recovered reduce the amount of funds
available to pay UI benefits to eligible individuals. VEC is always responsible for re-
covering incorrect payments made through the traditional state UI program, but staff
also became responsible for recovering incorrect payments made through the federal
pandemic programs during COVID.
VEC completes all required activities and several recommended strategies to recover
UI overpayments. Recovery efforts are initiated by VEC’s benefit payment control
unit, which sends monthly billing statements to individuals, establishes repayment Fraudulent actors who
receive overpayments
plans, and offsets current benefit payments for claimants with outstanding debts to can be prosecuted on
VEC. After 60 days of nonpayment, VEC’s benefit payment control unit forwards criminal charges, but VEC
delinquent accounts to VEC’s collections unit, which sends a final bill. After 30 more does not have authority
days of nonpayment, VEC’s collections unit refers accounts to other state agencies for to pursue these cases.
Decisions to pursue
enrollment in offset programs where tax refunds, lottery winnings, or wages earned criminal charges for
through contract work for the state are garnished for repayment. Moreover, delinquent fraud are typically made
accounts with balances under $3,000 are referred to a third-party private collections by the local common-
agency, and accounts over $3,000 are referred to the Office of the Attorney General wealth’s attorney in the
jurisdiction the claimant
for recovery. Accounts that remain delinquent after one year are referred to the U.S.
resides. Fraudsters can
Department of Treasury for enrollment in the federal treasury offset program. Ac- also be prosecuted in
counts with balances remaining after seven years may be written off. Local common- federal court by the U.S.
wealth’s attorneys determine whether to criminally prosecute fraud (sidebar). Department of Justice.
VEC has historically been relatively successful at recovering overpayments, but recov-
Recovery rates may ex-
ery has decreased during COVID. VEC’s recent decrease in collections is likely at- ceed 100 percent be-
tributable to the increase in collections workload during the pandemic and suspension cause they do not ac-
of collection activities. DOL expects states to recover at least 68 percent of overpay- count for when the
recovered overpayments
ments that they detect. VEC met this standard in the five years prior to COVID-19,
were established. For in-
with an average recovery rate of 104 percent between 2015 and 2019 (sidebar). VEC’s stance, amounts recov-
rate of recovery of overpayments decreased in 2020, falling to 53 percent for the year, ered in one quarter may
and has continued to decrease to 19 percent in the first two quarters of 2021. have been established in
previous quarters. There-
VEC has suspended referrals of delinquent debt to OAG and a private collections fore, the amount recov-
agency, key collection activities, since October 2020. In July 2021, VEC suspended all ered in one particular
quarter could exceed
remaining overpayment collections activities. VEC indicates that these activities were
was what established.
suspended to allow for backlogs in UI appeals to be processed so that overpayment
decisions could be finalized. (If collections begin before an overpayment decision is
finalized, VEC would potentially have to refund any debt payments that were
Chapter 5: Quality and Accuracy of Claims Determinations
collected prematurely.) VEC also decided to suspended collections activities for all
finalized over-payments in anticipation of the launch of the modernized UI system in
November 1, 2021. The suspension of collections activities is expected to
continue until at least March 2022 but may continue through July 2022.
VEC has also suspended some collections activities because of pending decisions re-
HB 2040 (2021 special
session I) established an lated to VEC’s new overpayment waiver program (sidebar). The new law requires VEC
overpayment waiver pro- to investigate the individual’s situation to determine if requiring repayment would de-
gram allowing claimants prive the individual of the income needed for basic necessities or essential living ex-
who received an overpay-
penses. VEC plans to use benefit payment control unit staff to process these applica-
ment at no fault of their
own to have the overpay- tions, and staff estimate that this process will significantly add to their workload,
ment forgiven if they leading to further delays in resolving claims issues. About 10,000 overpayment waiver
demonstrate repayment applications were received in the first six weeks of the program. Collections actions
would be “contrary to eq-
cannot begin on any overpayments that do not qualify for forgiveness until the appli-
uity and good con-
science”. Claimants over-
cation is processed, a decision is made by benefit payment control unit staff, and ap-
paid for weeks claimed peals rights have been exhausted.
between March 15th, 2020
and July 1, 2022 may ap-
To maximize the potential recovery of overpayments, VEC should immediately re-
ply for a waiver. sume overpayment recovery practices for all overpayments that are finalized and ap-
proved for collections. Results of the BAM survey estimate that VEC has issued more
than $1.2 billion in overpayments from the state program since 2020 (January 2020
through June 2021) that is potentially recoverable, but the agency is not currently pur-
suing recovery of this debt. Subject matter experts indicate that debt recovery is more
difficult the older the debt becomes. Therefore, VEC’s suspension of overpayment
recovery activities may reduce the likelihood that overpayments will be recovered,
which hinders replenishment of the UI trust fund. It also slows reimbursement to
employers who were incorrectly charged.
To minimize the potential impact to the trust fund and employers, VEC should imme-
diately resume collections activities for all finalized overpayments. Further, applica-
tions for waivers of overpayments that have already been received should be processed
quickly so that any overpayments not forgiven can be finalized and recovery activities
initiated. There is no federal timeliness standard or goal for processing overpayment
waivers, but a reasonable time period could be for VEC to process all previously re-
ceived overpayment waiver applications within 60 days and future overpayment waiver
applications within 30 days of receipt. VEC should create and adhere to internal time-
liness standards for processing overpayment waivers.
Additionally, backlogged appeals should be processed as quickly as possible so that
any bona fide overpayments can be finalized and collection efforts may begin. Recom-
mendations addressing the challenges causing these backlogs are discussed in Chapters
3 and 4.
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Chapter 5: Quality and Accuracy of Claims Determinations
RECOMMENDATION 25
The Virginia Employment Commission (VEC) should immediately resume overpay-
ment recovery activities for all finalized overpayments and initiate collections activities
for all future overpayments immediately after finalization. VEC should also create and
adhere to internal timeliness standards for processing all previously received and future
overpayment waiver applications to ensure overpayments are finalized and recovery
activities are initiated in a timely manner.
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Chapter 5: Quality and Accuracy of Claims Determinations
76
Unemployment Insurance System
6 Modernization and IT Security
The Virginia Employment Commission (VEC) is in the final phase of completing a
VEC’s legacy UI IT
three-phase modernization project to replace its legacy unemployment insurance (UI) system was built in 1985
information technology system (sidebar). VEC began the project in 2009 and hired a and is VEC’s primary tool
third-party vendor, HCL America (HCL), to complete the project. The project was for administering UI
claims. The system relies
scheduled to be completed by May 2013 but has experienced multiple delays. Phase
on a mainframe and
one of the project enabled VEC to scan UI case files and documents into a digital COBOL programming, an
repository. Phase two created a new system for calculating and tracking employer UI outdated code language
taxes. Phase three will create a new system for processing and administering UI bene- that was originally de-
signed in 1959.
fits.
In 2021, more than half of states completed or were in the process of modernizing
their UI IT systems. States have taken several approaches to modernization projects,
including completing them in-house, through third-party vendors, or through multi-
state consortiums. States have spent between $14 million and nearly $100 million to
modernize their UI IT systems, depending on the project scope. Modernizing UI IT
systems is complex and requires both software programming and UI expertise, ac-
cording to experts. A 2016 national review of states’ UI IT modernization projects
found that more than a third of projects exceeded their budget or timeline. In addition,
about a quarter of the projects had failed or been discontinued, underscoring the im-
portance of robust project management, careful planning, and proactive risk mitiga-
tion for VEC’s UI modernization project.
VEC has continued to rely on manual processes
because of UI modernization project delays
Delays in the UI modernization project have had consequences for out-of-work Vir-
ginians’ timely receipt of UI benefits. Specifically, delays have required claimants and
staff to continue to use outdated, manual UI claims processes that contributed to per-
sistent inefficiencies at VEC. VEC’s legacy system does not have a customer-facing
portal or dashboard; therefore, claimants must rely on call centers, physical mail, or
VEC’s customer service unit to check their claims status and submit required docu-
ments. Additionally, VEC staff have had to manually process claims and build worka-
rounds to overcome system limitations. For example, VEC staff are required to man-
ually link the associated employer and wage data to each claim. This process required
so much staff time that VEC had to reassign a portion of its workforce division staff
to assist with this task during the pandemic. The legacy system also lacks certain auto-
mated data analytics, which increases the risk of inaccurate or fraudulent claims
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Chapter 6: Unemployment Insurance System Modernization and IT Security
being filed. For example, until August 2021, VEC fraud investigators had to
manually trans-fer data from the legacy system to a database, and then conduct
analysis within the database to identify patterns of potential fraud, such as duplicate
addresses or social security numbers.
Delays have also meant that some key staff have been unable to fulfill their primary
job responsibilities because they have been tasked with supporting the ongoing IT
project. VEC has had to dedicate significant staff time to help design and test func-
tions of the new system. Project delays have required some key VEC staff, such as IT
programmers, appeals and adjudication staff, and quality assurance staff, to devote
significant time to the modernization project. Many of these staff indicated that their
work on the UI modernization project detracted from their ability to focus on their
primary responsibilities at VEC. Using these staff was problematic between 2015 and
2019 when reductions in VEC’s federal administrative funding required VEC to hold
some positions vacant, and it became increasingly problematic in 2020 when VEC
accumulated large UI claims backlogs during the pandemic.
Expenditures on VEC’s UI modernization also nearly doubled the original projected
costs, but much of the increases account for additional functionality. Cost increases
were modest before 2020, with the total project budget increasing 19 percent from $54
million to $64 million between 2009 and early 2020 (Figure 6-1). These additional
funds accounted for certain system requirements not in the original contract, as well
as an increased number of VEC staff being dedicated to the project. The COVID-19
pandemic spurred recent, larger expenditures. Between March 2020 and July 2021, the
total expenditures for the project increased another 26 percent from $64 million to
$81 million. These additional funds were used to hire VEC IT staff to work with the
system, add new federal COVID-19 UI programs, and build in additional functionality
(e.g., more robust identity verification, enhanced customer relationship management
[CRM] capabilities).
VEC also requested and received an additional $16 million from the General Assembly
for FY22 (using funds from the American Rescue Plan Act of 2021) to complete the
testing and deployment of the remaining federal COVID-19 programs and add train-
ing required for the new system. This brought the total UI modernization expenditures
to $100 million. VEC has requested another $13 million for several technology up-
grades after the completion of the UI modernization project, including additional
CRM enhancements, improved communication between the call center and UI sys-
tems, enhanced workforce management functions, and upgraded architecture for
VEC’s applications.
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Chapter 6: Unemployment Insurance System Modernization and IT Security
FIGURE 6-1
UI modernization expenditures significantly exceeded original project cost,
partly due to new federal programs
SOURCE: VEC financial documents, including ARPA request, (updated September 2021), and interviews with VEC
staff.
NOTE: VEC’s UI IT modernization project has been primarily funded through REED Act funds, federal CARES and
ARPA funds, and penalties and interest collected on employer taxes. Five percent of the project’s funding has come
from state general funds. Does not include an additional $13 million in ARPA funds requested to upgrade the UI
system following the completion of the modernization project.
New system expected to have most functions
recommended by experts and enhance usability
VEC’s new UI benefits system includes several key functions that experts recommend
Guided workflows are
should be part of modernized UI IT systems. Most importantly, VEC’s new system designed to respond to
will have an online customer portal that will allow UI claimants to view their UI claim claimants’ answers as
status, notices VEC has sent them, information they still need to provide VEC, and they complete the appli-
cation. For example, if
the total amount of weekly benefits they have received (Table 6-1). These improve-
claimants indicate they
ments should reduce the number of calls VEC receives related to claim status inquiries. lost their job because of
The new system will also have guided workflows (sidebar) and pop-up prompts to help a specific reason, the ap-
claimants understand specific terms and steps in the UI application process. This will plication would then
prompt them with ques-
reduce claims errors that require VEC staff to conduct detailed reviews of claims.
tions designed specifi-
Additionally, the new system will allow claimants to provide detailed information about cally for that situation, to
the circumstances of their separation from employment and other aspects of their UI ensure the correct infor-
eligibility, which should reduce staff time spent adjudicating claims. mation is provided and
to reduce the back-end
However, two important functions are not yet fully included in VEC’s modernized UI work needed to process
IT system. The new system will not allow claimants to electronically recover their per- the claim.
sonal identification number (PIN), if lost. Claimants will be able to electronically re-
quest a new PIN but will have to wait to receive it by mail. PINs will no longer be
needed to file claims online in the new system, according to VEC staff, but they will
still be needed for claimants who contact VEC by phone to file their claims or
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Chapter 6: Unemployment Insurance System Modernization and IT Security
inquire about the status of their claim. Several states offer the ability to electronically
recover PINs (e.g., Arkansas, Michigan, and Utah).
In addition, the new system will be able to automatically notify claimants by email
when their claims status changes or VEC staff need additional information to process
their UI claim, but not by text. VEC leadership indicate they will enable text-based
notifications through VEC’s existing call center contract with Verizon, but it is unclear
when this function would be implemented, and it would not be fully integrated into
the new UI benefits system. Until this function is fully implemented, VEC will con-
tinue to experience claims delays and high call volume from claimants. A national re-
port by The Century Foundation identified the ability to electronically receive email or
text notifications as a best practice for modernized UI systems.
TABLE 6-1
New UI system is expected to have most functions recommended by experts
Included in new
Criteria
VEC UI benefits system
Guided workflow/process for completing applications Fully
Adjustable user capacity during periods of high volume Fully
Optimized for multiple devices (computer, laptop, tablet, phone) Fully
Interface with back-end systems (e.g., appeals, workforce) Fully
Customer portal with claim status information Fully
Electronic document upload/repository Fully
Role-based access permissions for VEC staff and other agencies Fully
Electronically reset/recover passwords or PINs Partially a
Automatic cross-match of UI claims with national fraud databases Fully
Customer relationship management system (CRM) b Partially
Live-chat with staff (business hours) or automated chat-bot (24/7) Partially
Automatic text/email notifications about claim status & required documents Partially
SOURCE: Interviews with VEC staff and national SMEs, including NTT data, On Point Technology, and UWC Strategy;
VEC system demonstration; Review of national white-papers from The Century Foundation, National Employment
Law Project, National Conference of State Legislatures, and U.S. Department of Labor.
a
Claimants will not be able to electronically recover PINs, but PINs will no longer be necessary to apply for a claim
online or access claim information through customer portal.
b
A CRM acts as a repository for all information related to customer interactions, which staff can easily access to re-
spond to customer claims, with a history of transactions, communications, and other account information.
About two-thirds of the modernized system’s functions will be available when the
system is launched, including all basic features needed to process UI claims. The re-
maining one-third of functions are expected to be completed before the close-out of
the project in June 2022. Many of these latter functions would improve the efficiency
and effectiveness of the UI claims process, including a CRM system, or the ability
for
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Chapter 6: Unemployment Insurance System Modernization and IT Security
claimants receiving certain UI benefits to inquire about the status of their claim using
VEC’s Interactive Voice Response system. According to VEC staff, many of these
functions also relate to federal reporting capabilities and will not be needed until quar-
terly reports are filed in January 2022.
VEC has taken recent actions to help mitigate
project risks, but transition to the new system will
present challenges for claimants and VEC staff
Several significant project risks could prevent VEC’s modernized UI IT benefits sys-
The Internal Agency
tems from going live successfully in November 2021. For example, if VEC is unable Oversight Committee
to accurately convert data from the legacy IT system, VEC may be unable to ensure (IAOC) is a monthly meet-
the accuracy of previous claims and whether they were over or underpaid. ing to discuss the UI
modernization project
VEC staff have taken steps to mitigate some of the key risks to the project. For ex- overall, and includes staff
ample, to address the risk of staff attrition, VEC has dedicated more resources to the from VEC, its vendor HCL,
and VITA’s Project Man-
project, including hiring five IT contractors to assist with programming and maintain-
agement Division.
ing the new system. Additionally, VEC has held meetings more frequently, including
The Risk Assessment
both its Internal Agency Oversight Committee (IAOC) meetings (from monthly to bi- Meetings are quarterly
weekly) and its Risk Assessment Meetings (from quarterly to monthly) (sidebar). Staff meetings that focus spe-
involved in UI modernization are providing weekly updates to VEC leadership to dis- cifically on identifying
cuss ongoing risks and mitigation strategies. Moreover, VEC has tested the system and managing risks to the
UI modernization project,
with a wide variety of agency staff, including both experienced staff as well as newer and includes VEC leader-
staff who have less familiarity with the UI program. ship and a smaller subset
of project staff.
The Virginia Information Technologies Agency (VITA) has also increased its oversight
of VEC’s UI modernization project and support to help VEC mitigate risks that could
delay the project’s launch (sidebar). Because of the project’s size and complexity, VITA’s project manage-
VITA’s project management division (PMD) has overseen VEC’s UI modernization ment division (PMD)
project since it began in 2009, and VITA staff participate in monthly oversight meet- oversees state IT projects
that cost $1 million or
ings with VEC leadership and the vendor. VITA staff have also worked with an exter- more (or are considered
nal vendor to complete IV&V reports identifying risk areas throughout the project. In “major” because of im-
July 2021, VITA dedicated additional staff time to managing key project risks and portance or complexity).
helping VEC plan staff training on the new system. VITA also recommended increas- PMD staff monitor
whether projects are on
ing monthly project oversight meetings to twice monthly and an additional IV&V re- schedule and within
port. budget and scope. For
projects significantly be-
In September 2021, VEC announced it would delay the launch of the new system by hind schedule or over
one month to November 2021 to mitigate several risks to the system’s successful im- budget, PMD staff can
plementation. The modernized UI system was scheduled to go live on October 1, recommend that the state
2021, pursuant to an executive directive from the governor in May 2021. According to halt the project or take
other steps to minimize
VEC leadership, this additional time would allow the agency to train more VEC staff further costs and delays.
to use the new system and to conduct usability testing with claimants at VEC field
offices. This decision followed an interim report by JLARC that identified insufficient
training and user testing as key risks to the project’s success.
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Chapter 6: Unemployment Insurance System Modernization and IT Security
One of the most significant risks to the UI modernization project’s ongoing success
is inaccurate/incomplete data conversion, which could make transitioning to the new
system challenging for some claimants and for VEC staff. Data from past and ongoing
UI claims—such as past claims, benefit payments, and personally identifiable infor-
mation—must be converted to a format that can be read by the new system and then
migrated to the new system. Without proper conversion, attempts to migrate the data
may result in either incomplete or inaccurate data being loaded into the new system.
Successful conversion and migration of this data is important because errors in claim-
ants’ data could affect the accuracy of their benefits calculations and payments for
ongoing or future claims, or for identifying overpayments for past claims. As of Oc-
tober 2021, VEC and HCL had conducted 42 data conversion tests. As of September
2021, 95 percent of the data had been converted, with 80 percent of the data convert-
ing correctly. During the most recent test in October 2021, 99 percent of the data had
been converted and the percentage of data converting correctly increased to 92 per-
cent. This is above VEC’s minimum acceptable accuracy rate of 90 percent, as estab-
lished in its contract with HCL. VEC does not plan to run the old and new systems
concurrently, which makes it important that a substantial portion of the data converts
correctly when the new system is launched.
Another significant risk to the UI modernization project’s ongoing success is staff
attrition. VEC’s highest staffing risk is not having a sufficient number of IT staff with
the programming experience needed to support the launch of the new system and
make programming changes after it comes online. For example, experienced IT pro-
grammers will be needed to maintain a read-only version of the legacy system for
several months after the new system is launched. Several of VEC’s IT programmers
familiar with the legacy system have indicated they intend to retire in November 2021.
Additionally, VEC will need to hire additional programmers who can maintain and
“Our single strongest modify the new system once the warranty period with HCL ends.
recommendation is to
place customers at the
VEC should consider taking several additional actions to ensure the long-term success
center of the project, of the modernized UI IT system, including regularly collecting user feedback on sys-
from start to finish. The tem usability. VEC planned to conduct some usability testing with claimants at field
biggest mistake we saw offices before the new system is launched in November, according to VEC leadership.
states make was failing
to involve workers at
However, VEC should also periodically collect feedback from end users after the new
critical junctures in the system is launched. This would help VEC identify areas of customer confusion and
modernization process. collect suggestions for continued system improvement. It would also align VEC with
guidance from experts that states should “allow for extensive usability testing
– Centering Workers:
” by…staff and customers” (sidebar). Several other states, including Pennsylvania and
Massachusetts, created mechanisms for stakeholder involvement during the develop-
How to Modernize UI
Technology
ment and implementation of their UI modernization projects. Washington and New
Mexico send surveys to claimants and employers to collect feedback on their IT sys-
tems and needed improvements.
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Chapter 6: Unemployment Insurance System Modernization and IT Security
RECOMMENDATION 26
The Virginia Employment Commission (VEC) should regularly collect feedback on
the usability of the new Unemployment Insurance benefits information technology
system from claimants and employers and make regular improvements to the system,
as necessary, that address such feedback. VEC should provide a summary of user
feedback and planned and completed system changes to the House Committee on
Labor and Commerce, the Senate Committee on Commerce and Labor, the Commis-
sion on Unemployment Compensation, and the governor by March 31, 2022 and at
the end of each quarter in 2022. VEC should also publish this information on its
website.
After completing the UI modernization project, VEC should identify additional func-
tions that would be beneficial to the new UI IT system. As described previously, VEC’s
new UI benefits system currently lacks a few functions experts recommend (Table 6-
1). Given the length of VEC’s UI modernization project, the new system also may lack
functions recently developed for modern UI IT systems. Therefore, VEC should con-
duct a request for information (RFI) to identify any additional features that would
further enhance the efficiency or effectiveness of the UI IT system. Information
should be collected for all parts of VEC’s UI system—imaging, employer UI tax, and
UI benefits. The RFI should help VEC identify specific features it could add to its UI
IT system, the cost of implementing those features, and the entities capable of devel-
oping those features. After completing the RFI, VEC should determine the feasibility
of modifying its UI IT system using in-house resources or by procuring a third-party
vendor and then proceed with developing them.
RECOMMENDATION 27
The Virginia Employment Commission (VEC) should conduct a request for infor-
mation to identify additional features needed for a modernized unemployment insur-
ance IT system and hire a vendor to develop these features or develop them using
agency staff.
Significant problems remain unresolved in
previously completed UI IT upgrades
Although Phase 2 of VEC’s UI modernization project (the employer tax system) was
launched in November 2015, 49 system problems remain unresolved. VEC and the
vendor have categorized the remaining problems as either minor or moderate in their
severity, but multiple VEC staff indicate that these problems hinder effective UI tax
collection from employers. One problem with the modernized system is that inaccu-
rate tax rate notices are produced for some employers, and another problem is that
incorrect rates of delinquent employer UI tax payments are applied to some
employer accounts. These problems result in employers being charged inaccurately.
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Chapter 6: Unemployment Insurance System Modernization and IT Security
“I spend more than half of They also increase the workload of VEC staff who must respond to employer
my day trying to find inquiries and manually revise the inaccurate rates and notices (sidebar).
ways to get VUIS to work
as it should.
VEC and its vendor have resolved the majority of the problems identified with the
modernized system, but there is no formal plan to address the remaining 49. Nearly
” 600 problems have been identified since testing began in 2012, and more than 90 per-
“We are having to do a lot
of workarounds in order cent had been resolved as of November 2021. More than half of the remaining 49
to complete our jobs. issues have been unresolved for two years or more. Moreover, VEC tax staff inter-
These take time to figure
viewed and surveyed by JLARC expressed overall dissatisfaction with the new system,
out and sometimes
prevent [us] from being citing slowness, unexpected errors, and a general lack of user-friendliness. According
able to take further steps to VEC staff, there is no formal plan or timeline for resolving these problems.
in our collection efforts.
” RECOMMENDATION 28
“Employers point out The Virginia Employment Commission should require unemployment insurance IT
errors and mistakes on
important aspects of the modernization contractor to develop a plan that includes specific actions and a time-
correspondence that our line for addressing all existing tax system problems and details (1) how each problem
system generates— will be fixed, (2) deadlines for fixing each problem, and (3) any additional resources
especially needed to fix the problems.
miscalculations on
Annual Tax Rate Notices
that are defects of our VEC IT staff are also not sufficiently trained to modify or extract data from the em-
system and cannot be ployer tax system. VEC’s contract with HCL assigns responsibility to HCL, “to con-
fixed. struct training materials so that the VEC assigned…staff is familiar with the functions
– VEC tax staff
” and features (including navigation) of the UI system.” However, almost no VEC IT
staff have received training on the employer tax system, including on how to run ac-
curate data queries. HCL staff are still considered the system experts and are often
consulted about the information contained in the system. This is problematic because
HCL will stop providing system support one year after the project close-out date, at
which point VEC staff will assume full responsibility for the system.
VEC should work with HCL to draft a plan for training VEC IT staff to use and
modify the employer tax system. The plan should describe which VEC staff require
training, what the training will cover, and when the training will be complete. Training
should be scheduled when HCL and VEC staff have sufficient capacity, but all training
should be completed before HCL’s contractual warranty ends in June 2023.
RECOMMENDATION 29
The Virginia Employment Commission (VEC) should establish a plan with its unem-
ployment insurance modernization vendor to ensure VEC IT staff are sufficiently
trained to operate and modify the employer tax system.
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Chapter 6: Unemployment Insurance System Modernization and IT Security
VEC’s IT systems, policies, and processes have not
undergone comprehensive review in several years
VEC has not had a comprehensive review of IT security requirements conducted since
VEC has documented 18
December 2017. VEC’s internal audit division regularly audits VEC’s IT security, but attempted cybersecurity
its audits are limited in scope and based on risk, with security controls and require- breaches since 2019, four
ments being reviewed on a rotating basis. Virginia’s Auditor of Public Accounts (APA) of which were at least
partially successful. In two
also regularly reviews VEC’s IT security, but reviews are similarly limited in scope. In
of these breaches, a VEC
recent years, the APA identified several findings related to VEC’s IT security practices, employee’s credentials
including the need to improve the agency’s IT strategic governance. VEC hired a third may have been compro-
party (Vaco Risk Solutions) to conduct a comprehensive review of its compliance with mised, but VEC’s IT secu-
state IT security standards in 2017. The review identified 80 security shortcomings. rity staff took immediate
action to minimize the
Nearly all of the issues identified were resolved by 2019, and VEC has not had any risk. In both cases, the
major cybersecurity breaches since then (sidebar). Nevertheless, VEC’s last compre- incident was isolated to a
hensive IT security compliance review was conducted several years ago. Another com- single device, and did not
prehensive review is warranted, particularly given the many changes that VEC’s IT compromise the entire
VEC network.
systems have undergone during 2020 and 2021. Furthermore, although many of
VEC’s agency policies align with VITA’s IT security requirements for state agencies, a
comprehensive IT security review would verify the extent to which VEC is fully meet-
ing these requirements.
VITA staff have indicated that they would be better able to assist VEC with IT security
if the agency were fully transformed to the state’s central IT environment. VEC is one
of the last agencies in the Commonwealth to fully transform to Virginia’s centralized
IT infrastructure provided by VITA. VEC currently receives many services through
the centralized model, but a portion of VEC’s IT network exists outside of the state’s
central environment, including more than 300 servers used for developing and testing
the modernized UI IT system and several other minor administrative systems. VEC
was originally scheduled to fully transform to the state’s centralized IT infrastructure
in 2020, but the agency’s UI modernization project has delayed VEC’s ability to com-
plete transformation.
Added IT security is a key advantage to fully transforming to the state’s centralized IT
infrastructure. VITA and the state’s third-party security vendor (Atos) are responsible
for testing and ensuring the security of systems within the state’s environment, and
VEC has this responsibility for the systems that remain in its own environment. How-
ever, many of VEC’s internal servers are not tied to the centralized IT infrastructure,
so they are not receiving the ongoing security scans and monitoring that VITA’s secu-
rity vendor provides. VITA staff indicate that neither they nor their vendor has full
visibility into VEC’s internal systems to monitor information security, and so they are
unable to detect vulnerabilities or security breaches and would be unable to contain
data breaches.
VEC should work with VITA to have an IT security audit conducted by a vendor as
soon as possible because complete transformation to the state’s IT infrastructure is
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Chapter 6: Unemployment Insurance System Modernization and IT Security
unlikely before June 2022. The audit should (1) review the extent to which VEC is
complying with state IT security requirements and (2) clarify the coverage of VITA
and VEC’s IT security protections and identify any gaps that warrant corrective action.
RECOMMENDATION 30
The Virginia Employment Commission (VEC) should work with the Virginia Infor-
mation Technologies Agency (VITA) to facilitate an audit of VEC’s IT security sys-
tems and to identify any necessary IT security improvements. The audit should be
completed by a vendor approved by VITA. The audit should validate whether VEC’s
existing IT security systems meet the requirements issued by VITA.
VEC should also complete its transformation to the state’s central IT infrastructure as
soon as possible after completing UI modernization. Transferring to the state’s infra-
structure will mitigate many of VEC’s potential IT security risks because there will be
more clarity on the coverage of IT security protections and VEC’s adherence to state
IT security requirements. Transformation will also eliminate VEC’s need to maintain
a temporary cloud solution to host untransformed servers, which costs VEC approx-
imately $2.4 million per year. Transforming before UI modernization is complete
(scheduled for June 2022) is not feasible, according to VEC staff. Both projects require
significant VEC IT staff resources, and IT challenges with transformation could neg-
atively affect the success of UI modernization.
RECOMMENDATION 31
The Virginia Employment Commission should fully transform all agency IT systems
and servers to the state’s central IT infrastructure as soon as possible.
86
Unemployment Insurance Eligibility
7 Criteria and Benefits
Federal law requires each state to provide unemployment insurance (UI) benefits to
Federal unemployment
individuals who meet eligibility requirements (sidebar). There are federal eligibility re- law is established
quirements, but states interpret these and add their own requirements. States also set through the Federal Un-
the amount and duration of UI benefits individuals can claim. The Virginia Employ- employment Tax Act and
the Social Security Act of
ment Commission (VEC) reviews individuals’ UI eligibility and administers UI bene-
1935.
fits, but the General Assembly sets UI eligibility requirements and benefit levels.
UI benefits should be accessible to eligible unemployed individuals searching for em-
ployment. Accessibility can be limited when eligibility criteria are especially restrictive,
there is insufficient awareness of the UI program, or the benefits application process
is overly complex. (See Chapter 4 for more information on awareness in Virginia and
the complexity of VEC’s application process.) Low participation in UI programs limits
states’ ability to provide temporary income support to unemployed individuals, which
ultimately helps stabilize the state economy.
Many Virginians eligible to claim UI benefits do not,
as evidenced by Virginia’s low recipiency rate
Subject matter experts point to a state’s recipiency rate as the best regularly reported meas-
ure of the accessibility of a state’s UI program. A state’s UI recipiency rate is defined A state’s UI recipiency
rate underestimates the
as the percentage of the state’s unemployed population receiving UI benefits. Recipi- actual accessibility of UI.
ency is an imperfect measure of accessibility because it is calculated using a state’s total For example, an esti-
estimated unemployed population, rather than a state’s eligible unemployed population. mated 300,000 Virginians
Consequently, recipiency rates (as defined by the U.S. Department of Labor) underes- were unemployed on av-
erage each month during
timate the actual utilization (or take-up) of a state’s UI program, because the recipiency COVID-19, but only an
rate calculation includes ineligible individuals whereas the take-up rate calculation does estimated 220,000 were
not (sidebar). As a result, some experts try to calculate UI take-up rates (sidebar). Nev- eligible for UI.
ertheless, recipiency rates are the more commonly used measure of accessibility be- Take-up rate is an esti-
cause they are regularly published and based on federal statistics. Before COVID-19, mate of UI claimants as a
share of the eligible un-
no state had achieved a recipiency rate of much more than 50 percent since after the
employed population.
Great Recession. Additional details about
the methodology to esti-
Virginia has consistently had one of the lowest recipiency rates in the country over the
mate eligibility is in Ap-
last two decades. Virginia’s average recipiency rate was 24 percent between 2000 and pendix B.
2020 compared with the national average recipiency rate of 35 percent. Only two other
states (Arizona and South Dakota) consistently had lower recipiency rates (Figure 7-
1).
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
FIGURE 7-1
Virginia’s average recipiency rate was third lowest in the nation from 2000–
2020
SOURCE: U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Chartbook,
Section A: Labor Force Data.
Virginia’s recipiency rate has also generally declined in recent decades, similar to other
Recipiency rates in- states. Virginia’s recipiency rate decreased from 27 percent in 2000 to 16 percent in
creased during COVID-
19. Virginia’s recipiency
2019. Virginia’s decreasing recipiency rate follows a broader national trend; the na-
rate increased to 70 per- tional average recipiency rate decreased from 37 percent in 2000 to 28 percent in 2019.
cent in 2020 (over 300% (Virginia and other states experienced a significant and atypical increase in recipiency
from 2019). The average rates in 2020 during COVID-19, sidebar.) Although recipiency rates have generally
national recipiency rate
increased to 75 percent.
decreased nationwide, Virginia’s recipiency rate has remained comparably low, never
Recipiency rates similarly exceeding the lowest 10 states between 2000 and 2019 (Figure 7-2).
increased during previ-
ous economic recessions
(e.g., post 9/11 recession FIGURE 7-2
and Great Recession), Virginia’s recipiency rate has remained below the U.S. average since 2000
but the COVID-19 in-
crease was significantly
larger.
SOURCE: U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance Chartbook,
Section A: Labor Force Data.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
Several factors likely contribute to Virginia’s low and generally decreasing recipiency
A base period is used to
rate. Two of the main factors that limit UI utilization, according to experts, include
calculate the amount of
stringent UI eligibility criteria and relatively low UI benefits. Overly stringent UI eligi- UI benefits claimants re-
bility criteria limit the number individuals who are eligible for UI benefits. Low UI ceive in Virginia. For
benefits can depress recipiency when the value of benefits is not enough to justify the most claimants, VEC staff
look at wages in the first
time or administrative burden of completing the claims process.
four of the last five quar-
ters before the UI claim
Virginia’s UI eligibility requirements are similar to was filed.
other states
An individual must meet three categories of eligibility requirements to qualify for UI:
JLARC staff compared 12
monetary eligibility, separation eligibility, and continuing or weekly eligibility (Figure 7- states’ eligibility policies
3). To be monetarily eligible, individuals in Virginia must earn a combined total of with those in Virginia.
$3,000 in two of the four quarters of their base period (sidebar) to qualify for the Three categories of
states were selected, in-
lowest potential benefit amount ($60 per week). To meet separation eligibility require-
cluding neighboring
ments, individuals must be unemployed through no fault of their own. Specifically, states (Washington, D.C.,
individuals cannot have been fired due to misconduct or engaged in fraud. The state Kentucky, Maryland, Ten-
outlines limited circumstances when an individual may voluntarily quit their job and nessee, West Virginia),
still be eligible for unemployment insurance (known as a “voluntary quit”). Finally, states with high recipi-
ency rates (Massachu-
individuals must file a continuing weekly claim certifying that they have met work setts, New Jersey, Penn-
search requirements and remain “able and available” for work to satisfy weekly eligi- sylvania), and states with
bility requirements. low recipiency rates (Ari-
zona, Florida, Georgia,
South Dakota). Twenty-
FIGURE 7-3 two eligibility policies
Individuals must meet three categories of eligibility requirements to receive UI and requirements were
evaluated. A subset of
benefits
these is shown in Table
7-1 and the full analysis
is provided in Appendix I.
Self-employed workers
and independent con-
tractors (“gig workers”)
are ineligible for UI
benefits in Virginia and
SOURCE: Interviews with VEC staff. other states because
they are not attached to
an employer who pays UI
Virginia’s UI eligibility requirements and policies generally align with UI eligibility re-
taxes. This policy will in-
quirements and policies in 12 other states reviewed (sidebar) (Table 7-1). For example, creasingly affect accessi-
consistent with many of the 12 states, Virginia requires earnings to establish UI eligi- bility to UI as the share
bility and includes employees who voluntarily quit but demonstrate “good cause.” As of self-employed workers
grows. A description
in every other state reviewed, some workers are categorically ineligible for participation
about the growth of the
in the program, including self-employed workers or independent contractors (also gig economy and the
known as “gig workers”) (sidebar). potential impact on UI is
included in Appendix I.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
TABLE 7-1
Virginia’s eligibility policies largely align with those in a sample of 12 other states
Eligibility-related policies Policy exists # peer states (of 12)
in Virginia where policy exists
Allows voluntary quit separations for “good cause” Yes 12
Misconduct disqualification (10 weeks or less) a Yes 11
1–3 work search contacts required per week Yes 11
Disqualification because of illegal drug use Yes b 6
Multiple quarterly earnings used to calculate benefits Yes 12
Allowance for dependents No 4
Maximum benefit duration >= 26 weeks Yes 10
Partial earnings allowed while receiving benefits Yes 7
SOURCE: U.S. Department of Labor, Employment and Training Administration, 2020 Comparison of State Unemployment
Laws; Code of Virginia.
NOTE: Table includes a subset of the eligibility policies reviewed. Full list of eligibility policies reviewed is included in
Appendix I and a description of the 12 states used for comparison is included in Appendix B. a If individuals are discharged (or
separated) from work because of misconduct, they are ineligible for UI under both federal and state law. States retain author-
ity to define misconduct, and state UI agencies interpret these statutory definitions when administering the program. State
laws generally require that an individual work again for a specified number of hours or weeks before they can again file a
claim for UI if laid off by a new employer. Subject matter experts generally consider a disqualification period of 10 weeks or
less to be standard. b If confirmed by positive U.S. Department of Transportation screen.
While Virginia’s eligibility requirements generally align with those in other states, the
state’s minimum earnings threshold to qualify for UI benefits is slightly higher than
thresholds in a majority of other states. Virginians must earn a total of at least $3,000
during the two highest quarters of their base period to be eligible for UI benefits. This
means that a minimum wage worker earning $9.50 per hour would need to work
slightly more than 13 hours per week, on average, for two quarters to qualify for the
minimum weekly UI benefit. Compared with all other states, Virginia’s minimum earn-
ings threshold is the 19th highest (Figure 7-4). Minimum earnings requirements vary
widely among other states. Washington is the only state that does not have a minimum
earnings eligibility requirement, instead requiring claimants to work a minimum num-
ber of hours to qualify. North Carolina has the highest minimum earnings threshold,
where workers need to earn a minimum of about $6,200 in total during the two highest
quarters to qualify for UI.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
FIGURE 7-4
Virginia’s minimum earnings threshold is higher than the national median
SOURCE: U.S. Department of Labor, Employment and Training Administration, 2020 Comparison of State
Unemployment Laws.
NOTE: States use varying base periods to calculate whether a claimant’s earnings meet the state’s minimum qualify-
ing threshold. Washington is not included in this chart because it does not have a minimum earnings threshold for
individuals to qualify for UI. Instead, Washington requires claimants to have worked for 680 hours and earned
wages (no baseline qualifying amount) during their base period to qualify for UI.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
Length of time Virginians can receive UI aligns with
other states, but benefit levels are relatively low
The original intent of UI is to provide partial financial support while individuals search
for reemployment. However, UI benefits are meant to be temporary and are not in-
tended to disincentivize individuals from returning to work. Therefore, states must
balance helping individuals replace income and cover basic living costs with encourag-
ing reemployment. To achieve this, many states structure benefit levels as a share of
average wage levels in the state to reflect cost-of-living adjustments, while also limiting
the number of weeks claimants are eligible to receive benefits (also known as benefit
duration), so individuals return to work.
Benefit levels and duration are set by the General Assembly. To determine a claimant’s
States have maximum
UI benefit durations be- maximum benefit duration, VEC staff must examine a claimant’s total prior earnings
cause UI benefits are in- during the entire base period to measure how actively the claimant worked during the
tended to provide tem- base period. The more a claimant makes during the entire base period, the longer they
porary financial support
can receive benefits. In Virginia, the maximum length of time claimants may receive
while individuals search
for reemployment. Indi- state UI benefits ranges from 12 to 26 weeks in non-recessionary periods, depending
viduals are eligible for on a claimant’s prior earnings (sidebar). (VEC is permitted to extend claimants’ bene-
the upper limit of Vir- fits for an additional 13 weeks during periods of high unemployment.)
ginia’s maximum UI ben-
efit duration when they VEC staff must also determine the weekly benefit amount an individual is eligible to
earn more than $37,800 receive. Weekly benefits are based on the highest two quarters of earnings during the
during their base period.
individual’s base period (the first four of the last five quarters before the UI claim was
Similarly, they are eligi-
ble for the lower limit of
filed). Weekly benefit levels range from a minimum of $60 to a maximum of $378. An
Virginia’s maximum UI individual would need to meet the minimum threshold of $3,000 in total during the
benefit duration when two highest quarters of their base period (equivalent to $6,000 per year if a claimant’s
they earn at least $3,000 earnings and hours are consistent) to qualify for the $60 minimum weekly benefit
during their base period.
amount and make $18,900 over the highest two quarters of the base period (equivalent
to $37,800 per year) to qualify for the $378 maximum weekly benefit amount.
Number of weeks Virginians can collect UI benefits is largely
comparable with other states
Claimants typically collect UI benefits for fewer weeks than their allotted maximum
duration. This occurs when claimants find a new job and stop filing for benefits, do
not file their weekly claims, or become ineligible because of other factors. In 2019,
claimants collected UI benefits for an average of nearly 14 weeks in Virginia and just
under 15 weeks nationwide. That same year, only 35 percent of claimants received
benefits for their full number of eligible weeks (known as “exhausting” benefits).
The upper limit of Virginia’s maximum UI benefit duration (26 weeks) is similar to 39
other states (Figure 7-5). Only eight states, including North Carolina and Georgia,
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
have a shorter upper limit (ranging from 16 to 25 weeks). Montana (at 28 weeks) and
Massachusetts (at 30 weeks) are the only states that routinely allow some claimants to
receive benefits for longer than 26 weeks.
The lower limit of Virginia’s maximum UI benefit duration (12 weeks) is somewhat low
compared with other states. The shortest maximum timeframe claimants could be eli-
gible for UI benefits is longer in 29 other states, but there is wide variation across
states. For example, Washington’s range of maximum UI benefit duration goes down
to one week, while some states allow all claimants to receive unemployment benefits
for 26 weeks (depending on weekly claims filing). Having a comparably lower limit of
maximum UI benefit duration means that some Virginia claimants receive benefits for
less time than claimants in other states. However, changes to Virginia’s lower limit
appear unnecessary because most claimants do not claim benefits for all weeks they
are eligible.
Virginia provides lower UI benefit levels than other states
Virginia’s UI benefits provide less income replacement than many other states. Experts
generally agree that UI benefits should replace roughly 50 percent of an individual’s
weekly wages. For individuals earning between $6,000 and $37,800 a year (about 40
percent of Virginia’s workforce), Virginia’s UI benefits replace 52 percent of their in-
come. For roughly 56 percent of Virginia’s workforce (individuals earning more than
$37,800), Virginia’s UI benefits replace less than half of claimants’ prior income be-
cause Virginia caps the maximum benefit amount claimants receive. Virginia’s average
2019 income replacement ratio was 34 percent, ranking 33rd among states.
The maximum weekly UI
In addition to its replacement ratio, Virginia has relatively low weekly benefit amounts benefit amount reflects
compared with other states. In 2019, Virginia’s maximum weekly benefit amount (side- the largest UI benefit
bar) was $378, which ranked 37th nationwide (Figure 7-6). Virginia’s maximum benefit that claimants can re-
ceive each week through
is also low as a share of the state’s 2019 average weekly wage of $1,154. The $378
Virginia’s state UI pro-
maximum benefit for state UI is just under 33 percent of the state’s average weekly gram. The average
wage, making it 43rd in the nation on this measure. Virginia’s average weekly benefit weekly UI benefit
was $316, which ranked 36th nationwide in 2019 and which has consistently fallen amount reflects the
amount of UI benefits
below the average and median weekly benefit for the nation. Virginia’s average weekly
that claimants collected,
benefit amount dropped considerably in 2020 because lower earners participated at on average, each week
higher rates in the traditional state UI program during the pandemic. Decreases in the through Virginia’s state
average weekly benefit amount are typical during high unemployment periods. UI program.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
FIGURE 7-5
Virginia’s upper bound for benefit duration is comparable to other states, but
its lower bound is moderately low
SOURCE: U.S. Department of Labor, Employment and Training Administration, 2020 Comparison of State Unemploy-
ment Laws.
NOTE: Nine states, including West Virginia and Maryland, have what is called uniform duration, meaning all claimants
are eligible to receive unemployment benefits for a set maximum duration (26 weeks), which does not vary with hours
worked or prior earnings. Claimants in these states are subject to similar weekly filing requirements and may stop
receiving benefits before their full duration has expired.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
FIGURE 7-6
Virginia’s average and maximum benefit levels are relatively low, meaning that
benefits replace less of claimants’ prior earnings than in other states
SOURCE: U.S. Department of Labor, Employment and Training Administration, Unemployment Insurance
Chartbook, Section A: Labor Force Data; 2020 Comparison of State Unemployment Laws.
NOTE: The right-hand side of the figure reflects 2019 replacement ratios prior to the COVID-19 pandemic. Replace-
ment ratios typically fall during recessionary periods as the group of individuals claiming UI diversifies and includes
higher-income individuals who cannot replace their income at the same rates because of maximum benefit caps. In
2020, however, replacement ratios improved in some states as a greater share of lower-income earners from high-
risk industries affected by pandemic-related closures claimed unemployment insurance.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
Virginia’s UI benefit levels do not cover basic food, housing, and
transportation needs for many individuals
Virginia’s standard state UI benefit replaces less than half of basic food, housing, and
Cost-of-living estimates
transportation costs for many individuals, particularly those who qualify for lower ben-
use cost-of-living data
from the Massachusetts efits, live in expensive areas, or have dependents (sidebar). For example, a single adult
Institute of Technology’s working full time and making the minimum wage could be eligible for a $197 weekly
(MIT) Living Wage Pro- unemployment benefit. This weekly benefit would not cover the individual’s cost of
ject and are limited to
housing or the combined cost of food, transportation, and medical expenses (Figure
Virginia’s traditional
state UI program, where 7-7).
the maximum weekly
benefit is $378. This
analysis does not include
FIGURE 7-7
temporary federal UI Benefits do not support basic food, housing, and transportation costs for many
programs (e.g., PUA, individuals
PEUC) that increased
benefits $300–$600. See
Appendix B for addi-
tional information.
SOURCE: Massachusetts Institute of Technology, Living Wage Project; U.S. Department of Labor, Employment and
Training Administration, Unemployment Insurance Chartbook, Section A: Labor Force Data.
NOTE: Individuals whose pre-unemployment income qualifies them for the $60 minimum weekly benefit and indi-
viduals whose pre-unemployment income was equivalent to full-time minimum wage would not have been able to
cover their cost of living even when employed. All data comes from MIT’s 2020–2021 update, and values are reported
in 2020 dollars. The new minimum wage of $9.50 per hour was used to calculate earnings and benefit levels for
minimum wage workers. The benefit levels shown above are solely based on traditional state UI and not expanded
federal benefits available during the COVID-19 pandemic. Taxes reflect MIT estimate that single adults in Virginia pay
approximately $6,500 and individuals with dependents pay approximately $13,000 in taxes annually.
The percentage of living expenses standard UI benefits replace varies widely across
the state. For example, the $316 average weekly benefit (2019) would cover 65 percent
of basic living costs in Roanoke and 40 percent in Arlington County. The $197 weekly
benefit for full-time minimum-wage earners would cover 41 percent of basic living
costs in Roanoke and 25 percent in Arlington County, because the local cost of living
varies significantly.
96
Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
The UI benefit covers a lower proportion of expenses for claimants with dependents.
For claimants with a single dependent, a weekly UI benefit of $316 would cover
roughly 19 to 31 percent of the cost of living and dependent care. A weekly UI benefit
of $197 would cover only 12 to 20 percent of the cost of living and dependent care.
The weekly UI benefit covers less expenses if the claimant supports additional de-
pendents.
General Assembly could consider increasing UI benefits
A state’s UI benefit levels are a legislative policy decision. UI benefits are funded
through state UI employer taxes; therefore, increasing benefits would require increas-
ing employer tax rates or identifying an alternative funding source (e.g., general funds
or a new administrative UI tax). Chapter 8 includes policy options that could raise
additional revenue for the trust fund and potentially cover the costs of benefit en-
hancements the General Assembly wishes to implement, if any.
Increasing UI benefits by tying them to an economic metric
Virginia does not regularly increase UI benefit amounts, which is a primary reason its
The General Assembly
UI benefits are lower than other states. Virginia’s UI benefits were last increased in altered UI benefit levels
2014 (sidebar). Experts recommend automatically indexing maximum weekly UI ben- in 2008 and 2014. In
efits to an economic metric that will rise with earnings levels, such as a percentage of 2008, the maximum ben-
the state’s average annual salary or average weekly wage. A 1981 third-party review of efit was raised from $363
to $378, which corre-
Virginia’s UI program recommended tying the maximum weekly benefit amount to 55
sponded to 44% of the
percent of the state’s average weekly wage and indexing it annually but was only par- state’s average weekly
tially implemented (sidebar). Currently, 35 other states automatically index their maxi- wage. (This was a one-
mum weekly benefit amount to a statewide economic metric (e.g., the state’s average time increase; benefits
were not indexed to
weekly wage or average annual earned income).
weekly wages.) In 2014,
The General Assembly has several options to automatically increase its UI benefits if the General Assembly al-
tered the minimum ben-
it wishes to do so. Specifically, the General Assembly could amend state law to index
efit, increasing it from
the maximum UI benefit to a statewide economic measure, such as a percentage of $54 to $60 and raised
the state’s average weekly wage (e.g., 50 percent) or the state’s annual growth rate of the threshold for mone-
the average weekly wage (e.g., 3 percent). The economic metric chosen would affect tary eligibility from
the size and speed of UI benefit level increases and would have varying fiscal impacts $2,700 to $3,000.
on the state’s UI trust fund. For example, if benefits were indexed to 50 percent of
the state’s average weekly wage, maximum benefits would increase from $378 to ap-
proximately $682 in the first year and automatically adjust each year after that as the
state’s average weekly wage changes (Table 7-2). This approach would have a signifi-
cant upfront cost for the UI trust fund—approximately $46 million in the first year
(CY23) and $340 million over five years (CY23–CY27). In contrast, if benefits were
indexed to the state’s annual growth rate of the average weekly wage (assumed to be
nearly 3 percent), maximum benefits would increase from $378 to approximately $389
in the first year and automatically adjust each year after that as the state’s average
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
weekly wage changes. The financial impact to the trust fund would occur more grad-
ually but still accumulate over time, totaling approximately $2 million in the first year
(CY23) and $41 million over five years (CY23–CY27).
Under any scenario, the General Assembly could require adjustments to the benefits
formula to be made gradually each year until the target amount or growth rate is
achieved. This approach would prevent the increase in benefits from too acutely af-
fecting the trust fund, especially if an increase were to be enacted during recovery
from a recession or other period of high unemployment.
Policy options for con-
sideration. Staff typically POLICY OPTION 4
propose policy options The General Assembly could amend section § 60.2-602 of the Code of Virginia to
rather than make recom- modify the unemployment insurance benefits formula to automatically adjust unem-
mendations when (i) the ployment insurance benefit amounts annually based on a statewide economic metric.
action is a policy judg-
If the General Assembly wishes to increase UI benefits but does not want to do so
ment best made by
elected officials—espe-
annually, another option is to enact a one-time increase to UI benefits. The increase
cially the General Assem- could be designed several ways. For example, Virginia’s maximum UI benefit could be
bly, (ii) evidence suggests increased to $577, which was 50 percent of Virginia’s average weekly wage in 2019
action could potentially (Table 7-2). This change would cost the state’s trust fund approximately $32 million in
be beneficial, or (iii) a re- the first year (CY23) and $209 million over five years (CY23–CY27).
port finding could be ad-
dressed in multiple ways. POLICY OPTION 5
The General Assembly could amend section § 60.2-602 of the Code of Virginia to
modify the unemployment insurance benefits formula to enact a one-time increase in
the maximum unemployment insurance benefit amount.
TABLE 7-2
Increases to Virginia’s maximum benefit amount could be structured in several
ways, but each option would increase trust fund costs
Potential state UI
New max UI trust fund cost
Policy benefit amount (2023) (2023)
Index max UI benefit amount $682 $46 million
(e.g., to 50% of VA’s average weekly wage)
Index growth of the max UI benefit amount $389 $2 million
(e.g., to growth rate of VA’s average weekly wage of 2.8%)
One-time increase to max UI benefit amount $577 $32 million
(e.g., to 50% of VA’s 2019 average weekly wage)
SOURCE: JLARC analysis of data from the U.S. Department of Labor and U.S. Bureau of Labor Statistics using the UNIS-X
model.
NOTE: Table reflects the new potential maximum benefit amount and the potential initial increase to Virginia’s UI trust fund in
calendar year 2023. Maximum benefit amounts and trust fund costs would increase in later years for several of the policies.
For more information about the assumptions and data used for these projections, see Appendix B.
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Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
Increasing benefits for claimants with dependents
Virginia could also consider increasing UI benefits for eligible individuals with depend-
ents. Dependents significantly increase individuals’ living expenses. Thirteen states cur-
rently have “dependent allowances” to help benefits cover some of the increased cost
of dependent support. In Maryland, for example, individuals can receive between $8
and $40 per dependent up to a certain amount. In New Jersey and Rhode Island, indi-
viduals receive dependent allowances, which are calculated as a portion of claimants’
weekly benefit amount. States’ definitions of a dependent varies, but dependents must
be primarily supported by the individual.
A dependent allowance could be calculated as a percentage of an individual’s weekly
benefit amount for each dependent. Alternatively, the state could develop a dependent
allowance based on a portion of the median cost of childcare for Virginians. When
considering whether to increase benefits for claimants with dependents, the General
Assembly could take into account other supports they receive. For example, the TANF
program is available to help low-income Virginians with dependent expenses. The new
federal Child and Dependent Care Tax Credit is also available to help with the costs
of dependents. The credit is set to sunset in 2021 but may remain available through
2025 if Congress extends it.
POLICY OPTION 6
The General Assembly could amend section § 60.2-602 of the Code of Virginia to
modify the unemployment insurance benefit formula to create a dependent allowance
that is tied to an economic metric or calculated as a portion of the individual’s weekly
benefit amount.
Regularly measuring UI benefits would inform policy decisions
Regardless of whether the General Assembly increases UI benefits, Virginia should
regularly track metrics related to UI benefits and establish a mechanism to help assess
the adequacy of benefits. Neither VEC leadership nor the legislative committee that
currently oversees the state’s UI trust fund (the Commission on Unemployment Com-
pensation) regularly examine metrics related to recipiency, average benefit levels, or
benefit income replacement ratios. VEC should annually calculate and compile infor-
mation on average UI benefit levels, the average income replacement of UI benefits
in Virginia, and the recipiency rate for UI benefits. VEC should include this infor-
mation in its annual report to the Commission on Unemployment Compensation.
Other states, like New Jersey and California, regularly review state UI benefit levels,
income replacement ratios, and recipiency rates.
99
Chapter 7: Unemployment Insurance Eligibility Criteria and Benefits
RECOMMENDATION 32
The General Assembly may wish to consider amending section § 60.2 of the Code of
Virginia to require the Virginia Employment Commission (VEC) to annually calculate
average unemployment insurance (UI) benefit levels, the average income replacement
of UI benefits in Virginia, and the recipiency rate for UI benefits. VEC should provide
this information in its annual report to the Commission on Unemployment Compen-
sation.
As part of this regular review of UI benefits, the Commission on Unemployment
Compensation could be granted the authority to convene an advisory committee to
consider potential changes to Virginia’s UI benefits. Committee membership could
include employer representatives (e.g., chambers of commerce, industry associations),
employee representatives (e.g., labor advocacy groups, legal aid representatives), and
subject matter experts (e.g., labor economist, finance expert, labor law expert). The
advisory committee could be tasked with (1) reviewing UI benefits, replacement ratios,
and recipiency rates; (2) identifying factors that affect UI benefits and recipiency (e.g.,
design of UI benefit calculations or UI eligibility criteria); (3) assessing the advantages
and disadvantages of potential changes to benefits; and (4) recommending to the
Commission options to change benefit levels when needed.
POLICY OPTION 7
The General Assembly could amend section § 60.2 of the Code of Virginia to author-
ize the Commission on Unemployment Compensation to convene an advisory com-
mittee comprising stakeholders and subject matter experts to (1) review UI benefits,
replacement ratios, and recipiency rates; (2) identify factors that affect UI benefits and
recipiency (e.g., design of UI benefit calculations or UI eligibility criteria); (3) assess
the advantages and disadvantages of potential changes to benefits; and (4) recommend
to the Commission options to change benefit levels when needed.
100
Unemployment Insurance Trust Fund
8 Solvency and Employer Taxes
Federal law requires states to fund unemployment insurance (UI) benefits with em-
ployer taxes, but most of the tax design and collection are left to states’ discretion.
Collected taxes are deposited in special trust funds, which can be used only to pay UI
benefits. A state’s trust fund level will rise if tax collections exceed benefit payments
in the same year or fall if the reverse is true. Trust funds must be adequately funded
because eligible claimants are legally entitled to benefits. In some states, including Vir-
ginia, trust fund health also affects the amount of state UI taxes that employers pay,
with rates increasing when the trust fund drops below certain levels.
In addition to the state’s economy and the demand for UI benefits, Virginia’s trust
fund levels depend on the General Assembly’s policies for employer UI taxes. State
law establishes three components of the UI tax on liable employers (Figure 8-1). The
first component—the base tax—consists of 14 possible schedules depending on the
prior year’s trust fund level. Each schedule contains a range of rates; an employer’s
assigned rate depends on its prior use of UI (unless assigned a flat rate such as for new
or delinquent employers). The second component is a pool tax paid by all employers to
fund benefits that cannot be charged to a specific Virginia employer (e.g., paid to for-
mer workers of out-of-state employers or employers that are now out-of-business).
The third component is a solvency tax of 0.2 percent that goes into effect when the
state’s trust fund falls below 50 percent of the state’s solvency goal. Based on the trust
fund level at the end of the prior fiscal year and the amount of benefits needing to be
funded by the pool tax, the Virginia Employment Commission (VEC) determines each
year’s tax rates.
FIGURE 8-1
Virginia’s UI tax has three parts
SOURCE: JLARC analysis of Code of Virginia.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Virginia’s UI trust fund has recovered from
recessions at a pace comparable to other states
The U.S. Department of Labor (DOL) and experts view the optimal UI trust fund
The Average High Cost balance as large enough to remain solvent during a typical economic downturn and to
Multiple is the most com- avoid “prolonged and large-scale indebtedness” if insolvency does occur. States need
mon measure of UI trust
outside funding to cover trust fund insolvency, typically through interest-bearing loans.
fund readiness used by ex-
perts to assess the funds Insolvent or low trust funds require either increasing employer taxes or cutting claim-
needed to pay UI benefits ant benefits. Higher trust fund levels can mitigate or delay the need for these actions
during economic down- until the economy improves.
turns. The ratio’s numerator
is the trust fund balance di- According to a widely used measure of trust fund readiness (sidebar), Virginia’s read-
vided by covered wages iness met recommended levels before two of the last three economic recessions. A
and the denominator is the trust fund with a readiness score of “1” is commonly recommended and means a state
average of the three high-
est benefit cost ratios (i.e.,
could afford one typical year of recession payments. Virginia’s readiness score fell be-
benefits paid divided by low the recommended score prior to the Great Recession and slightly exceeded the
covered wages in same recommended score prior to the 2001 recession and COVID-19 pandemic (Figure 8-
year) in the past 20 years or 2). (Virginia’s readiness score exceeded the 50-state median prior to the 2001 recession
three recessions (whichever
time period is longer).
and was similar to the 50-state median prior to the Great Recession and COVID-19
pandemic.)
FIGURE 8-2
Virginia’s trust fund met the recommended goal before two of the last three
recessions
SOURCE: National Bureau of Economic Research recession definitions and JLARC analysis of DOL ETA 394 data.
NOTE: Because readiness depends on prior benefit payouts and current trust level, a readiness score of “one” trans-
lates into different trust fund levels across time for the same state. The 2001 recession occurred March through
November 2001, and readiness data reflects the end of CY2000. The Great Recession occurred December 2007
through June 2009, and readiness data reflects the end of CY2007. The COVID-19 pandemic recession occurred Feb-
ruary through April 2020 and readiness data reflects the end of CY2019.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Virginia needed to borrow money from the federal government to pay UI benefits
States can receive trust
during the last two economic recessions like many states (sidebar), but its loan amounts fund loans from the U.S.
were lower than other states (Figure 8-3). Virginia borrowed $986 million during the Treasury, and loans are
Great Recession and $164 million during COVID-19, but these amounts are lower subject to interest (with
exceptions). Repayment is
than other states when measured relative to the total number of workers. Virginia did
due by November 10 of
not need to borrow money to fund the increases in UI benefit levels during the 2001 the second consecutive
recession, but eight states did. year during which a state
has an outstanding loan
on January 1.
FIGURE 8-3
Virginia’s UI loan amount and repayment times
SOURCE: U.S. Treasury data on state loans.
NOTE: Whether a loan is required and its amount are not a sole indication of solvency; some states, including Virginia,
used outside funding sources like CARES to avoid or reduce borrowing. The 50-state median and loan repayment
time are limited to borrowing states. Borrowing frequency and amount are limited to federal loans, and therefore
exclude other sources of funding used by some states, such as bonds.
The cost of borrowing from the federal government to pay UI benefits has been mod-
erate for Virginia. The state paid $14 million in interest on Great Recession loans.
Unlike some states, Virginia did not reduce benefit levels to aid trust fund recovery
after the Great Recession. After the Great Recession, Virginia missed its loan repay-
ment deadline by one year, causing employers in the state to pay an extra $21 per
employee in federal UI taxes in 2011. Employer taxes increased because the federal UI
tax rate rises each year after the due date federal loans are unpaid. (Federal UI taxes
are a flat rate determined by federal law and fund UI administration rather than trust
funds; see Chapter 1.) More recently, Virginia avoided paying interest on COVID-19
loans because it fully repaid the loans before interest starting accruing.
103
Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Virginia repaid its federal UI loans faster than some states. Faster repayment reduces
interest and avoids federal tax increases for employers. Virginia repaid its Great Re-
cession and COVID-19 loans faster than the majority of states that borrowed money
(Figure 8-3). Virginia deposited $1.1 billion of federal COVID-19 funds (Corona-
virus Aid, Relief, and Economic Security Act and American Rescue Plan Act) into
the UI trust fund. This allowed Virginia to quickly repay its COVID-19 loan, reduce
its rebuilding time, and avoid prolonged increases in state UI employer taxes.
Virginia has not always rebuilt its UI trust fund balance within five years, as recom-
mended by DOL. After loan repayment, DOL recommends that states rebuild trust
funds within five years because that is the average frequency of recessions in the
modern economy. Trust funds that are rebuilt quickly are better able to weather re-
cessions. When the 2001 recession ended, Virginia’s trust fund was not close to re-
gaining its prior level six years later at the onset of the Great Recession. As a result,
the trust fund was not well positioned to pay out claims during the Great Recession.
It took Virginia six years to rebuild its trust fund to the previous level after the Great
Recession ended. The recession caused by the COVID-19 pandemic occurred far-
ther from the preceding recession than is typical for recessions, which gave Virginia
Undetected misclassifica- more years to rebuild its trust fund. The state will need to maximize revenue collec-
tion can allow employers tion to rebuild the UI trust fund more quickly to prepare for the next recession.
to underpay income tax,
workers’ compensation
premiums, and UI taxes. Improvements to VEC’s employer tax processes
Misclassified workers can
lose important rights would increase tax revenue
(e.g., minimum wage) and
benefits (e.g., UI, workers’
Consistent and comprehensive tax collection is important to the trust fund’s health,
compensation). but some employers do not pay the taxes for which they are liable. Tax underpayments
Virginia initiatives to ad- can result from employers misunderstanding UI rules or intentionally violating them
dress misclassification in to reduce tax payments (Figure 8-4). Employers who are liable for UI may not register
2021 include a new unit with VEC so they pay no UI taxes. Even registered employers may receive a lower tax
established at the OAG
bill than they should if they undercount taxable wages in their quarterly reports to
and an inter-agency task
force (including VEC) ex- VEC. For example, an employer may illegally misclassify workers as independent con-
amining misclassification tractors instead of employees (sidebar), so the employer avoids paying taxes on their
on large construction wages. Lastly, employers may register and submit accurate reports to VEC but not pay
projects. VEC has dedi- the taxes owed. Employers who do not pay owed taxes can indirectly increase the tax
cated a team to misclassi-
fication since 2015.
burden on employers who are complying with the law, because a lower trust fund bal-
ance results in higher tax rates for everyone.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
FIGURE 8-4
Employers can underpay UI taxes in several ways
SOURCE: Interviews with VEC tax staff and review of VEC field tax manual.
VEC could take additional steps to detect unregistered employers
subject to UI taxes and registered employers that are underpaying
VEC takes most steps recommended by DOL or used by other states to identify UI
tax revenue that is legally owed, but not currently reported, to the state. DOL advises
states to educate new employers about UI and make registration easy to maximize the
number of new employers proactively paying UI taxes. VEC accomplishes these goals
through integrating its registration process with that of the Virginia Department of
Taxation and by posting a VEC link on several state agencies’ websites (e.g., the De-
partment of Small Business and Supplier Diversity and the State Corporation Com-
mission). To identify employers who did not voluntarily register with VEC, the agency
analyzes federal internal revenue service (IRS) data. The IRS provides VEC with lists
of new employers that (1) recently registered with the IRS or (2) pay federal UI taxes.
VEC sends letters to employers who are not registered with VEC that explain their
potential tax liability.
VEC could adopt an additional step used by some other states to pursue unregistered
employers. Currently, VEC does not follow up when employers they have notified of
their potential tax liability do not register with VEC. In contrast, Utah audits some of
those employers and indicates this practice can be helpful in finding unreported work-
ers. Virginia should conduct a one-year pilot program to assess the effectiveness of VEC used 1099 data from
auditing employers who do not respond to notices of potential tax liability. 2015 to identify regis-
tered employers with a
VEC should also conduct a separate one-year pilot program to assess the effectiveness high number of 1099
of using a new data source to find unregistered employers liable for UI taxes. States workers (independent
contractors). Staff audited
such as Montana and Utah use Form 1099 data from the IRS regarding independent
a selected subset of those
contractors to identify unregistered employers potentially liable for UI taxes. VEC employers. However, VEC
should identify employers not registered with VEC who reported 1099 workers to the did not tally the results of
IRS (sidebar) and send notices to these employers that they are potentially liable for those audits (e.g., amount
UI taxes. To reduce the administrative burden of this effort, VEC could prioritize of tax revenue added), so
it is impossible to con-
larger employers (e.g., with at least five independent contractors). clude whether the ap-
proach was cost effective.
105
Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
VEC should assess the results of both pilots to determine if they should be converted
into permanent practices. In making the decisions, VEC should consider the amount
of new tax revenue from audited employers who are found liable for the UI tax, staff
time required for the new audits, and their value in deterring employers from misclas-
sification.
RECOMMENDATION 33
The Virginia Employment Commission (VEC) should conduct a one-year pilot pro-
gram to identify employers who owe unemployment insurance taxes but are not regis-
tered with VEC by auditing employers who do not register with VEC after receiving
notifications of potential tax liability. VEC should assess the pilot program’s effective-
ness to decide whether to use this methodology on an ongoing basis.
RECOMMENDATION 34
The Virginia Employment Commission (VEC) should conduct a one-year pilot pro-
gram to identify employers who owe unemployment insurance taxes but are not regis-
tered with VEC by auditing a sample of employers who may be misclassifying workers
based on their 1099 tax filings. VEC should assess the pilot program’s effectiveness
and decide whether to use this methodology on an ongoing basis.
VEC currently lacks a “SUTA dumping” detection system, which violates federal re-
“SUTA dumping" is the feder-
ally prohibited practice of de-
quirements. Since 2010, DOL has required states to use automated systems to identify
liberately selling or otherwise employers that have engaged in illegal “SUTA dumping” (sidebar). These systems per-
restructuring businesses to form checks such as flagging employers who moved a large number of workers from
lower UI tax rates. For example, one business to another. VEC had an automated SUTA dumping detection system
an employer with a high UI tax
rate (because of high prior UI
prior to 2015, but it stopped working when VEC launched the first phase of its mod-
use) creates a shell company ernized UI tax system. VEC did not address the problem because it would have re-
whose rate as a new business is quired VEC IT staff to update the programming, and these staff were dedicated to
lower, then transfers workers to working on VEC’s UI modernization project. A DOL audit in 2018 cited VEC’s non-
the new company. “SUTA”
compliance with SUTA dumping software requirements, and VEC said it planned to
stands for the federal State Un-
employment Tax Act. resume using it in 2019. Currently, VEC has no timeframe for when the SUTA dump-
ing system will be re-activated.
VEC should reinstate an automatic SUTA dumping system no later than December
2022. This will allow VEC to complete the ongoing UI modernization project (ex-
pected June 2022) before dedicating IT resources to recoding the SUTA dumping sys-
tem. Reinstating this system will put VEC back in compliance with DOL requirements
and allow VEC to collect additional UI tax revenue. Nationwide, states reported cap-
turing $21 million in additional UI revenue through SUTA dumping identification in
2019. VEC’s system should contain all components listed in federal law and guidance,
including automatic processes to flag employers with unusually high movement of
employees between quarters.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
RECOMMENDATION 35
The Virginia Employment Commission should reinstate its State Unemployment Tax
Act dumping identification system no later than December 2022.
VEC audits fewer employers than DOL requires, but individual audits
are effective at identifying owed UI taxes
A major responsibility of VEC tax staff is auditing a subset of registered employers
annually. During audits, staff review employer records (e.g., W-2s, time sheets) to check
employer compliance with tax rules. VEC collects owed UI taxes from a business when
an audit finds unreported workers or taxable wages. The amount of UI revenue col-
lected through audits depends on the volume of audits conducted and the effective-
ness of each audit. Audits are conducted by field staff, each of whom has an assigned
geographical domain.
VEC has not always met DOL’s standards for the number of employers and share of
Audits during 2020: VEC
wages audited. In three of the five years preceding the pandemic (sidebar), VEC fell significantly short of
slightly underperformed the standard of auditing 1 percent of employers. For exam- DOL’s standard and the
ple, VEC audited 0.9 percent of employers in 2019. VEC tries to meet this standard national total for both au-
dit volume standards. VEC
by requiring each field tax staff member to annually audit at least 52 employers.
surpassed DOL’s standard
In all five years before the pandemic, VEC underperformed DOL’s standard of audit- and the national total for
both audit effectiveness
ing 1 percent of total wages. VEC’s underperformance was more pronounced for this
metrics.
standard; for example, VEC audited only 0.5 percent of wages in 2019 (third lowest
in the nation). VEC tries to meet this standard by requiring each staff member to
annually audit at least one large employer.
VEC leadership attribute low audit volume to staff vacancies and turnover, but an-
Audit analysis uses fed-
other reason is underperformance by existing staff. Since 2018, an average of 13 per- eral fiscal year because
cent of the approximately 50 field tax positions responsible for audits were vacant. In that is the time period for
addition, tax staff are not meeting VEC’s requirement to audit 52 employers annually. VEC’s 52 audit require-
ment. In addition to the
For example, of the 37 staff in FFY19 (sidebar), only 25 staff completed at least 52
37 staff present and
total audits and 34 staff completed at least one large audit. To consistently meet DOL’s trained during the full
standards, VEC needs to increase the number of audits completed by each tax staff FFY19, eight staff were
member or increase the number of total tax staff, or both. new to the position or
employed only part of
VEC regularly surpasses DOL’s two measures of tax audit effectiveness, but collects the year.
less new tax revenue per audit than is collected in other states. In each of the five years
preceding COVID-19, VEC exceeded DOL’s standards to (1) identify at least 2 percent
of misreported wages out of all audited wages and (2) identify an average of two mis-
classified workers per audit. While those benchmarks are important, maximizing the
amount of additional tax revenue that can be collected should be prioritized. However,
VEC’s audits do not capture as much tax revenue as other states’ audits. For example,
in 2019, VEC captured an average of $114 net new taxes per audit, compared with the
50-state median of $168. Virginia’s low taxable wage base would appear to at least
partially explain the lower amount of tax revenue collected per audit in Virginia.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Targeted audits are more likely to collect additional tax revenue according to staff, but
VEC selects employers to be audited through a mix of random and targeted selection.
DOL requires 10 percent of audits to be random but otherwise encourages states to
be “targeting their audits to maximize the discovery of improper employer reporting”
through audit criteria “that reflect potential noncompliance.” Staff have full flexibility
in selecting employers to audit and choose the majority at random, according to man-
agers. The remainder are selected based on the employer’s industry or history of con-
cerning incidents (e.g., repeated instances of former employees filing for UI benefits
that were not reported by the employer, recurrent delinquency, discrepancies in quar-
terly reports, or anonymous tips).
Requiring more targeted audits of employers would likely yield more tax revenue. VEC
should require tax auditors to conduct at least half of their audits (26) on employers
more likely to avoid UI taxes. VEC should develop a definition for employers at risk
of UI tax avoidance―to include those in industries with a high likelihood of misclas-
sification or who previously exhibited concerning behavior―and develop a system for
tax staff to identify employers meeting that definition. Such a system would ensure
consistency in the types of employers flagged for potential audits among regions while
retaining flexibility for staff to pick audits based on their expertise and personal
knowledge of employers.
RECOMMENDATION 36
The Virginia Employment Commission (VEC) should modify existing unemployment
insurance (UI) tax audit policies to require field tax auditors to conduct at least half
of their audits per year from a list of employers identified to be at-risk for UI tax
avoidance. VEC should define “at-risk” to include industry and employer-specific fac-
tors and establish a system for consistently identifying such employers.
VEC should add a collection method for delinquent taxes and
strengthen accountability for staff collection efforts
Unpaid employer UI taxes are another potential revenue source for the UI trust fund.
VEC tax staff are responsible for collecting taxes and are required by Virginia law to
“take all appropriate and cost-effective actions to aggressively collect” delinquencies.
In 2019, 4 percent ($15.6 million) of UI taxes were not paid on time.
VEC’s collection of delinquent taxes is similar to other states and comparable to Vir-
ginia state agencies. In 2019, Virginia collected 98.4 percent of UI taxes that were
known to be owed, which was similar to the 50-state median of 98.3 percent. Another
measure of tax collection effectiveness is the percentage of debt over 60 days old. In
an analysis of state debt as of March 2020 conducted by the Virginia Department of
Accounts, 22 percent of VEC’s UI tax debt was over 60 days due. This was similar to
the average across state agencies (excluding the Virginia Department of Taxation and
courts system) of 19 percent.
Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
VEC could collect additional delinquent taxes by using the Treasury Offset Program,
which is required by federal and state law. Through this program, states submit lists of
debt over a year old to the U.S. Treasury to intercept federal money, such as income
tax refunds. Since 2015, federal law required states to participate for employer UI taxes,
and 37 states now participate. (States are also required to use the federal Treasury Off-
set Program to collect debt from individuals who have received UI benefit overpay-
ments; see Chapter 4.) VEC would collect additional delinquent employer taxes by
using this program, though the amount is difficult to estimate because other states
with similar tax collection volume to Virginia collect varying amounts of delinquent
taxes, ranging from hundreds of dollars to nearly one million dollars. VEC staff at-
tribute delays in participation to having limited IT staff available to implement pro-
gram changes needed to fulfill federal data submission requirements. DOL granted
VEC an extension through June 2020 to implement the program, but VEC did not
meet the deadline. VEC currently plans to send tax debt to the Treasury Offset Pro-
gram once its UI modernization has been completed and IT staff become available.
RECOMMENDATION 37
The Virginia Employment Commission should begin using the federal Treasury Offset
Program for applicable delinquent taxes as soon as staff resources become available.
VEC staff do not always pursue delinquencies in a timely and thorough manner. VEC
JLARC conducted a case
policies require staff to resolve cases within 90 days of assignment, and staff have file review of 14 ran-
several methods to collect delinquent taxes. However, JLARC reviewed 14 employers domly selected employ-
who were delinquent in August 2019 (sidebar), and nine were still delinquent two years ers who received the de-
linquency rate in 2019.
later. Per VEC policies, staff should steadily escalate efforts from warning methods,
See Appendix B for more
such as warning letters, to more aggressive measures (e.g., subpoenas, bank liens). details.
However, none of these aggressive measures were used in four of the 14 cases. Staff
in two cases started using these more aggressive collection options two years after
delinquency. In addition to formal warning letters and more aggressive measures, VEC
staff are expected to use informal methods to pursue delinquencies, which can some-
times be worthwhile, according to tax staff and managers. For example, calling an
employer gives staff the opportunity to convey the financial repercussions, and inter-
net searches can reveal that an employer may have moved and not received delinquency
letters. Staff used these types of informal efforts to collect delinquencies in only six
of the 14 cases.
More systematic tracking of outstanding delinquencies could help managers identify
and assist underperforming staff, including initiating informal and aggressive efforts
when appropriate. DOL expects states to monitor tax collection efforts. A 2019 VEC
Internal Audit report found that staff ’s efforts to collect delinquencies were inade-
quate. In response, VEC developed a corrective action plan that would start providing
managers with lists of outstanding delinquencies quarterly. The agreed-upon correc-
tive action plan was not implemented at least in part because COVID-19 began three
months after its completion. However, managers stated that regular information on
109
Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
outstanding delinquencies would be helpful because the current tax software system
“There is very little time to does not allow ready access to that information. Without this information, assessing
actually process work
because customer
whether staff are taking timely and appropriate steps to collect delinquent payments
service has taken over is “very difficult,” according to two regional managers. They can manually review in-
most of the work day. dividual employer records, which is time-consuming and can only provide insight into
– VEC central office tax
” a limited number of cases.
staff
RECOMMENDATION 38
“Employers [who] The Virginia Employment Commission should provide quarterly reports to tax divi-
attempt to resolve their
questions by contacting sion regional managers that list each employer with tax debt more than six months
the Central Office will past due and require the managers to use this information to ensure that tax field staff
contact the Field Tax are taking all reasonable steps to collect the debt.
Representative in their
area when they don't get
a response. Field Tax Reducing tax administrative workloads would increase time for audit
Representatives fill the and delinquency collection
Customer Service void
requiring them to Meeting customer service demands in addition to fulfilling other responsibilities is
constantly shift their sometimes challenging for VEC tax staff (sidebar). Unlike VEC’s benefits division,
duties. there is no designated customer service staff for tax assistance. In JLARC’s survey, a
” minority (41 percent) of all tax division staff agreed their division was “able to effec-
– VEC field tax staff tively meet the needs of VEC customers.” In particular, central office tax staff struggle
JLARC surveyed VEC staff to both respond to employer inquiries and fulfill mission-critical tasks in a timely man-
in April 2021 about their ner (e.g., processing payments). Approximately half (48 percent) of central office tax
perceptions of their job, staff who responded to a JLARC staff survey (sidebar) described their workload as
VEC as an employer, IT
systems and security, and
“too much,” which was higher than the rest of the agency (31 percent), and central
agency leadership. JLARC office tax staff consistently work overtime hours. While overtime is not significant for
received responses from field tax staff, they estimate spending 5 to 20 percent of their time on customer service,
789 VEC staff, for an over- reducing time available for audits and delinquency collection.
all response rate of 69
percent. The survey in- Centralizing some customer service functions would allow VEC to use resources more
cluded full-time and part- efficiently. VEC should make certain tax staff positions responsible for providing basic
time agency staff. Con-
customer service (e.g., looking up tax rates or deactivating an account) in a centralized
tract staff were not in-
cluded in the survey. (See manner, and adjust the number of positions as needed for adequate capacity to answer
Appendix B for more in- questions from employers. VEC should modify its website and formal letters to direct
formation.) employers to these customer service staff. (VEC should maintain the responsibility of
specialized customer service [e.g., advising on mergers] with relevant divisions.) With
electronic filing being implemented, the workload is decreasing for some central office
staff, positioning them for this new role. Eliminating the responsibility of answering
incoming employer questions would allow skilled staff to concentrate on complex
work, as well as create time for more audits and delinquency efforts. The Virginia
Workers’ Compensation Commission initiated a similar restructuring to separate cus-
tomer service from staff with other responsibilities and found the approach improved
efficiency.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
RECOMMENDATION 39
The Virginia Employment Commission should designate customer service positions
in the tax division to handle basic employer communications and questions.
Another way to gain efficiencies in the tax division would be to require electronic pay-
ment of taxes. Currently, employers have the option to pay taxes online or mail hard-
copy checks to VEC. Staff estimate that paper payments account for 40 percent of
total payments but 60 percent of staff processing time. Each paper payment requires
VEC staff to sort agency mail, deliver checks to the right unit, type up its contents,
compare the payment amount to agency records, and shred checks after a waiting pe-
riod. These steps, in combination with intermittent staff shortages, sometimes result
in waits of weeks or months for payments to appear in VEC’s electronic records, mak-
ing it more difficult for staff to track delinquent payments. Delays also increase calls
from concerned employers. VEC should require electronic payment of taxes (and re-
lated transactions such as fine payments) in 2023, by which time employers will have
transitioned to electronic filing. VEC should offer exceptions for employers for the
same circumstances as currently provided for quarterly report submissions. Utah took
this step, and found it saved significant time. Similarly, the Virginia Department of
Taxation reported a smooth roll-out of its electronic payment mandate, with nearly all
employers now paying electronically. With the reduction of staff resources spent pro-
cessing paper payments, VEC could increase the number of tax field staff dedicated
to audits and collection of delinquent payments.
RECOMMENDATION 40
The Virginia Employment Commission should require employers to make unemploy-
ment insurance payments electronically starting in 2023, develop criteria that would
allow employers to be granted an exception to this requirement, and notify employers
of the criteria.
Changes to tax design are not necessary but could
be considered
Virginia’s state employer UI tax design is adequate to support trust fund solvency and
aligns with best practices recommended by experts. Specifically, Virginia’s 14 tax rate
schedules, solvency tax, and pool tax create a wide range of rates for employers, a goal
encouraged by experts. Changes to Virginia’s UI taxes are triggered by solvency levels,
which is preferable to the static measures used by some states. Additionally, Virginia
has a forward-funded UI tax structure, meaning that its tax revenue exceeds benefit
payments during a strong economy to build up trust fund reserves. Further, the
amount of taxes collected and the amount of benefit payments are aligned to prevent
the trust fund from becoming too overfunded or underfunded.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Revenue increases are not essential because Virginia’s tax structure is generally sound,
and the state can take federal loans to ensure solvency. However, additional revenue
could be used to build a larger trust fund reserve to limit the fluctuations in tax rates
and would be needed if the legislature increased UI benefit levels. (See Policy Options
4 through 6 in Chapter 7.)
If the General Assembly wishes to increase revenues for the UI trust fund, the legis-
lature could consider policy changes that would enhance the fairness of the state em-
ployer UI tax structure. The tax structure results in employers with lower UI usage
subsidizing the benefit costs for employers with the greatest use. Policy changes to
increase revenue for the UI trust fund could be structured to increase taxes on certain
employers while leaving other employers’ tax rates unchanged. There are several op-
tions to consider, including raising the taxable wage base, minimum tax rate, or maxi-
mum tax rate (Table 8-1).
Employers would face a financial burden from additional UI taxes. Therefore, any
changes could be delayed until average UI tax rates return to their level prior to
COVID-19 pandemic. Because of substantial federal funds being deposited into the
UI trust fund and state policies restricting UI tax growth in the prior and upcoming
calendar years, this may be soon. As long as changes were modest, Virginia’s UI tax
rates would remain relatively low compared with other business taxes and other states’
UI tax rates. Virginia’s average tax rate as a percentage of total wages (0.2 percent) was
eighth lowest in the nation and about half the 50-state median (0.5 percent) in 2019.
Forty-three states had a Additionally, average UI taxes were at most 1 percent of total business taxes in Virginia
higher taxable wage
base than Virginia in
in 2019. The average Virginia employer pays more in other payroll taxes (e.g., Medicare
2019, with the highest and Social Security) and income taxes (personal or corporate).
being Washington at
$52,700. Alabama had the Virginia’s UI taxable wage base is low and could be increased
same base as Virginia.
Five states were lower Virginia’s taxable wage base (“base”)—the maximum amount of employees’ income
than Virginia: Louisiana that is subject to UI tax—is lower than most states (sidebar). State law sets Virginia’s
had a base of $7,700
base for UI at $8,000, which was last increased in 1991. Federal law establishes a min-
while Arizona, California,
Florida, and Tennessee imum allowable base of $7,000. Virginia’s base is lower than the 50-state median
had bases at the federal ($14,000), and the gap has grown over time between Virginia’s base and other states’
minimum of $7,000. (Figure 8-5). Virginia’s base for UI is set in state law.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
TABLE 8-1
Revenue gains through revising tax structure could supplement the trust fund
or be used to lower other tax rates
Potential annual
Policy Potential change revenue increase Employers affected a
Index to annual wage change $3.6M-$5.9M b 76%
Taxable wage base
Increase to $14,000 $113.3M-$186.1M
Increase from 0% to 0.01% $655,000-$735,000 71-85%
Minimum tax rate c
Increase from 0% to 0.04% $2.6M-$2.9M
Increase from 6.2% to 6.8% $2.2M-$3.3M 2-4%
Maximum tax rate
Increase from 6.2% to 10% $4.2M-$15.2M
SOURCE: JLARC analysis of Code of Virginia, VUIS data, DOL Form 204 data, and UNIS-X model.
NOTE: Projections are based on employer taxable wages in 2020. The range of potential annual revenue increases
for each option reflects data limitations (e.g., some apparently duplicate employer records) as well as differences in
revenue depending which tax schedule is in effect. See Appendix B for a detailed explanation of projection method-
ology. a This is the share of all contributory employers, so employers assigned special tax rates (e.g., delinquent
rates) are included but reimbursing employers (i.e., nonprofits, governments) are excluded. b Revenue would in-
crease each year that average annual wages increase. Data in table assumes CY2023 as the first year of implemen-
tation, when the base is projected to be $8,160. In 2032, the base is projected to be $9,752 and the potential reve-
nue increase is estimated between $37.9 million and $62.1 million. Projections assume average wages increase 2%
annually (based on average of decade prior to COVID-19). c Potential annual revenue increase and employers af-
fected pertains to years in which a 0% minimum tax rate would have been activated.
FIGURE 8-5
Taxable wage base remained fixed in Virginia, grew in other states
SOURCE: ETA 394 data from U.S. DOL.
Virginia’s low base means that employers paying higher wages have a lower effective
UI tax rate. A lower tax base results in a larger difference in the percentage of wages
employers pay as taxes―a measurement of tax burden. For example, a Virginia em-
ployer pays an effective tax rate of 0.01 percent in taxes for a high-wage worker earning
$200,000, compared with an effective tax rate of 0.08 percent (eight times higher) for
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
a minimum-wage employee (Table 8-2). As workers make higher wages, they are eligi-
ble for higher UI benefits (up to the maximum of $378 per week), which dispropor-
tionately affects the trust fund. Because employers can pass tax burdens on to workers
through lower wages, a low base also creates the potential for low-wage workers to
lose income.
Some states index their UI tax rates to a metric that captures the changing economy.
This ensures predictable, incremental updates to the base without needing regular leg-
islative changes. Half of states automatically adjust their bases through indexing;
nearly all through defining their base as a percentage of the average annual wage. Vir-
ginia could adopt a similar approach. To avoid a substantial one-time jump in taxes for
employers, Virginia could set its base to increase by the same percentage as wages
increased in the past year. This approach could raise the base by $160 (to $8,160) the
first year implemented, if Virginia’s wages followed historic trends.
TABLE 8-2
Virginia’s taxable wage base of $8,000 results in lower effective tax rates for
employers that pay higher salaries
Worker 1 Worker 2 Worker 3 Worker 4
(at base) (minimum wage a) (average wage b) (higher-wage)
Wages in year $8,000 $19,760 $59,736 $200,000
Taxable wages $8,000 $8,000 $8,000 $8,000
Tax paid $16 $16 $16 $16
Percentage of taxable wages 100% 40% 13% 4%
Effective tax rate c 0.20% 0.08% 0.03% 0.01%
SOURCE: JLARC analysis of Code of Virginia.
Policy options for con- NOTE: Example assumes base tax rate of 0.2 percent tax, the average tax rate prior to COVID-19. Example excludes
sideration. Staff typically solvency and pool taxes. a Full-time at minimum hourly wage of $9.50, effective in Virginia as of May 1, 2021. b Full-
time average wage of a Virginia worker covered by UI in 2019. c Effective tax rate calculated by dividing taxes paid by
propose policy options
the workers’ yearly wages.
rather than make recom-
mendations when (i) the
action is a policy judg- Alternatively, Virginia could keep a fixed taxable wage base but raise it through one-
ment best made by time legislation. For example, the state could set its base at the 50-state median of
elected officials—espe- $14,000. This would raise the employers’ UI tax for any workers earning at least $8,000
cially the General Assem- annually and would increase tax revenue by $113.3 million to $186.1 million annually,
bly, (ii) evidence suggests depending on the tax schedule in effect.
action could potentially
be beneficial, or (iii) a re-
port finding could be ad- POLICY OPTION 8
dressed in multiple ways. The General Assembly could amend § 60.2-229 of the Code of Virginia to increase
the unemployment insurance taxable wage base.
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
Virginia could require employers with no recent UI use to pay a
minimal UI tax
Experts recommend that states avoid using a 0 percent tax rate for employers who
have not recently used UI benefits. Even employers that do not typically use UI bene-
fits may need to do so during recessions. If employers go bankrupt and their former
employees need to use UI, VEC will not be able to recoup those UI costs by taxing
the bankrupt employer. Virginia employers share the burden caused by bankrupt em-
ployers through the pool tax charged to all employers. Requiring all tax-paying em-
ployers to pay at least a small amount of tax lessens the tax burden on other employers.
Four of the 14 possible base tax schedules in Virginia include 0 percent tax rates for
employers who have not recently used UI benefits. In years when the trust fund meets
the state’s funding goal, these tax schedules are in effect, and employers with no use
of UI in the last four years will receive a 0 percent tax rate. Virginia’s minimum tax
rates are relatively consistent with other states. These tax schedules have not been used
since 2001, and VEC’s model predicts these tax schedules will be activated starting in
2030, if no recessions occur beforehand.
Virginia could slightly increase its minimum tax rate from 0 percent. This would in-
crease taxes for 80 to 85 percent of employers. For example, a new tax rate of 0.01
percent would raise $655,000–$735,000 annually for the UI trust fund—an average
cost of $4 per affected employer. The new minimum tax rate could be between .01
percent and 0.07 percent (because the current second-lowest tax rate is .08 percent).
POLICY OPTION 9
The General Assembly could amend § 60.2-531 of the Code of Virginia to increase
the minimum base unemployment insurance tax rate for all employers, to a new rate
between 0.01 percent and 0.07 percent.
Virginia could increase the maximum tax rate for employers with the
highest recent UI use
States’ UI tax rates vary depending on an employer’s UI use, and employers are subject
to a maximum tax rate. Federal law requires state tax rates to generally increase with
employers’ use of UI for two reasons: to discourage employers from unnecessarily
laying off workers and to ensure that UI costs are paid for by those employers who
generate the most UI claims. However, all states set maximum tax rates to minimize
the tax burden on any one employer. Experts caution against inappropriately low max-
imum tax rates because they may not effectively discourage layoffs. However, there is
no expert consensus about an ideal maximum rate, aside from the federal requirement
to be at least 5.4 percent. While Virginia’s maximum tax rate is similar to other states,
employers paying the maximum tax rates pay less in Virginia than in other states be-
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Chapter 8: Unemployment Insurance Trust Fund Solvency and Employer Taxes
cause Virginia’s taxable wage base is lower. Virginia employers at the capped rates ac-
counted for 12 percent of taxes in 2020 but 22 percent of benefit charges in the prior
year.
The General Assembly could raise its maximum tax rates to increase the equity of
employer UI taxes. Increasing the maximum employer tax rate would better align UI
usage and benefits paid for the subset of employers that most frequently use UI. This
Per state law, VEC assigns
a delinquency tax rate of
policy change could be paired with a decrease to the tax rates paid by other employ-
6.2 percent to penalize ers—who have subsidized benefit costs generated by employers who have the 6.2 per-
employers who are delin- cent maximum tax rate—to improve the equitability of tax distribution.
quent for at least three
months as of the preced- To generate additional trust fund revenue, the state could increase the maximum tax
ing July 31. The delin- rate without decreasing rates for other employers. If Virginia increased the maximum
quency rate overrides the tax rate to the 50-state median of 6.8 percent, rates would increase for 2 to 4 percent
base rate an employer
would otherwise have
of employers, and tax revenue would increase by approximately $2 million to $3 mil-
been assigned. Delin- lion annually. At a higher maximum rate of 10 percent, the UI trust fund would gain
quency tax rates are de- approximately $4 million to $15 million in additional revenue per year. Any change to
signed to exceed regular the maximum tax rate should be accompanied by consideration of changing the delin-
tax rates to incentivize
employers to make timely
quency rate (sidebar) to avoid the unintended consequence of the delinquency rate
tax payments. being beneficial for employers with the highest UI use.
POLICY OPTION 10
The General Assembly could amend § 60.2-531 of the Code of Virginia to increase
the maximum base unemployment insurance tax rate.
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Appendix A: Study resolution
Review of the Virginia Employment Commission
Authorized by the Commission on November 16, 2020
WHEREAS, the economic losses due to the COVID-19 pandemic led to historically high unemploy-
ment benefits claims in the United States and Virginia, and Virginia’s monthly unemployment rate rose
sharply from 3.3% in March 2020 to 10.8% in April 2020, declining to 6.1% in August 2020; and
WHEREAS, the Virginia Employment Commission (VEC) is the state agency responsible for admin-
istering the Unemployment Insurance (UI) program, including receiving and processing unemploy-
ment benefits claims and issuing payments; and
WHEREAS, citizens have expressed frustration with their inability to navigate VEC’s unemployment
benefits claims process, successfully file benefits claims, and receive benefits in a timely manner; and
WHEREAS, efforts to modernize the information technology systems VEC uses to operate the un-
employment insurance program have been delayed; and
WHEREAS General Assembly members introduced budget amendments during the 2020 Special
Session to (i) create within VEC a team of IT experts to help fulfill the agency’s mission and (ii) enable
VEC during a declared state of emergency to redirect staff resources normally dedicated to collecting
benefit overpayments of less than $500; and
WHEREAS, VEC also administers key federal laws related to increasing employment opportunities
through job placement and job training assistance, and demand for such assistance has increased be-
cause of COVID-19’s economic impacts; now, therefore be it
RESOLVED by the Joint Legislative Audit and Review Commission that staff be directed to review
the operations of the Virginia Employment Commission.
In conducting its study, staff shall (i) evaluate the impacts of the COVID-19 pandemic on VEC’s
operations and staffing; (ii) evaluate the timeliness and effectiveness of the operational and staffing
changes VEC implemented in response to the pandemic; (iii) evaluate how VEC’s UI operations are
supervised and led; (iv) evaluate the IT systems used to receive, review, and process unemployment
insurance claims and respond to customer inquiries; (v) evaluate the effectiveness of VEC’s coordina-
tion with the Virginia Information Technologies Agency; (vi) examine the upfront and ongoing costs
and cost savings of creating a core team of IT experts within the agency; (vii) identify opportunities
to improve customer service, including ways to increase automation and improve customer call-back
protocols; (viii) compare Virginia’s UI benefit amounts to benefit amounts provided by other states;
(ix) evaluate the efficiency and fairness of the unemployment insurance appeals process; (x) determine
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Appendixes
how VEC has used additional federal funding made available to states during the pandemic; (xi) quan-
tify the frequency and volume of benefit overpayments that are less than $500 and the VEC staff
resources dedicated to their collection; (xii) evaluate VEC’s ability to connect out-of-work Virginians
with meaningful employment opportunities; and (xiii) determine whether additional funding is needed
to enable VEC to enhance its operations to a standard that reasonably meets the public’s needs and
expectations.
JLARC shall make recommendations as necessary and review other issues as warranted.
All agencies of the Commonwealth, including the Virginia Employment Commission, the Auditor of
Public Accounts, and the Virginia Information Technologies Agency shall provide assistance, infor-
mation, and data to JLARC for this study, upon request. JLARC staff shall have access to all infor-
mation in the possession of agencies pursuant to § 30-59 and § 30-69 of the Code of Virginia. No
provision of the Code of Virginia shall be interpreted as limiting or restricting the access of JLARC
staff to information pursuant to its statutory authority.
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Appendixes
Appendix B: Research activities and methods
Key research activities performed by JLARC staff for this study included:
interviews with Virginia Employment Commission (VEC) staff, other Virginia and federal
agencies, employers and employer groups, claimants and claimant representatives, subject-
matter experts, and other states;
analyses of VEC data on unemployment insurance (UI) claims, tax audits, agency staffing,
overtime hours worked, and agency funding; Virginia Department of Human Resource
Management data on state agency staffing and salaries; U.S. Department of Labor (DOL)
50-state data on UI timeliness and accuracy, UI trust fund levels, federal UI operational
funding; and Virginia trust fund modeling through UNIS-X and VUIS;
surveys of VEC staff and employers;
case file reviews for a sample of VEC’s UI appeals and a sample of tax files for employers
delinquent on state UI taxes;
usability assessment of VEC’s UI claims filing website;
observations of appeals hearings, customer service interactions, and meetings; and
reviews of documents and literature, including research literature related to UI eligibility
criteria, UI benefit levels and design, UI claims administration, UI tax design, and UI
modernization; federal law and guidance; VEC documents, such as agency policies and
procedures, forms, applications, and notices; website materials; staff training materials;
and staff position descriptions.
Structured interviews
Structured interviews were a key research method for this report. JLARC staff conducted over 180
interviews with individuals from a variety of agencies and organizations. Key interviewees included:
VEC staff
JLARC staff conducted 122 interviews with 61 staff from VEC, including the commissioner, deputy
commissioners, directors of all major UI divisions, and several staff from each UI division. For ex-
ample, JLARC staff conducted multiple interviews with the chief deputy commissioner, deputy com-
missioner of UI, UI division director, acting chief of UI benefits, chief of UI tax, director of IT,
chief administrative law judge, and director of customer service and customer contact centers to learn
about the agency’s programs, ongoing response to the challenges presented by COVID-19, and plans
for future improvements. Interviews were also conducted with staff in many divisions and units to
understand the roles and responsibilities of each division and unit; the work processes and procedures
used to carry out their primary responsibilities; and staff perspectives on VEC’s processes, challenges,
and culture. Interviews were also used to discuss the availability and meaning of VEC’s UI claims and
tax data.
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Other Virginia state agency and federal agency staff
JLARC staff conducted 25 interviews with staff at 10 Virginia state agencies. These interviews were
conducted for a range of purposes:
to learn about VEC’s UI modernization project, VEC’s transition to cloud infrastructure,
and VEC’s IT security, JLARC staff interviewed staff at the Virginia Information Tech-
nology Agency (VITA);
to discuss various aspects of VEC’s UI IT modernization contract management and con-
tract documents, JLARC staff spoke with staff at VITA and the Office of the Attorney
General (OAG);
to obtain information on how other agencies operate call centers, and provide customer
service, JLARC staff interviewed staff at the Department of General Services, the Vir-
ginia Department of Transportation, and the Virginia Department of Taxation;
to learn about strategies for tax and debt collection and how other agencies work with
VEC to help collect debt, JLARC staff interviewed staff at the Virginia Department of
Taxation, the Virginia Department of Accounts, and the OAG;
to discuss the state’s competitive hiring requirements and salary data and benchmarks for
specific VEC staff positions, JLARC staff interviewed staff at the Virginia Department
of Human Resource Management;
to learn about effective approaches for disseminating eligibility information and conduct-
ing hearings and appeals, JLARC staff spoke with staff at the Virginia Workers’ Compen-
sation Commission;
to obtain information on its role regarding UI appeals and debt collection, JLARC staff
spoke with staff of the OAG;
to discuss various aspects of VEC’s operations and IT security, JLARC staff interviewed
staff at the Auditor of Public Accounts (APA); and
to learn about agencies’ responsibilities related to emergency planning, JLARC staff inter-
viewed staff at the Virginia Department of Emergency Management.
JLARC staff also conducted eight interviews with federal agency staff, including three interviews with
the Internal Revenue Service to learn about federal UI taxes, UI tax oversight, debt collection, and UI
fraud; four interviews with DOL to discuss federal funding, the resource justification model, and UI
trust fund revenue modeling; one interview with the DOL Office of the Inspector General (OIG) to
discuss OIG reports and UI best practices; and one interview with the DOL State Conformity and
Compliance Team to discuss potential state UI policy and procedure changes.
Employers and employer groups
JLARC staff conducted seven interviews with employers or groups representing employers, including
the Associated General Contractors of Virginia; the Virginia Chamber of Commerce; the Virginia
Metropolitan League; the Virginia chapter of the National Federation for Independent Business; the
Virginia Network of Private Providers; the Virginia Restaurant, Lodging, and Travel Association; and
the Virginia Retail Federation. Staff also conducted an interview with a large third-party administrator
that operates on behalf of businesses to interact with VEC regarding UI claims. The purpose of these
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interviews was to obtain employer perspectives on VEC activities, including tax rate setting and tax
collection, the UI claims and appeal process, and other interactions with VEC.
UI claimants and claimant representatives
JLARC staff conducted interviews with three groups that represent UI claimants, including the Vir-
ginia Chapter of the AFL-CIO and legal aid groups. The primary purpose of these interviews was to
learn more about claimants’ experience working with VEC during the claims application, adjudication,
and appeals processes.
JLARC staff also spoke directly with several individuals who had direct experience with the UI claim
process and received written feedback from numerous other individuals. These conversations focused
on claimants’ experience working with VEC during the UI claims and appeals processes, including
challenges claimants faced with VEC’s online claims application system, phone system, and other cus-
tomer services.
Subject-matter experts
JLARC staff conducted 17 interviews with subject-matter experts, including individuals from the Na-
tional Conference of State Legislatures, the National Association of State Workforce Agencies, the
National Employment Law Project, Strategic Services on Unemployment & Workers' Compensation,
the Urban Institute, Georgetown Law – Center on Poverty and Inequality, the Century Foundation,
the State Software Collaborative, NTT Data, On Point Technology, and Deloitte Consulting. These
interviews covered a variety of topics based on the expertise of the individual, but most interviews
covered best practices for UI benefits and tax administration, customer service, and UI IT moderni-
zation.
Other states
JLARC staff conducted 21 interviews with staff from other states, including Alaska, Illinois, Maine,
Maryland, Montana, New Jersey, Ohio, South Carolina, Utah, Washington, Tennessee, and Vermont.
The purposes of these interviews varied by state and staff, but interviews dealt primarily with other
states’ practices and strategies for administering UI benefits quickly and accurately, collecting taxes
and auditing employers, maintaining trust fund solvency, UI debt collection, customer service, and
strategic planning.
Data collection and analysis
Several types of data analyses were performed for this study, including analyses of:
VEC UI benefits and claims data;
DOL UI performance data;
DOL improper payment data;
VEC and DHRM data on staff turnover and salaries;
50-state data on federal funding;
50-state data on UI trust fund levels;
VEC UI tax audit counts and results; and
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Virginia trust fund modeling through UNIS-X and VUIS.
50-state spending data (Chapter 3)
JLARC used state financial data collected by DOL for FFY2015 through 2020 to conduct several
analysis of operational efficiency. First, JLARC compared VEC’s efficiency to other states using
Minutes Per Unit (MPU) data. The MPU is the average number of minutes it takes a state to complete
a workload unit. Workload units differ for each function, such as one appeal (appeals function) or one
employer (tax function). The six UI functions examined were initial claims, containing claims, non-
monetary determinations, appeals, wage records, and UI tax. Analysis of VEC’s Systematic Alien Ver-
ification for Entitlement was omitted because the amount of associated funding is much smaller than
the other functions. JLARC calculated the 50-state median MPU and compared it to Virginia’s. The
data source for these calculations was DOL’s relevant Unemployment Insurance Program Letter con-
taining each year’s UI grant allocation. Second, JLARC analyzed state-level data on the share of ad-
ministrative staff out of total UI staff. Administrative staff were defined as those reported under two
spending categories: administrative staff and technical services (e.g., certain leadership, internal audit,
and public relations) and support (e.g., research and time sheet review).
VEC and DHRM staffing and salary data (Chapters 3, 4, and 5)
JLARC collected data from VEC and DHRM to analyze agency staffing levels, vacancies, and turnover
rates. Staffing levels were calculated over time (2015 – 2021) for different types of staff positions (full-
time and part-time; permanent and restricted) and divisions. VEC’s vacancy rate was calculated over
time (2015 – 2021) using the number of vacant full-time positions relative to total full-time positions,
and it was compared to the average vacancy rate across all Virginia state agencies and a cohort of
similar Virginia state agencies. Finally, VEC’s turnover rate was calculated over time (2015 – 2021)
using the number of agency separations of full-time staff relative to the total number of full-time
positions. Two calculations were performed: one capturing all separations (e.g., retirements) and one
for voluntary separations (e.g., leaving VEC for another job).
JLARC also used DHRM salary data to conduct an analysis of VEC salaries for selected positions and
determine parity with the average, median, maximum, and minimum salaries for sets of comparable
employees across Virginia state agencies. Salary data was for full-time, filled positions at VEC and
other Virginia state agencies. With DHRM guidance, JLARC staff identified 19 comparison sets for
14 VEC positions across five divisions and subgroups (Call Centers, UI Benefits, Tax, UI Appeals,
and IT). JLARC staff ensured that comparison sets of employees at other Virginia state agencies
included at least 30 individuals (except for VEC positions with fewer than 5 employees). Comparison
sets were comprised of individuals with comparable position levels (e.g., employees, first-line super-
visors, and managers) and either identical or matching Standard Occupational Classification (SOC)
System codes or DHRM’s role-class codes. Once comparison sets were identified, average and median
salaries of VEC staff were compared to the average, median, maximum, and minimum salaries for
the comparison sets.
In addition, DHRM shared data from the proprietary Mercer Benchmark Database with JLARC staff
to make comparisons between the 14 VEC positions and private sector comparison sets. Mercer data
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included salaries for individuals in comparable positions who work for private sector companies na-
tionwide. DHRM staff suggested 23 position titles from the Mercer Database corresponding to each
of the VEC positions. JLARC staff then compared average, median, 25th percentile, and 75th percentile
VEC salaries with these private sector comparison sets.
VEC claims data (Chapter 4)
JLARC staff analyzed individual-level UI claims data from VEC. Data was extracted from VEC’s
legacy UI IT benefit system and included all UI claims submitted between January 1, 2018 and March
22, 2021 for the regular state UI program, extended benefits program, and federal Pandemic Emer-
gency Unemployment Compensation programs. JLARC staff used this data to calculate summary
statistics for the number and type of UI claims, adjudications, and appeals VEC staff processed before
and prior to the COVID-19 pandemic.
JLARC staff also analyzed VEC claims level data from the Pandemic Unemployment Assistance
(PUA) program. Staff used this data to determine the proportion of PUA payments that were made
inaccurately and the proportion of inaccurate payments attributable to fraud. These calculations were
based on data provided by VEC for PUA claims submitted between April 18, 2020 and April 8, 2021.
DOL UI performance data (Chapters 4 and 5)
JLARC staff used data reported by states and maintained by the DOL Employment and Training
Administration (ETA) to analyze and compare VEC’s performance on a number of metrics related to
UI claims and appeals administration. JLARC staff assessed timelines of claims processing and ap-
peals using the ETA 9050 First Payment Time Lapse dataset, ETA 9052 Nonmonetary Determination
Time Lapse Detection Date dataset, ETA 9054 Appeals Time Lapse dataset, and ETA 9055 Appeals
Case Aging dataset. JLARC staff assessed the quality of claims and appeals determinations using data
from the ETA 9056 Nonmonetary Determinations Quality dataset and ETA 9057 Lower Authority
Appeals Quality Review dataset.
JLARC staff primarily analyzed the above datasets to compare VCE’s performance across time on
various metrics, as well to compare to other states and 50-state medians. The data listed above was
often accessed through DOL ETA’s “Benefits: Timeliness and Quality” and “State Rankings of Core
Measures” reporting functions, as well as downloaded from DOL ETA’s “Data Downloads” page and
“Unemployment Insurance Payment Accuracy Datasets” page.
DOL improper payment data (Chapter 5)
JLARC staff reviewed and analyzed data published by DOL ETA on state workforce agencies’ UI
improper payments (called “incorrect payments” in Chapter 5), including the ETA 227 Overpayment
Detection and Recovery Activities dataset and improper payment data derived from the Benefit Ac-
curacy Measurement (BAM) statistical survey. These data were used to assess the accuracy of benefit
payments and potential extent of fraudulent payments made by VEC.
The BAM survey is designed to estimate the accuracy of paid and denied claims in the regular state
UI program and is conducted by agency staff in each state. In Virginia, VEC’s quality assurance unit
assesses payment accuracy for these programs by randomly sampling paid claims and denials on a
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quarterly basis from the UI claims populations. On an annual basis, VEC samples 480 paid UI claims
and 150 cases for each of the three types of denials – monetary, separation, and nonseparation. VEC
quality assurance staff also reconstruct the UI claims process for each claim and investigate the claim-
ant’s monetary and separation eligibility, as well continuing weekly eligibility requirements for the spe-
cific week sampled to evaluate the accuracy of each sampled payment. For claims improperly paid or
denied, a cause, the party responsible for the error, and the point in the process where the error
occurred is identified. For incorrectly paid claims, quality assurance staff determine the amount of
benefits the claimant should have received. The results of the BAM sample is then used to estimate
the accuracy rates, number of overpayments, number of underpayments, and total UI benefits paid
across all paid claims in the regular state UI program during the sampling time period. These amounts
are used to determine an overall Improper Payment Rate (IPR) for the state’s UI program (UI benefits
overpaid plus UI benefits underpaid divided by the total amount of UI benefits paid).
JLARC staff used the data collected through the BAM program and reported by DOL to estimate the
amount of UI benefits that VEC may have incorrectly paid. JLARC staff compared VEC’s improper
payment rates and amounts between 2016 and 2020 to assess how payment accuracy was affected
during COVID-19. VEC staff also used BAM improper payment data to assess impacts to the fraud
rate among VEC’s improper payments during the COVID-19 time period. JLARC staff also reviewed
BAM results provided by VEC quality assurance staff for the first and second quarters of the 2021
calendar year to assess the continued impacts to UI payment accuracy.
50-state recipiency and benefit levels data (Chapter 7)
JLARC staff used data from Section A of DOL ETA’s Unemployment Insurance Chartbook (Labor
Force Data) to compare Virginia’s annual recipiency rates from 2000-2020 with those in all other states
and territories. JLARC staff also calculated a U.S. average and median recipiency rates for the period,
as well as quintiles for state recipiency rates over the period. JLARC staff ranked Virginia’s average
recipiency rate from 2000-2019 with average recipiency rates for the same period in the other 49 U.S.
states. In addition, JLARC staff compared Virginia’s recipiency rates over time as well as the increase
in recipiency from 2019 to 2020 with the U.S. average recipiency rate.
JLARC staff used data from Section A of the Chartbook to examine average benefit levels for Virginia
compared with the other 49 U.S. states, as well as the U.S. average and median benefit levels.
JLARC staff also used data from Section A of the Chartbook to examine the share of prior income
for claimants replaced by benefits received in Virginia (replacement rate). JLARC staff compared Vir-
ginia’s replacement rate with those in the other 49 states, as well as against the U.S. average. DOL ETA
calculates two replacement ratios, Replacement Ratio 1 and 2, by dividing weekly benefit amounts by
normal hourly wages, multiplied by 40 hours. The ratios differ in terms of which values are weighted.
JLARC staff used Replacement Ratio 2 for comparison purposes because it uses weighted averages
for both weekly benefits and normal wages.
For all other comparisons of minimum weekly benefit amounts, maximum weekly benefit amounts,
minimum earnings threshold for eligibility purposes, dependent allowance levels, and a range of other
monetary and non-monetary UI policy comparisons, JLARC staff used the 2020 Comparison of State
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Unemployment Laws provided by US DOL ETA. This report reflects the status of state laws enacted
as of January 1, 2020.
Eligibility policy factors analysis and comparison against peer states (Chapter 7)
JLARC staff utilized the 2020 Comparison of State Unemployment Laws provided by DOL ETA to
create a list of 22 policy factors that influence recipiency rates and overall accessibility of state UI
programs, according to subject matter experts. These policy factors included factors that determine
state UI eligibility criteria (i.e., enabling individuals who voluntarily quit for “good cause” to be eligible
for UI), as well as policy factors (i.e., benefit levels) with a more indirect impact on accessibility. JLARC
staff compared Virginia’s policy factors to 12 other states. The 12-state sample was selected to ensure
a mix of states with high recipiency rates, states with low recipiency rates, and neighboring states:
Low Recipiency: Arizona, Florida, Georgia, South Dakota
High Recipiency: Massachusetts, New Jersey, Pennsylvania
Neighboring: District of Columbia, Kentucky, Maryland, Tennessee, West Virginia
The 22 policy factors are listed in Table 7-1 in Chapter 7.
Calculation of UI take-up rates and eligible unemployed population (Chapter 7)
JLARC staff used five-year estimates from the American Community Survey produced by the U.S.
Census Bureau to produce proxies for the eligible unemployed populations in both Virginia and na-
tionwide. JLARC staff used respondent answers to questions about employment status to filter out
self-employed individuals and respondent answers to questions about whether or not individuals were
able and available to work to estimate the share of unemployed individuals who would meet separation
eligibility criteria.
JLARC staff also used survey data collected by the Bureau of Labor Statistics (BLS) as part of the
Current Population Survey (CPS) UI Nonfiler Supplement. The supplement is targeted to unemployed
individuals who decided not to file for and has only been issued in two years – 2005 and 2018. JLARC
staff used data from the 2018 supplement to estimate the share of unemployed individuals in both
Virginia and the nation as a whole who did not file for UI because they were not aware of the program.
Calculation of benefit levels relative to cost-of-living measures (Chapter 7)
JLARC staff used data collected and published by the Massachusetts Institute of Technology’s Living
Wage Calculator to examine Virginia’s average cost of living figures for each household and family
expenditure category for single individuals, as well as individuals with one dependent. Staff also ex-
amined the average cost of living figures for 11 Virginia metropolitan statistical areas and two Virginia
independent cities. JLARC staff recalculated the annual cost of living estimates provided by MIT as
weekly estimates and compared them to various benefit levels including: the minimum weekly benefit
amount, the maximum weekly benefit amount, the 2019 average weekly benefit amount, the 2020
average weekly benefit amount, and the weekly benefit amount that would be earned by a full-time,
minimum wage worker.
The following household and family expenditure categories were included in the analysis:
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Food
Child Care (for individuals with one dependent)
Medical
Housing
Transportation
Taxes
The following 11 MSAs, one county, and two independent cities were included in the analysis:
Arlington County, VA
Blacksburg-Christiansburg-Radford, VA
Charlottesville, VA
Harrisonburg, VA
Lynchburg, VA
Richmond, VA
Roanoke, VA
Staunton-Waynesboro, VA
Virginia Beach-Norfolk-Newport News, VA
Winchester, VA
Kingsport-Bristol-Bristol, TN
Washington-Arlington-Alexandria, DC
Martinsville, VA
Danville, VA
Projection of trust fund impact of potential policy options altering maximum benefit amount
levels (Chapter 7)
JLARC projected the fiscal impact of two UI benefit level adjustments: (i) Indexing the maximum
benefit amount to 50 percent of the state’s average weekly wage, and (ii) requiring that the maximum
benefit amount to be increased by the growth rate of the state’s average weekly wage. To model the
trust fund impacts of these two changes, JLARC staff utilized DOL’s UNIS-X model. The version
used was last transmitted to VEC by DOL on May 11, 2020.
General assumptions
JLARC adjusted the baseline Economic Scenario Variables. First, the change in labor force participa-
tion was projected to drop by 2.15 percent in 2021 and then to grow by 0.79 percent each year from
2022 to 2032, using the five-year average growth rate in labor force participation from 2014 to 2019.
JLARC similarly adjusted projections for changes in the share of total covered employment. Covered
employment was projected to drop by 5.30 percent in 2021 and then to grow each year by 1.56 percent
from 2022 to 2032 using the five-year average growth rate in covered employment from 2014 to 2019.
JLARC also incorporated unemployment rate estimates into the model, inputting an estimated unem-
ployment rate of 4.7 percent for the first quarter of 2021 (according to the Bureau of Labor Statistics)
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and assuming a constant unemployment rate of 3.8 percent from 2022 to 2032, the five-year average
unemployment rate from 2014 to 2019.
JLARC also included estimates about the growth of the state’s average weekly wage, assuming a
growth rate of 2.4 percent in 2021 according to the Bureau of Labor Statistics Quarterly Census of
Employment and Wages (QCEW). A growth rate of 2.8 percent was assumed for 2022 to 2032, based
on the five-year growth rate in the state’s average weekly wage from 2014 to 2019.
Indexing the maximum weekly benefit amount to 50 percent of the state’s average weekly wage
JLARC used DOL’s model to project the fiscal impact to the UI trust fund of increased benefit pay-
ments that would result from indexing the maximum weekly benefit amount to 50 percent of Virginia’s
average weekly wage. The state’s average weekly wage for 2020 ($1,255) was taken from Bureau of
Labor Statistics data. JLARC assumed a yearly growth rate of 2.8 percent based on the five-year aver-
age growth rate for Virginia’s average weekly wage from 2014-2019. JLARC then calculated 50 percent
of these increasing state average weekly wage levels to estimate a new maximum weekly benefit
amount.
Indexing the growth of the maximum weekly benefit amount to the growth of the state’s average weekly wage
JLARC also used DOL’s model to project the fiscal impact to the UI trust fund that come from
increasing benefit payments by indexing the growth of the maximum weekly benefit amount to the
growth rate of Virginia’s average weekly wage. The state’s average weekly wage for 2020 ($1,255) was
increased each year by 2.8 percent based on the state’s historical five-year growth rate from 2014-2019.
JLARC then calculated the impact of increasing benefit levels from the current maximum weekly
benefit amount of $378 by 2.8 percent each year.
Making a one-time adjustment to tie the maximum benefit amount to 50 percent of Virginia’s 2019 average weekly
wage
JLARC used Bureau of Labor Statistics data to determine the average weekly wage in Virginia for
2019, which was $1,153. JLARC then calculated 50 percent of this average weekly wage ($577) and
incorporated this amount as the new maximum benefit amount beginning in 2023.
VEC tax audit analysis (Chapter 8)
Form 581 data reported by VEC to DOL combined with VEC human resources data provided by
DHRM was used to analyze VEC’s UI tax audit activities.
VEC is required by DOL to audit at least 1 percent of all contributory employers in the state. Because
Virginia had 221,325 in the base period, staff would need to have completed 2,213 audits to meet this
requirement. Even if VEC’s 40 field staff (as of 1/1/2019) had met the 52 audit annual requirement,
VEC would only have completed 2080 audits.
VEC is also required by DOL to audit at least 1 percent of wages paid by contributory employers in
the state. Because Virginia had $175,718,978,273 wages in the base period, staff would need to have
audited $1,757,189,783 of wages to meet this requirement. With 40 staff, VEC audited $921,471,616
wages. Assuming this average of $23,036,790 per audit held, 52 audits per staff person would only
have covered $1,197,913,101 wages.
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JLARC calculated the return on investment for VEC staff time spent on UI employer tax audits.
According to data reported to DOL, VEC captured $221,000 additional taxes from audits in 2019.
That revenue is much lower than the $705,000 spent completing the audits, estimated as one-third of
VEC tax staff annual salaries as of 1/15/2019.
State UI tax burden on employers (Chapter 8)
JLARC compiled data from several sources to determine that state UI taxes accounted for 1 percent
of total business taxes paid in Virginia (Table B-1). This figure is an approximation for two reasons.
First, data represents slightly different time periods across business tax types. Second, no data was
available on the amount of federal and state individual income taxes paid by Virginia pass-through
businesses.
TABLE B-1
State UI taxes are a small amount compared to other Virginia business taxes
Business tax Total Payments ($M) Percentage of total payments
Local taxes a $15,427 38%
Social Security b 13,219 33
Federal corporate income tax c 6,969 17
Medicare d 3,528 9
State corporate income tax e 943 2
UI state tax in Virginia f 367 1%
UI federal tax g 156 0%h
Total $ 40,609 100%
SOURCE: Virginia Department of Taxation’s FY2019 annual report; Social Security Administration website, ”Earnings and Employment
Data for Workers Covered Under Social Security and Medicare” tables on Internal Revenue Services; ETA 394 data from DOL website.
NOTE: a Data for SFY2019. Includes tangible personal property, machinery and tools, merchants’ capital, and public service corporations
taxes; excludes Business, Professional, and Occupational License tax because no statewide totals were available. b Employer contributions
for Old-Age & Survivors and Disability Insurance in CY2018. c SFY2019 data. d Employer contributions for Medicare Part A in CY2018. e
SFY2019 data. f CY2019 data. g FFY2019 data. h Actual figure is 0.4 percent.
This table only depicts the aggregate of taxes and does not illustrate a typical employer’s experience.
A business’s tax liability is dependent on its circumstances and the unique rules around each tax type.
For example, federal taxes for limited liability corporations are the rate of the owner’s personal income
taxes, while corporations pay 21 percent. Other taxes paid by employers such as Social Security and
federal UI depend on their number of employees and the amount of their wages. Lastly, various tax
deductions or credits can be applicable.
Projection of UI trust fund impact of raising UI taxable wage base and certain taxes
(Chapter 8)
JLARC projected the fiscal impact of three UI tax changes: increasing the taxable wage base, increas-
ing the minimum tax rate, and increasing the maximum tax rate.
General notes
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JLARC’s projections for all three tax changes used data from VEC’s employer tax records ― the Vir-
ginia Unemployment Insurance System (VUIS) ― provided by VEC. The data contains quarterly rec-
ords for each contributory employer (whose owed UI taxes equal their assigned tax rate multiplied by
taxable wages), and excluded reimbursing employers (whose owed UI taxes equal the exact amount of
UI benefits paid to prior employees). JLARC’s analyses relied on CY2020 data, which contained
2,447,223 records. After excluding duplicate records and records for employers classified as inactive
(i.e., out of business), 839,867 records remained. Data from the fourth quarter of CY2020 (220,902
observations after data cleaning) was used to count the number of employers potentially affected by
tax increases to avoid duplication across quarters. JLARC’s projections for tax rate changes also used
CY2020 summary data reported by VEC to DOL’s Employment and Training Administration (ETA),
called ETA 204 data. The data contains average or total annual data for employers by experience rating
group. It includes 224,005 contributory employers.
JLARC’s projections are limited to expected changes in the base tax. The analysis doesn’t account for
changes in UI trust fund interest from the U.S. Treasury, which would increase if the trust fund was
higher in a given year. Tax projections are limited to the base UI tax, not the pool or solvency tax. To
calculate the share of affected employers for each policy option, JLARC only considered the total
number of contributory employers because reimbursing employers would not be affected.
Taxable wage base
JLARC projected the increased tax revenue for increasing the taxable wage base (“base”) to $14,000,
selected because it is the 50-state median in 2019 (Table B-2). JLARC staff predicted the respective
increase in taxable wages for each employer. If all employees’ annual wages would exceed the new
base, then raising the base to that level increases tax revenue by that same percent as the base increased.
Therefore, raising the base to $14,000 (a 75 percent increase) can result at most in a 75 percent tax
increase for individual employers. Taxes will increase by less than 75 percent for employers for whom
75 percent increase in taxable wages would result in taxable wages exceeding gross wages; a logical
impossibility.
JLARC used the same method to project the fiscal impact of indexing the base to annual average
wages (Table B-2). An additional step was needed to predict the new base values in each future year,
which requires predicting annual average wage trends. JLARC analyzed historic average Virginia wage
data from US DOL’s 394 data and found an average annual increase of 2 percent between 2010 and
2019. (2020 data was available but excluded as an outlier year due to the COVID-19 pandemic.) Going
forward, a 2 percent annual average increase in wages would prompt the same percent increase in the
UI base. Assuming indexing begins CY2023, the base would rise to $8,160 in that year. It would likely
increase annually, reaching an estimated $9,752 in CY2032.
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TABLE B-2
Impact of raising taxable wage base depend on tax schedule and new base
New base Tax schedule Projected new taxes Number of affected employers
$14,000 (fixed) 50% $186,147,712 168,239 a
85% 163,238,105
115% 113,252,742
$8,160 (CY2023, 50% 5,907,163
if indexed) 85% 5,190,043
115% 3,622,642
$9,752 (CY2032, 50% 62,102,027
if indexed) 85% 54,479,690
115% 37,891,013
SOURCE: JLARC analysis of VUIS data.
NOTE: All analysis uses VUIS data; none use ETA 204 data a Equal to the number of total contributory employers.
Minimum tax rate
JLARC modeled two potential minimum tax rates: 0.01 percent and 0.04 percent. 0.01 percent is the
smallest possible non-zero minimum tax rate while maintaining the number of current decimal points
in state taxes. 0.04 percent is approximately halfway between the current minimum rate of 0 percent
and the second-to-minimum rates (0.08 percent, 0.09 percent, 0.10 percent) in the tax schedules con-
taining a minimum tax rate of 0 percent. The amount of new taxes produced by increasing the mini-
mum tax rate does not vary across the four relevant tax schedules. JLARC projected the fiscal impact
of raising the minimum tax rate using both VUIS data and ETA 204 data (Table B-3) to counteract
weaknesses in the data.
Using the VUIS method, each employer’s taxable wages were multiplied by the new tax rate of 0.01
percent to calculate tax revenue, which was summed across employers to provide total new tax reve-
nue. The same process was repeated for a new tax rate of 0.04 percent. The ETA 204 method used a
similar approach with summary-level data about employers.
TABLE B-3
Impact of raising minimum tax rate depend on methodology and new tax rate
New minimum Number of affected
tax rate Method Projected new taxes employers
0.01% VUIS $655,006 187,607
ETA 204 735,000 157,990-161,671
0.04% VUIS 2,620,024 187,607
ETA 204 2,938,000 157,990-161,671
SOURCE: JLARC analysis of VUIS and ETA 204 data.
Maximum tax rate
JLARC projected the fiscal impact of two possible maximum tax rates (Table B-4). The lower bound
of 6.8 percent was chosen because it ais the 50-state median of possible tax rates as of January 2020,
and represents a small but noticeable increase from the current 6.2 percent. The upper bound of 10
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percent was chosen to represent a large but feasible increase; eight states had maximum rates at or
above that benchmark.
The amount of new tax revenue from raising the maximum tax rate varies by tax schedule because
current tax rates at a given experience rating vary across schedules. The fiscal impact of each new
maximum tax rate was tested at three tax schedules: (1) trust fund solvency at the CY2020 level of 85
percent (selected to enable comparisons to actual 2020 data and test fiscal impact on a midway sched-
ule), (2) trust fund solvency at 50 percent (schedule containing highest tax rates), and (3) trust fund
solvency at 115 percent (schedule containing lowest tax rates).
For each tax schedule, JLARC developed a hypothetical revised version for each of the two new max-
imum tax rates. Next, JLARC pulled the amount of taxable wages at each experience rating from
VUIS data. Tax revenue for each experience rating level under current policy equals their taxable wages
multiplied by their current tax rate, aggregated to arrive at total tax revenue. Similarly, tax revenue at a
higher maximum rate equals the current taxable wages of employers at each experience rating level
multiplied by their new tax rates, aggregated to arrive at total tax revenue. JLARC also projected the
fiscal impact of raising the maximum tax rate using ETA 204 data for 85 percent solvency.
TABLE B-4
Impact of raising maximum tax rate depend on methodology and new tax rate
New maximum Number of affected
tax rate Method Projected new taxes ($) employers
6.8% VUIS | 50% schedule $3,304,071 5,549
VUIS | 85% schedule 2,173,335 4,076
ETA 204 | 85% schedule 2,734,000 6,357
VUIS | 115% schedule 2,500,678 3,473
10% VUIS | 50% schedule 15,166,436 5,549
VUIS | 85% schedule 8,689,916 4,076
VUIS | 115% schedule 4,242,271 3,473
SOURCE: JLARC analysis of VUIS and ETA 204 data.
Surveys
Two surveys were conducted for this study: (1) a survey of VEC agency staff and (2) a limited survey
of Virginia employers.
Survey of current VEC staff
JLARC staff administered an electronic survey to 1,128 full-time and part-time staff at VEC (exclud-
ing contractors) in April 2021. The survey received 789 responses, for a response rate of 70 percent.
JLARC received responses from staff in every division at VEC, but more than half of respondents
worked in either the Unemployment Insurance or Workforce Services division. Survey topics included:
perceptions of their overall experience working at VEC;
perceptions of their division at VEC;
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staff satisfaction with working at VEC, including salary, workload, and turnover intention;
perceptions of technology and data security at VEC;
perceptions of interactions between VEC headquarters and local offices;
challenges and improvements related to VEC’s administration of the UI program; and
perceptions of agency senior leadership.
Survey of employers
JLARC administered an electronic survey to a limited group of employers in March through May 2021
that covered various aspects of their interactions with VEC. At JLARC’s request, the following em-
ployer groups disseminated the survey to their members: the Virginia Restaurant, Lodging & Travel
Association; the Metropolitan Business League; the Chamber of Commerce; the Virginia branch of
the National Federation of Independent Business; the Associated General Contractors of Virginia;
and the Virginia Network of Private Providers. The total number of businesses that received the
survey is unknown, but 49 individuals completed the survey. Survey topics included the affordability
and administrative ease of UI taxes, and employers’ experiences working with VEC on UI claims, UI
appeals, and workforce programs.
Case file reviews
JLARC staff reviewed a limited sample of seven case files of UI appeals, including three first-level
appeals, three commission-level appeals, and one circuit court appeal. The case files included the un-
derlying deputy determination, the original claim application and corresponding information submit-
ted by the claimant, information submitted by employers, notices of appeal, notices of hearings, and
the decision of the appeals examiner. The case files were selected and provided by VEC to allow
JLARC staff to learn more about the types of documents and decisions involved in UI appeals.
JLARC staff also reviewed a sample of 14 case files of UI tax information for delinquent employers.
The sample of 14 was randomly selected from the 2,500 active employers with a delinquent tax rate
in 2020 (after excluding potentially duplicate records). The time period reviewed differed for each
case: it ended when the employer resolved the delinquency (or March 2021, whichever came first), and
it began when the employer first became delinquent (or January 2016, whichever came first). The March
2021 cut-off ensured the review didn’t extend to months for which VEC was still processing docu-
ments, while the January 2016 cut-off excludes records prior to the IT system being modernized.
JLARC considered missing quarterly reports or outstanding account balance to be delinquencies.
For each case, JLARC examined all formal collection letters to employers, sheriffs, banks, and courts.
JLARC calculated the amount of time between each collection letter and counted the number of
escalated letters (e.g., liens, set-offs) versus warning letters (e.g., quarterly notices, billing statements).
JLARC also read staff documentation of personal work to address delinquencies such as calling em-
ployers or searching for them through online databases. For each case, JLARC assessed if VEC applied
interest and the late report filing deadline when appropriate. Lastly, JLARC noted context explaining
the delinquency or delay in resolution, such as an incorrect address being on file.
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Usability Assessment
JLARC staff conducted a usability test of VEC’s UI claims filing website, Gov2Go. This assessment
was developed based on standards established by Usability.gov, a national resource for user
experience best practices and guidelines, which is managed by the Digital.gov team in the U.S.
General Services Administration Technology Transformation Service.
The usability assessment’s purpose was to determine the extent to which VEC’s online customer-
facing processes for receiving UI benefits were usable and accessible by customers. The usability
framework asked the following questions, some of which used an ‘agree/disagree’ scale:
1. Which type of benefits did you apply for?
2. Were you able to successfully complete this process?
a. [If No] At what point in the process were you unable to navigate further, and why
were you unable to navigate further?
b. [If Yes] Approximately how long did it take to complete the process?
3. It was easy to find where to begin this process on the website.
4. The instructions for how to complete this process were clear and comprehensible.
5. It was clear to me how far along I was at each step in the process
6. It was easy to navigate within this process
7. Most people would be able to complete this process quickly.
8. The information I needed for this process was readily available on the website
9. Did you have to use the automated chat-bot function at any point in the process?
a. [If yes] I was easily able to find the information I needed using the automated chat-
bot function.
10. Did you have any additional feedback to share regarding the usability / ease-of-use of this
process?
Usability tests completed by JLARC helped identify potential usability issues and could provide a fu-
ture framework for VEC to use to assess the usability of its modernized UI IT system.
Readability Assessment
JLARC staff conducted a simple readability assessment of public-facing webpages discussing UI ben-
efits, eligibility, how to file a claim, and answering frequently asked questions related to the claims
process. Five of the most public-facing webpages were analyzed using Microsoft Word’s Readability
Statistics, indicating a relatively high (i.e., between high school and college) reading level for all
webpages.
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Observations
JLARC staff observed seven appeals hearings, including four first-level hearings and three
commission-level hearings. These hearings were conducted over the phone, and JLARC staff
listened to the hearings with permission of all parties involved. The purpose of the observations
was to learn about VEC’s procedures for conducting the hearings, the role and practices of VEC’s
appeals examiners in hearings, and any challenges experienced by claimants or employers during the
hearings.
JLARC staff reviewed four recordings of customer calls received by VEC Customer Contact Centers.
The purpose of this limited observation was to learn about the experiences of both customers and
VEC call center agents during calls. These calls were previously recorded and shared with JLARC staff
for review because of technological limitations and COVID-19 restrictions.
JLARC staff observed monthly (later bi-weekly) Internal Agency Oversight Committee (IAOC) meet-
ings pertaining to the UI IT modernization project. The primary purpose of these observations was
to monitor the progress of the development and implementation of the UI IT modernization project.
These observations also allowed JLARC staff to learn about the management and oversight of the
project.
Document reviews
JLARC staff reviewed a wide variety of documents to inform its study of VEC, including:
statutes and regulations pertaining to VEC, UI, and workforce services, including 50-state
comparisons of UI laws produced by the DOL’s Employment and Training Administra-
tion (ETA);
internal VEC documents, including agency policies and procedures, staff training materi-
als and guidance, employee work profiles, organizational charts, internal audit reports,
State Quality Service Plans, and contract documents between VEC and third-party ven-
dors;
VEC’s UI application materials, benefit forms, and claimant benefit rights information;
DOL UI program letters, training and employment notices, and other guidance docu-
ments;
DOL Employment and Training Administration research reports related to UI call centers,
UI eligibility and benefits, nonmonetary policies and practices, and financing state UI trust
funds;
reports from the DOL Office of Inspector General;
documents related to best practices in UI administration from the National Association of
State Workforce Agencies;
documents relating to UI tax design best practices and state variation, including docu-
ments from the IRS and VA TAX and subject-matter experts;
previous reviews of VEC conducted by the APA and The Urban Institute; and
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strategic and emergency planning documents from other Virginia state agencies, including
the Virginia Department of Emergency Management, the Virginia Economic Develop-
ment Partnership, and the Virginia Retirement System.
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Appendix C: Estimated impacts of employment services
provided by the Virginia Employment Commission
JLARC staff analyzed the impacts of staff-assisted workforce services provided by the Virginia Em-
ployment Commission (VEC) to unemployment insurance (UI) claimants and other job seekers under
the Wagner-Peyser Employment Services program. Participants’ earnings and employment were com-
pared to the same outcomes for individuals who used only self-services available through VEC’s Em-
ployment Services program. A majority (64 percent) of participants received individualized career
services, and some (16 to 20 percent) received individual employment plans, career guidance, and staff-
assisted job search. Comparison group members received no staff-assisted services, primarily doing
their own job search online using the Virginia Workforce Connection.
JLARC’s analysis indicates that people who receive workforce services will, on average, see higher
levels of earnings and employment than those who do not. The analysis found modest positive im-
pacts of staff-assisted services on earnings, which are estimated to have increased by 8 percent, and
participants’ employment rates, which are estimated to have increased by about 2 percent. The results
of this analysis were largely consistent with similar research at the national level, with an overall in-
crease in quarterly earnings, across all cohorts, of nearly 8 percent. Similarly, the estimated impact on
employment was 1.7 percent.
One key limitation of this analysis was that the data indicated beginning and end dates of services,
but the data did not indicate the total amount of services received. For example, it is unclear how
many times a participant might have met with workforce services staff during this time. Other limita-
tions of the analysis are discussed in further detail below.
Background
VEC provides workforce services to UI claimants and other job seekers under the Wagner-Peyser
Employment Services program. The services are intended to help UI beneficiaries return to employ-
ment and to connect individuals looking for work with employers seeking workers. The Employment
Services program is one of the core programs authorized and funded under the federal Workforce
Innovation and Opportunity Act (WIOA) in Virginia’s workforce development system. Other WIOA
core programs are:
The Adult, Dislocated Worker, and Youth program administered by the Virginia Commu-
nity College System;
The Adult Education and Family Literacy program administered by the Virginia Depart-
ment of Education; and
The Vocational Rehabilitation programs administered by the Department for Aging and
Rehabilitative Services and the Department for the Blind and Vision Impaired.
The Wagner-Peyser Employment Services program offers mainly short-term help for job seekers, such
as job search assistance, career guidance, and individualized employment plans. The program does not
offer longer term services such as job training, but some participants receive job training from other
workforce programs. Wagner-Peyser services may be delivered with the assistance of VEC staff or
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self-service. The program prioritizes staff-assisted employment services for unemployment insurance
claimants most likely to exhaust their benefits.
National research suggests that the Employment Services program produces small positive impacts
for participants and is cost-effective. A recent random assignment evaluation of DOL-funded
reemployment services for UI claimants in four states found small increases in employment and earn-
ings for participants, and reductions in the number of weeks they received UI benefits (Klerman and
Saunders 2019). Older research studies of staff-assisted employment services for UI claimants have
found small reductions in unemployment durations (summarized in Balducci and O’Leary 2018). In
addition, several evaluations of work requirements and job search assistance in state welfare reform
programs generally find small positive effects on earnings and employment.
Data and sample used for analysis
Services provided to individual participants were measured using person-level data provided by VEC
from the Participant Individual Record Layout (PIRL) system developed by U.S. DOL. Earnings and
employment outcomes were measured using individual-level, quarterly wage records provided by VEC
from the Unemployment Insurance Program. PIRL data covered the period from the third quarter of
2016 to the first quarter of 2019. Quarterly earnings data covered the 21 calendar quarters between
the fourth quarter of 2015 and fourth quarter of 2020.
Participants were defined as those who received staff-assisted services under the Wagner-Peyser Em-
ployment Services program. The comparison group was individuals who received only self-services
under Wagner-Peyser. The participant group consisted of 77,141 individuals, and the comparison
group included 128,204 individuals.
All participants (individuals in the staff-assisted group) received basic career services, 64 percent re-
ceived individualized career services, 20 percent received an individual employment plan, 17 percent
received career guidance, and 16 percent received staff-assisted job search. PIRL data shows 39 percent
of participants received training, although the type and source of training is not indicated. Individuals
in the self-service group received only basic information services.
Impacts were estimated for two outcomes: the 75th percentile of quarterly wages, and the average
percentage of individuals employed in a quarter (employment rates). The 75th percentile of earnings
was chosen because median earnings in the sample were zero, and mean earnings are less reliable
because they tend to be influenced by large positive outliers.
Characteristics of participant and comparison groups
Participants are generally similar to comparison group members (Table C-1). Participants are slightly
more likely to be male, and Black, but are very similar to the comparison group in age and employment
rates at program entry. Participants had substantially lower pre-program wages than the comparison
group. The approach to estimating impacts, using a difference-in-difference model, is intended to
account for this.
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TABLE C-1
Sample characteristics
Participants Comparison group
Characteristic (staff-assisted services) (self-services)
Male 56% 49%
White 49% 57%
Black 50% 41%
Average age 40 41
Employed at program entry 41% 42%
(according to quarterly wage records)
Avg. of 75th percentile of quarterly wages in the $2,749 $4,489
three quarters before program entry a
Avg. quarterly percentage employed in the three 39% 41%
quarters before program entry
Unemployment Compensation claimant 40% --
(including exhaustees)
SOURCE: JLARC staff analysis of data from PIRL and UI quarterly wage records.
NOTE: Applies to whole table. (Example: Not adjusted for inflation. Numbers may not add because of rounding.)
a Includes individuals with zero earnings.
Approach to estimating impacts
Impacts are estimated using a difference-in-difference model: the estimated impact is calculated as the
outcome post-participation minus the outcome pre-participation for individuals receiving staff-as-
sisted services minus the analogous pre-post difference for the self-services group.
The pre-period was the three quarters before services (or, for the comparison group, registration for
services), and the post-period was the seven quarters after service receipt. (The quarter of service
receipt was excluded because it includes time pre- and post-services.) The pre- and post-time periods
were chosen to maximize sample size given the available quarters of data. For individuals who received
services in more than one quarter, only the most recent quarter of service receipt (or the most recent
quarter of registration for services) was included.
The analysis controlled for differences in the timing of service receipt across the participant and com-
parison groups by doing separate comparisons for cohorts defined by quarter of service receipt. The
overall estimates are calculated as the average difference-in-difference value across cohorts. The co-
hort entering in the fourth quarter of 2017 was excluded because of a data limitation: the comparison
group included only 39 individuals, compared with an average of 13,000 individuals in the other quar-
terly cohorts.
The analysis was conducted including pandemic quarters (the second quarter of 2020 through the
fourth quarter of 2020) and excluding them. Excluding pandemic quarters did not change the results.
Results
The overall increase in quarterly earnings, averaged across cohorts, is estimated as 7.9 percent, and the
estimated impact on employment is a 1.7 percent increase (Tables C-2 and C-3). These results are
138
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broadly consistent with the findings from national research. Impacts for both outcomes vary substan-
tially across quarterly cohorts, however, which provides less confidence in the overall impact estimates.
Limitations of analysis
There were several limitations to the analysis, including:
The PIRL data system provides begin and end dates of services by type, but no measures
of the amount of services received.
The data shows that, on average, earnings and employment are lower after the program
than before the program. This is consistent with national research that most people who
are laid off earn less at their new jobs. Lower post-program earnings, however, do not
mean that workforce services are ineffective. The pre-post decline in earnings is larger for
the comparison group than for the group that received workforce services, so the impact
estimated by the difference-in-difference model is positive.
The difference-in-difference model assumes that there are no time-varying differences be-
tween the participant and comparison groups. This assumption is supported by an inspec-
tion of quarter-to-quarter changes in outcomes before program entry.
TABLE C-2
Estimated impacts of staff-assisted employment services on quarterly earnings
75th percentile of quarterly earnings
Participants Comparison Group
Outcome Pre- Estimated
and entry enroll- Post- Post Pre- Post- Post minus impact Percentage
cohort ment enrollment minus Pre enrollment enrollment Pre (diff-in-diff) impact
2016 (Q3) $ 3,043 $ 2,576 $ -468 $ 4,026 $ 3,563 $ -464 $ -4 - 0.1 %
2016 (Q4) 2,686 2,413 -273 3,970 3,489 -480 punctua-
208 5.2
tion
2017 (Q1) 3,163 2,690 -472 3,809 3,556 -253 -219 -5.8
2017 (Q2) 2,909 2,306 -603 4,524 3,537 -988 385 8.5
2017 (Q3) 2,277 2,153 -124 3,611 3,572 -40 -84 -2.3
2018 (Q1) 2,851 2,117 -734 5,342 3,513 -1,829 1,094 20.5
2018 (Q2) 2,487 2,109 -378 5,213 3,374 -1,839 1,461 28.0
2018 (Q3) 2,915 1,987 -928 5,505 3,996 -1,509 581 10.6
2018 (Q4) 2,650 1,869 -781 4,919 3,757 -1,162 381 7.7
2019 (Q1) 2,963 1,834 -1,129 5,819 4,290 -1,529 400 6.9
Average across cohorts $420 7.9%
SOURCE: JLARC staff analysis of data from PIRL and UI quarterly wage records.
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Appendixes
TABLE C-3
Estimated impacts of staff-assisted employment services on quarterly employment rate
Quarterly employment rate
Participants Comparison Group
Outcome Estimated
and entry Pre- Post- Post Pre- Post- Post minus impact Percentage
cohort enrollment enrollment minus Pre enrollment enrollment Pre (diff-in-diff) impact
2016 (Q3) 40% 37% -3% 41% 39% -1 % -2% -4%
2016 (Q4) 39 36 -3 41 38 -3 0 1
2017 (Q5) 40 37 -4 40 39 -2 -2 -4
2017 (Q2) 39 36 -3 42 38 -3 0 0
2017 (Q3) 37 36 -1 39 38 -1 -1 -1
2018 (Q1) 40 35 -5 42 36 -6 1 3
2018 (Q2) 38
asdf 35 -2 43 36 -7 5 11
2018 (Q3) 38 34 -4 43 36 -6 2 5
2018 (Q4) 38 33 -5 41 35 -6 1 3
2019 (Q1) 39 33 -6 43 36 -7 1 3
Average across cohorts 0.7% 1.7%
SOURCE: JLARC staff analysis of data from PIRL and UI quarterly wage records.
References
Balducchi, David E., and Christopher J. O’Leary. 2018. “The Employment Service–Unemployment
Insurance Partnership: Origin, Evolution, and Revitalization.”
Klerman, Jacob A., and Correne Saunders. 2019. “Findings Summary” (REA Impact Study Briefs).
Produced for the U.S. Department of Labor, Chief Evaluation Office. Rockville, MD: Abt Associ-
ates Inc.
140
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Appendix D: Analysis of selected Virginia Employment
Commission staff salaries
JLARC staff analyzed the salaries of 14 VEC staff positions with responsibilities related to the un-
employment insurance (UI) program, including UI benefits staff, UI tax staff, UI appeals staff, call
center staff, and IT staff. Two analyses were conducted to determine how the salaries for these selected
VEC staff positions compare to relevant benchmarks:
(1) an assessment of VEC staff ’s salaries compared to salaries for similar staff positions in
other Virginia state agencies; and
(2) an assessment of VEC staff ’s salaries compared to salaries for similar staff in private
sector positions.
The results of these analyses were used to determine whether VEC staff ’s salaries were above or
below relevant benchmarks. JLARC staff worked with staff from the Department of Human Re-
source Management (DHRM) to identify positions at Virginia state agencies and within the private
sector that are comparable to the selected VEC staff positions.
VEC salaries for several key positions are lower than salaries
for comparable positions at other Virginia state agencies
Most (11 of the 14) of the VEC positions examined had lower median salaries than comparable posi-
tions at other Virginia state agencies (Table D-1). These positions included all of the UI benefits, UI
appeals, and call center positions examined, and a majority of the IT staff positions examined. For
example, the median salary for VEC’s adjudication supervisors was 51 percent lower than the median
salary for comparable positions in other Virginia state agencies, such as the Department of Health
Professions, the Department of Juvenile Justice, and the Department of Professional and Occupa-
tional Regulation. Adjudication supervisors oversee VEC’s detailed reviews of UI claims that require
further examination of claimants’ eligibility. In addition, the median salary for VEC’s customer contact
center representatives was 27 percent lower than the median salary for comparable positions in other
Virginia state agencies, such as the Department for Aging and Rehabilitative Services and the Depart-
ment of Social Services. Currently, VEC has over 120 full-time customer contact center representa-
tives who are responsible for answering calls about UI claims.
Two of the VEC positions examined had higher median salaries than comparable positions at other
state agencies. Specifically, the median salary for VEC’s tax representatives (including regional leads)
was 36 percent higher than the median salary for comparable positions at other Virginia state agencies,
such as the Department of Motor Vehicles and the Department of Taxation. The difference between
VEC’s median salary for IT applications supervisors and that of comparable positions at other Vir-
ginia state agencies was more modest, with VEC median salaries measuring only 1 percent higher.
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TABLE D-1
Salaries for VEC staff positions reviewed are largely lower than salaries for comparable
positions at other Virginia state agencies
VEC Comparable VEC median VEC difference
VEC position
positions VA agency salary
positions
Call Center Staff
Customer contact center representative 131 287 $31,200 27% lower
Customer contact center specialist 19 287 35,278 18% lower
Customer contact center supervisor 7 187 45,000 2% lower
UI Benefits Staff
UI/claims special investigator a 44 6,910–6,927 44,773 20-21% lower
Hearing officer a 86 38–77 38,392 11–38% lower
Adjudication supervisor 8 8 50,000 51% lower
UI adjudication center manager a 3 1-3 58,000 42–52% lower
UI Tax Staff
UI tax representative/regional lead 44 212 54,504 36% higher
UI Appeals Staff
Appeals examiner/Admin. law judge 5 23 75,000 15% lower
IT Staff b
Applications programmer/analyst expert 10 183 93,250 8% lower
Applications programmer/analyst 5 121 60,000 9% lower
Applications supervisor 5 25 114,000 1% higher
Data warehouse DBA/developer c 3–10 95–1,067 72,855– 1% lower–
94,000 8% higher
Java programmer 4 8 56,000 41% lower
SOURCE: Department of Human Resource Management salary data for Virginia state employees as of June 30, 2021.
NOTE: Comparison sets comprised individuals at other state agencies with comparable position levels (e.g., employees, first-line su-
pervisors, managers) and either matching Standard Occupational Classification (SOC) System codes or DHRM’s Role-Class codes. For
some positions, additional filters were applied to further refine comparison sets. This analysis was conducted on filled, full-time posi-
tions at both VEC and other comparison state agencies. See Appendix B for additional information on JLARC staff’s salary analysis
methodology. a In some cases, VEC position salaries were compared to salaries for more than one comparison set of other state
agency employees. b Java programmers were included in each of the IT staff position groups analyzed, depending on their working
title, and then also analyzed separately as a group. c When positions with an exact match to certain SOC or Role-Class codes did not
exist at VEC, multiple groups of VEC employees were used to derive a median salary.
VEC staff salaries for key positions are lower than salaries for
many comparable private sector positions
To compare VEC staff salaries to comparable private sector positions, JLARC staff worked with
DHRM staff to select comparable positions in the U.S. Mercer Benchmark Database. The Mercer
database is a large proprietary, multi-industry compensation database that provides access to compen-
sation data from over 3,000 private sector companies and organizations covering over 2 million em
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Appendixes
ployees and over 1,200 types of positions. The positions used for comparison from the Mercer data-
base were full-time positions for similar occupations, taken from a cross-section of employers located
across the country.
Eight of the VEC positions examined had lower median salaries than comparable positions in the
private sector (Table D-2). These positions included all of VEC’s call center staff, as well as a majority
of the UI benefits staff and some critical IT positions. For example, the median salary for hearing
officers was 18 percent lower than the median salary for comparable positions in the Mercer database,
such as entry-level claims adjusters, examiners, or processors. Hearing officers conduct fact-finding
interviews and make eligibility decisions on claims that require more in-depth review. In addition, the
median salary of VEC’s Java programmers was 32 to 33 percent lower than the median salary for
comparable positions in the Mercer database, such as system programmers. As of June 30, VEC had
four Java programmers in the IT division. These staff are responsible for the design, development,
and management of applications used to support VEC’s operations. For example, the new IT system,
VUIS, was designed using the Java programming language.
Three of the VEC positions examined had higher median salaries than comparable private sector po-
sitions. Specifically, the median salary for IT applications supervisors was 10 percent higher than the
median salary for comparable positions in the Mercer database, such as applications system program-
mers. Differences between VEC’s median salary for appeals examiners or administrative law judges
and comparable positions in the Mercer database (e.g., paralegals or legal assistants) were more modest
at 4 percent to 9 percent, respectively.
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TABLE D-2
VEC salaries are largely lower than those for comparable positions in the private sector
VEC Comparable VEC median VEC difference
VEC Position
positions private sector salary
positions
Call Center Staff
Customer contact center representative 131 1,539 $31,200 14% lower
Customer contact center specialist a 19 3,015–4,485 35,278 19-22% lower
Customer contact center supervisor a 7 1,336–3,476 45,000 8–10% lower
UI Benefits Staff
UI/claims special investigator a 44 41–766 44,773 18% lower–
3% higher
Hearing officer 86 4,543 38,392 18% lower
Adjudication supervisor 8 7,835 50,000 15% lower
UI adjudication center manager 3 4,775 58,000 24% lower
UI Tax Staff
UI tax representative/ regional lead a 44 174–658 54,504 9% lower –
9% higher
UI Appeals Staff
Appeals examiner/Admin. law judge a 5 318–1,739 75,000 4–9% higher
IT Staff b
Applications programmer/analyst expert 10 8,826 93,250 13% higher
Applications programmer/analyst 5 16,220 60,000 42% lower
Applications supervisor 5 16,220 114,000 10% higher
Data warehouse DBA/developer c 3–10 230 72,855– 18% lower –
94,000 6% higher
Java Programmer a 4 333–908 56,000 32–33% lower
SOURCE: Department of Human Resource Management salary data for Virginia state employees as of June 30, 2021. Mercer Bench-
mark Database salary data as of July 2021.
NOTE: DHRM shared data from the proprietary Mercer Benchmark Database with JLARC staff to make comparisons between 14 VEC
positions and private sector comparison sets. DHRM staff suggested 23 position titles from the Mercer Database corresponding to each
of the VEC positions. This analysis was conducted on filled, full-time positions at both VEC and other comparison state agencies. See
Appendix B for additional information on JLARC staff’s salary analysis methodology. a In some cases, VEC position salaries were com-
pared to salaries for more than one comparison set of private sector employees. b Java programmers were included in each of the IT
staff position groups analyzed, depending on their working title, and then also analyzed separately as a group. c When positions with
an exact match to certain SOC or Role-Class codes did not exist at VEC, multiple groups of VEC employees were used to derive a
median salary.
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Appendixes
Appendix E: Prioritization of JLARC report recommendations
The JLARC report Operations and Performance of the Virginia Employment Commission (VEC) contains rec-
ommendations to improve VEC’s management and administration of the state’s unemployment in-
surance (UI) program. Most of these recommendations are directed to VEC and will require agency
leadership to take specific actions or make changes to internal agency policies, processes, or proce-
dures. There are also recommendations directed to the General Assembly because they either require
a change in state law or can be implemented through budget language.
Appendix organization
This appendix organizes the report’s recommendations according to VEC’s operational areas and top-
ics focused on in JLARC’s review: agency staffing and management, understandability of the UI pro-
cess, UI claims backlogs, VEC’s call centers, overpayments of UI benefits, VEC’s information tech-
nology, and the UI trust fund’s solvency.
The appendix also includes recommended timeframes for implementing the agency-directed recom-
mendations: by December 31, 2021, by June 30, 2022, and by December 31, 2022. Based on these
timeframes, VEC should act soonest on recommendations to:
establish goals for and monitor performance of the most important aspects of UI operations;
ensure that VEC staff are informed about key UI policy and procedural changes;
improve the understandability of the UI claims process for claimants;
eliminate adjudication backlogs;
improve call center performance;
investigate potentially fraudulent claims;
resume collection of overpayments; and
improve efforts to identify unpaid employer taxes.
The General Assembly may wish to take action on legislative recommendations during the 2022 Gen-
eral Assembly session.
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Agency staffing and management
Recommendations for General Assembly action
The report contains recommendations for the General Assembly to take action to (i) improve VEC’s
ability to temporarily rely on other state agency staff for assistance when workloads escalate in re-
sponse to sudden periods of high unemployment, (ii) improve VEC’s planning and preparedness for
future recessions, and (iii) enhance the legislature’s oversight of VEC’s performance. Another recom-
mendation would amend the Code of Virginia to allow disputes about certain claims that do not
qualify for a formal appeal to bypass the appeals division, to reduce the appeals division’s workload
and improve the efficiency with which these disputes are handled.
Obtain temporary staffing assistance from other state agencies ► The General Assembly may
wish to consider including language in the Appropriation Act requiring the Virginia Department of
Human Resource Management to lead a multi-agency workgroup, comprising agency leaders and hu-
man resources staff from state agencies most likely to be in need of staffing assistance during emer-
gencies, to examine the feasibility of and policies and procedures necessary for (i) granting agencies
exemptions from certain competitive hiring requirements during emergencies; (ii) requiring selected
state agency staff to temporarily support other agencies in need of staffing assistance during emer-
gencies through existing or new state initiatives; and (iii) providing necessary funding to cover the
associated costs. The workgroup should propose criteria to determine under what circumstances these
emergency hiring practices may be invoked and a process for invoking this authority as well as termi-
nating it. The workgroup should submit its findings to the secretary of administration, the chair of
the House Appropriations Committee, and the chair of the Senate Finance and Appropriations Com-
mittee by June 30, 2022. (Recommendation 3)
Plan operational response to UI claims increases ► The General Assembly may wish to consider
amending § 60.2-111 of the Code of Virginia to require the Virginia Employment Commission to
develop and maintain an unemployment insurance resiliency plan that describes the specific actions
the agency would take, depending on the level of increase in unemployment insurance (UI) claims, to
address staffing, communications, and other relevant aspects of operations to ensure continued effi-
cient and effective administration of the UI program. (Recommendation 7)
General Assembly monitoring of VEC’s performance ► The General Assembly may wish to
consider including language in the Appropriation Act or amending § 30-222 of the Code of Virginia
to create a subcommittee of the Commission on Unemployment Compensation to monitor the Vir-
ginia Employment Commission’s: (1) key performance metrics related to UI backlogs; (2) efforts to
identify, prevent, and recover incorrect UI benefits payments, including fraudulent payments; (3) pro-
ject to modernize the UI IT system; (4) expenditure of state funds appropriated for UI administration;
and (5) implementation of JLARC recommendations. The subcommittee should include individuals
who can represent the interests and experiences of claimants and employers. The subcommittee could
include members of the following General Assembly committees: Commission on Unemployment
Compensation, House Appropriations, Senate Finance and Appropriations, House Labor and Com-
merce, and Senate Commerce and Labor. The subcommittee should meet at least once quarterly and
sunset on June 30, 2025. (Recommendation 9)
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Improve efficiency of appeals workflow ► The General Assembly may wish to consider amending
§ 60.2-619 of the Code of Virginia to specify that non-valid unemployment insurance claims resulting
from monetary ineligibility are ineligible for appeal through the Virginia Employment Commission’s
appeals division. (Recommendations 18 and 19)
Recommendations for agency action
The report recommends that VEC take specific actions to improve agency staffing and agency man-
agement. VEC should implement most of these recommendations before December 31, 2021 or be-
fore June 30, 2022. Recommendation 1, which is directed to the secretary of labor, should be imple-
mented after July 1, 2022 because it is contingent on the completion of VEC’s modernized IT system,
scheduled for June 30, 2022. The report does not include recommendations to increase VEC staff
compensation to improve staff recruitment and retention, but the salary analysis presented in Appen-
dix D concludes that some VEC staff salaries are lower than comparable positions in other state
agencies and the private sector.
Staffing
Hire contractor to conduct detailed efficiency review for improved staffing and workflows ►
The secretary of labor should competitively procure a national firm with expertise in evaluating the
efficiency of an organization’s staffing structure, delegation of staff duties, and work processes to
conduct a comprehensive efficiency review of the unemployment insurance (UI) operations of the
Virginia Employment Commission to (i) identify specific actions that could be taken to improve the
efficiency of VEC’s UI operations, including through more efficient and effective use of staff and
technology, (ii) recommend improvements to the agency’s staffing and workflows to most effectively
use existing federal funding for UI operations, and (iii) determine whether current funding is adequate
to ensure effective UI operations. (Recommendation 1)
Improve staff supervision ► The Virginia Employment Commission should establish goals for the
ratio of supervisory staff to direct reports, particularly for key functions including call centers, adju-
dication and appeals centers, and fraud investigations. Agency leadership should regularly monitor the
ratio of supervisory staff to direct reports relative to the goals, and report performance in meeting
these goals in the monthly commissioner’s performance report. (Recommendation 2)
Increase number of VEC staff trained in UI ►The Virginia Employment Commission should
build a reserve of staff to assist with claims during periods of high claims volume by identifying
workforce services division staff whose time can practicably be reassigned to non-workforce activities
during periods of high unemployment insurance claim volume. These staff should be cross-trained
on key unemployment insurance processes. (Recommendation 12)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
1 •
2 •
12 •
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Agency management
Establish goals and monitor performance of key UI operations ► The Virginia Employment
Commission should establish meaningful performance goals for its call center operations and fraud
investigations, and ensure it has goals for effectively measuring performance in all other aspects of
unemployment insurance operations. Agency leadership should regularly monitor performance rela-
tive to the goals and report goals and performance in the monthly commissioner’s performance re-
port. (Recommendation 4)
Enhance independence and awareness of quality assurance unit ► The Virginia Employment
Commission (VEC) should transfer the unemployment insurance quality assurance unit from the un-
employment insurance division and have it report directly to the VEC commissioner (Recommenda-
tion 5) and require its unemployment insurance quality assurance unit to compile its findings and
recommendations in a central repository and routinely update VEC leadership on their status (Rec-
ommendation 6).
Keep key VEC staff informed of policy and procedural changes ► The Virginia Employment
Commission (VEC) commissioner should ensure that all key policy or other significant changes that
could affect the public, VEC, or VEC staff are communicated clearly and expeditiously to all VEC
staff, especially those in leadership or positions communicating with the public. (Recommendation 8)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
4 •
5 •
6 •
8 •
Understandability of the UI claims process
Recommendation for General Assembly action
The report includes a recommendation for the General Assembly to create an ombudsman position
within VEC to address concerns identified during JLARC’s review about the understandability of the
appeals process, especially by claimants.
Create an appeals ombudsman position ►The General Assembly may wish to consider amending
Article 2 of Chapter 1 of Title 60.2 of the Code of Virginia to direct the Virginia Employment Com-
mission to create an appeals ombudsman position to provide impartial information about the unem-
ployment insurance appeals process and help ensure that all parties are afforded due process in such
appeals. (Recommendation 20)
Recommendations for agency action
The report recommends that VEC take specific actions to improve the understandability and accessi-
bility of UI eligibility and the claims and appeals processes. These recommendations should be imple-
mented by VEC before December 31, 2021.
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Clearly explain UI eligibility and claims/appeals process ► The Virginia Employment Com-
mission (VEC) should, as soon as possible, have staff in its internal audit division review and revise
documents and online resources to more clearly describe and explain (i) eligibility criteria for Unem-
ployment Insurance (UI), (ii) how to navigate the UI claims and appeals process, and (iii) the status or
outcome of a claim. VEC should use examples from other states and input from VEC staff and
customers and should competitively procure a third party contractor with expertise in UI and cus-
tomer communications to assist with these efforts. (Recommendation 10)
Develop instructional videos and online eligibility tool ► The Virginia Employment Commis-
sion should develop (i) a series of instructional, short videos designed to help claimants better under-
stand their potential eligibility for unemployment insurance, the steps of the application process, and
how to file a claim and (ii) an interactive, online eligibility tool that enables claimants to better under-
stand their potential eligibility and benefits under the program. (Recommendation 11)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
10 •*
11 •
*Should be initiated by VEC staff internally by December 31, 2021, but procurement of a third-party contractor is likely
infeasible until mid-2022.
Backlog of claims requiring adjudication
Recommendations for General Assembly action
None
Recommendations for agency action
The report recommends that VEC take specific actions to eliminate the current backlog of claims
requiring adjudication. These recommendations should be implemented by VEC before December
31, 2021.
Strategically prioritize claims needing adjudication ► The Virginia Employment Commission
should formalize a policy for prioritizing and assigning claims for adjudication during periods of high
claims volume. This policy should detail how prioritization may change in response to claims volume
and clearly state the expectation that VEC should generally prioritize resolving older claims. (Recom-
mendation 13)
Detail actions and resources needed to resolve adjudication backlogs ► The Virginia Employ-
ment Commission (VEC) should develop a detailed plan that includes specific actions and a timeline
to resolve (i) outstanding adjudications and (ii) all issues on claims that VEC bypassed in 2020 and
2021. The plan should quantify the numbers and qualifications of new staff needed to resolve these
claims, outline the actions planned for hiring needed staff, and identify potential risks and mitigation
strategies. VEC should submit the plan to the House Labor and Commerce Committee, the Senate
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Commerce and Labor Committee, the Commission on Unemployment Compensation, and the gov-
ernor and provide a status update to each body quarterly in 2022. VEC should also publish the plan
and updates on its website. (Recommendation 14)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
13 •
14 •
UI Call Center Performance
Recommendations for General Assembly action
None
Recommendations for agency action
The report recommends that VEC take specific actions to improve the performance of its call center.
Two of these recommendations should be implemented prior to December 31, 2021, and the third
should be a priority for the agency in 2022.
Retain contractor for quickly escalating call center capacity ► The Virginia Employment Com-
mission should maintain an ongoing staff augmentation contract with a provider that is experienced
in providing call center services for unemployment insurance programs and can quickly provide in-
creased call center staff when call volumes increase. (Recommendation 15)
Report call center performance to General Assembly ► The Virginia Employment Commission
(VEC) should provide a written quarterly update on the performance of its call centers to the House
Labor and Commerce Committee, the Senate Commerce and Labor Committee, the Commission on
Unemployment Compensation, and the governor by December 31, 2021 and at the end of each quar-
ter in 2022. VEC should also publish these updates on its website. (Recommendation 16)
Assess and improve performance of call center staff ► The Virginia Employment Commission
(VEC) should establish and maintain a dedicated quality monitoring team composed of VEC staff
from each customer contact center. This team should use the recently procured quality monitoring
software to regularly review and assess call quality and performance for all VEC call agents, and iden-
tify any additional training needs on an agent-by-agent basis through weekly monitoring and assess-
ment of at least three calls per agent. (Recommendation 17)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
15 •
16 •
17 •
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Accuracy of claims processing and recovery of overpayments
Recommendations for General Assembly action
The report includes a recommendation for the General Assembly to amend the Code of Virginia to
require employers to send information about a former employee’s separation from employment to
VEC electronically rather than through the mail to improve the timeliness of claims determinations.
Require employers to report employee separations electronically ► The General Assembly may
wish to consider amending §60.2-121.1 of the Code of Virginia to require employers to electronically
provide separation information when requested to the Virginia Employment Commission unless they
are granted a waiver from providing this information electronically. (Recommendation 22)
Recommendations for agency action
The report recommends that VEC take specific actions to improve the quality of its claims determi-
nations, to investigate the backlog of potentially fraudulent claims, and to begin the process of recov-
ering excess benefits that were paid to claimants. Most of these recommendations should be imple-
mented by December 31, 2021.
Train VEC staff to conduct high-quality UI claims determinations ► The Virginia Employ-
ment Commission should develop a standardized training program that explains how to conduct high
quality unemployment insurance claims determinations and that is administered by a dedicated training
manager to all new and existing adjudication staff. (Recommendation 21)
Audit compliance with work search requirement ► The Virginia Employment Commission
should resume auditing a sample of UI claims to verify compliance of claimants with the unemploy-
ment insurance program work search requirement no later than December 1, 2021. (Recommendation
23)
Plan for investigating backlog of potentially fraudulent claims ► The Virginia Employment
Commission (VEC) should develop a plan for investigating the backlog of potentially fraudulent
claims and establish a strategy for prioritizing its investigations according to the potential dollar
amount of fraudulent payments per claim. This plan should include a strategy for hiring additional
fraud investigators and expediting training of new hires. This plan should be presented to the House
Committee on Labor and Commerce, the Senate Committee on Commerce and Labor, the Commis-
sion on Unemployment Compensation, and the governor by December 31, 2021. VEC should also
publish these updates on its website. (Recommendation 24)
Resume recovery of overpayments ►The Virginia Employment Commission (VEC) should im-
mediately resume overpayment recovery activities for all finalized overpayments and initiate collec-
tions activities for all future overpayments immediately after finalization. VEC should also create and
adhere to internal timeliness standards for processing all previously received and future overpayment
waiver applications to ensure overpayments are finalized and recovery activities are initiated in a timely
manner. (Recommendation 25)
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Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
21 •
23 •
24 •
25 •
Information technology
Recommendations for General Assembly action
None
Recommendations for agency action
The report recommends that VEC take specific actions to ensure that its new UI IT modernization
system is assessed and improved on an ongoing basis, that the unresolved problems with the employer
tax portion of the new system are resolved before VEC’s contract with the modernization vendor
ends, and that VEC’s IT environment meets IT security standards. Each of these recommendations
can be implemented in 2022.
Regularly improve UI system based on claimant feedback ► The Virginia Employment Com-
mission (VEC) should regularly collect feedback on the usability of the new Unemployment Insurance
benefits information technology system from claimants and employers and make regular improve-
ments to the system, as necessary, that address such feedback. VEC should provide a summary of
user feedback and planned and completed system changes to the House Committee on Labor and
Commerce, the Senate Committee on Commerce and Labor, the Commission on Unemployment
Compensation, and the governor by March 31, 2022 and at the end of each quarter in 2022. VEC
should also publish this information on its website. (Recommendation 26)
Identify ways to further modernize UI system ► The Virginia Employment Commission (VEC)
should conduct a request for information to identify additional features needed for a modernized
unemployment insurance IT system and hire a vendor to develop these features or develop them using
agency staff. (Recommendation 27)
Detail actions and timeline for fixing UI tax system problems ► The Virginia Employment
Commission should require its unemployment insurance IT modernization contractor to develop a
plan that includes specific actions and a timeline for addressing all existing tax system problems and
details (1) how each problem will be fixed, (2) deadlines for fixing each problem, and (3) any additional
resources needed to fix the problems. VEC should also establish a plan with its unemployment insur-
ance modernization vendor to ensure VEC IT staff are sufficiently trained to operate and modify the
employer tax system. (Recommendations 28 and 29)
Undergo an IT security audit ► The Virginia Employment Commission (VEC) should work with
the Virginia Information Technologies Agency (VITA) to facilitate an audit of VEC’s IT security
systems and to identify any necessary IT security improvements. The audit should be completed by a
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vendor approved by VITA. The audit should validate whether VEC’s existing IT security systems meet
the requirements issued by VITA. (Recommendation 30)
Fully transform to state’s central IT structure ► The Virginia Employment Commission should
fully transform all agency IT systems and servers to the state’s central IT infrastructure as soon as
possible. (Recommendation 31)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
26 •
27 •
28 •
29 •
30 •
31 •
Trust fund solvency (Chapter 8)
Recommendations for General Assembly action
None
Recommendations for agency action
The report recommends that VEC take specific actions to improve its ability to collect employer UI
taxes owed to the state’s trust fund. A handful of these recommendations could be implemented by
December 31, 2021, but most could be implemented in 2022.
Identify employers who owe UI taxes ► The Virginia Employment Commission (VEC) should
conduct two, one-year pilot programs to identify employers who owe unemployment insurance taxes
but are not registered with VEC by 1) auditing employers who do not register with VEC after receiving
notifications of potential tax liability and 2) auditing a sample of employers who may be misclassifying
workers based on their 1099 tax filings. VEC should assess the pilot programs’ effectiveness to decide
whether to use these methodologies on an ongoing basis. VEC should also reinstate its State Unem-
ployment Tax Act dumping identification system no later than December 2022. (Recommendations
33, 34, and 35)
Conduct targeted employer audits and delinquent tax collections ► The Virginia Employment
Commission (VEC) should modify existing unemployment insurance (UI) tax audit policies to require
field tax auditors to conduct at least half of their audits per year from a list of employers identified to
be at-risk for UI tax avoidance. VEC should define “at-risk” to include industry and employer-specific
factors and establish a system for consistently identifying such employers. VEC should also provide
quarterly reports to tax division regional managers that list each employer with tax debt more than six
months past due and require the managers to use this information to ensure that tax field staff are
taking all reasonable steps to collect the debt. (Recommendations 36 and 38)
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Use Treasury Offset Program to collect delinquent employer taxes ► The Virginia Employment
Commission should begin using the federal Treasury Offset Program for applicable delinquent taxes
as soon as staff resources become available. (Recommendation 37)
Enhance tax division efficiency and customer service ► The Virginia Employment Commission
should designate customer service positions in the tax division to handle basic employer communica-
tions and questions. (Recommendation 39)
Require electronic UI tax payments ► The Virginia Employment Commission should require
employers to make unemployment insurance payments electronically starting in 2023, develop criteria
that would allow employers to be granted an exception to this requirement, and notify employers of
the criteria. (Recommendation 40)
Implementation Timeframe
Recommendation # By December 31, 2021 By June 30, 2022 By December 31, 2022
33 •
34 •
35 •
36 •
37 •
38 •
39 •
40 •
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Appendix F: Other states’ oversight of unemployment
insurance programs
There are no federal requirements for states to have entities dedicated to overseeing unemployment
insurance (UI) programs, but at least seven states have such entities, and their characteristics vary
widely. Of the seven states, four have an executive branch oversight entity, two have legislative branch
oversight entities, and one has separate entities in the executive and legislative branches (Table F-1).
Membership varies, but all seven states include legislators in their UI oversight; two states include
executive branch representatives (e.g., the state agency administering UI, other state agencies, a cabinet
secretary); and six states include stakeholders (e.g., labor, businesses). The scope of most states’ over-
sight entities is fairly broad, typically including any aspects of UI policy and operations. Oregon and
Ohio are exceptions. Oregon’s two oversight entities focus specifically on IT modernization, and
Ohio’s oversight entity is tasked with reviewing UI benefit claim and receipt processes (e.g., customer
service, IT). At least several states (such as Alaska and Vermont) do not possess an entity dedicated
to UI oversight.
TABLE F-1
State oversight bodies can be composed of legislators, executive branch representatives, or
stakeholders
Members
State Entity type Legislators Executive branch Stakeholders
Illinois Agency board
○ ○ ●
Legislative subcommittee
● ○ ○
Maryland Legislative committee
● ○ ●
North Carolina Legislative committee
● ○ ○
Ohio Agency council a
● ● ●
Oregon Agency forum
● ● ○
Agency board
○ ● ●
a
South Carolina Agency review committee
● ○ ●
Tennessee Agency advisory council b
● ○ ●
SOURCE: States’ statutes, regulations, agency websites, and interviews with JLARC.
NOTE: a Type not explicitly stated. Classified as agency type because description is located in executive branch section of state statute
and the governor selects stakeholder members. b Type not explicitly stated. Classified as agency type because description is located in
executive branch section of state statute and the agency commissioner selects stakeholder members.
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Illinois
Illinois’s Employment Security Advisory Board (ESAB) is an agency advisory board. Its statutory
scope is broadly to “aid the Director in formulating policies and discussing problems related to the
administration.” The board was given one-time responsibilities such as studying the state’s experience
rating methodology in 2000 and reporting findings on UI benefits and trust fund solvency by 2007. It
has existed since at least 2000. It has four members each from the following categories: (1) “a labor
organization recognized under the National Labor Relations Act”, (2) “representative citizens chosen
from the employing class”, and (3) “representative citizens not identified with either the employing
class or a labor organization.” Its bylaws require quarterly meetings. State law requires the director of
the UI agency to submit an annual report to the ESAB about trust fund finances. The ESAB’s meet-
ings similarly focus on trust fund health but sometimes review other topics such as staffing levels
during COVID-19. When legislation related to UI is considered, the ESAB typically provides recom-
mendations. Additionally, the Illinois Senate has a labor subcommittee for UI.
Maryland
Maryland’s Joint Committee on Unemployment Insurance Oversight is a permanent legislative body.
State law authorizes it to “examine the need for additional alterations to the unemployment insurance
system, including the charging and taxation provisions and the eligibility and benefit provisions, in
consideration of the fairness of the system and in order to maintain” trust fund adequacy. It was
created in 2005 then re-authorized in 2007. It has 15 members: six legislators (three senators and three
delegates), two ex officio executive branch members (the secretary of labor and the secretary of com-
merce), and six stakeholder members specified in law: a Maryland Retailers Association representative,
Maryland Chamber of Commerce representative, National Federation of Independent Business rep-
resentative, Job Opportunities Task Force representative, and two representatives of union labor (cho-
sen by the Maryland State and District of Columbia AFL–CIO). An additional member is a repre-
sentative of the academic profession who is knowledgeable in unemployment insurance law. The
committee has no meeting frequency requirements and met at least once in 2020. The committee
proposes legislation (including in 2020) and is consulted on legislation proposed by others. State law
generally requires the UI program to “report to the Committee on the condition of unemployment
insurance in the State.” The committee is required to report its findings to the governor and General
Assembly in years when the committee meets.
North Carolina
North Carolina’s Joint Legislative Oversight Committee on Unemployment Insurance is a permanent
legislative body. State statute affirms its scope should be interpreted generously and includes: review-
ing UI statute and administration, identifying UI laws in need of change, monitoring trust fund debt
and adequacy, and reviewing workforce programs operated by the agency that also administers UI.
The committee was created in 2013 with a 10-year sunset, which was repealed in 2020 bill. It is com-
posed of eight legislators: four representatives and four senators. It has no meeting frequency require-
ments other than at the call of the chair and met three times in 2020. Information presented by the
agency varies by meeting, such as administrative funding, IT modernization, and COVID operational
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changes. The committee proposed legislation in its 2021 report to the legislature. The committee is
not required to produce reports.
Ohio
Ohio’s Unemployment Compensation Modernization and Improvement Council was created in fall
2020. It is tasked with reviewing UI claims and benefits processes, including: technology, potential
improvements to customer responsiveness, and coordination with other programs. Statute explicitly
forbids the council from considering UI trust fund solvency and benefit levels. There are 11 members.
The six legislators include chairpersons of the standing committees that handle UI legislation, two
senators (one each from majority and minority parties), and two delegates (one each from majority
and minority parties). The governor appoints four stakeholder members who are defined as those
who "on account of their vocation, employment, or affiliations can be classed as representative of
employers” and two employee representatives with the same definition. The last member is an agency
representative. The council has no minimum meeting frequency but met 14 times between January
and August 2021. Information presented to the council varies by meeting and has included the agency’s
funding, recession plan, UI fraud, and call centers. The council has interacted with the state auditor’s
office, which conducted a performance review of Ohio’s UI agency in 2020. The state auditor’s office
provided information directly to the council, and the council is likely to focus on its recommendations.
The council is required to provide annual opportunities for public testimony. Within six months of
its creation, it is required to produce a report describing the UI claims process and “any planned
improvements” to it. Ohio’s UI agency is required to notify the council of any “substantial disruption”
in the UI eligibility determination process or unauthorized access to agency records.
Oregon
Oregon created two external oversight entities to assist with its current UI IT modernization project:
the Modernization Oversight Forum and the Modernization Stakeholder Board. Neither the board
nor the forum has authority to make final decisions related to Oregon’s UI IT modernization project.
The Modernization Oversight Forum was created in 2020 to provide expertise and advice to the UI
IT modernization project on issues such as risk mitigation and best practices. The forum consists of
six members: two senators, two representatives, the state chief information officer, and the state leg-
islative fiscal office. The forum is required to meet quarterly, and its only meeting to date occurred in
2021.
The Modernization Stakeholder Board was created in 2019 to make “decisions that have a cross-
organizational operational impact.” Its responsibilities include identifying strategies for better cus-
tomer service, operating technical work groups, and providing information to their host organizations
to make needed changes due to the modernization project. The board consists of seven to 15 voting
members selected by the UI agency executive director from a pool listed in the modernization project
charter. Members currently include six specified state agencies whose processes interface with UI (e.g.,
Department of Revenue, Department of Consumer and Business Services) and five customer repre-
sentatives (e.g., Equifax, a legal aid organization, business owner). The board is required to meet
monthly and met seven times in 2020.
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South Carolina
The Department of Employment and Workforce (DEW) is South Carolina’s state agency administer-
ing UI, workforce statistics, and certain workforce services. The DEW has a review committee that
oversees all agency programs, but UI is a significant focus. The review committee is responsible for
conducting an annual performance review of the executive director and agency, screening candidates
for the appellate panel, reviewing the agency’s budget proposal, and making recommendations to the
governor and legislature. It is also charged with nominating applicants for executive director for the
governor to appoint but has no authority to remove the existing director. It was created in 2010.
Members consist of three senators (including at least one from the minority party), three representa-
tives (including at least one from the minority party) and four citizens selected by the governor (in-
cluding one representing businesses with under 50 employees and one representing businesses with
under 500 employees). It has the authority to administer oaths and issue subpoenas if needed for its
investigations. There are no meeting frequency requirements, and the review committee has not met
since prior to the COVID-19 pandemic (March 2020).
Tennessee
Tennessee’s State Unemployment Compensation Advisory Council is a permanent advisory council
to the agency that administers UI. It is responsible for assisting the commissioner of that agency “in
formulating policies and discussing problems related to the administration of ” UI and “assuring im-
partiality and freedom from political influence.” It has existed since at least 1947, and the agency
commissioner appoints members. Statute does not specify the number of members, but it states the
number of employer representatives and employee representatives “who may fairly be regarded as
representative because of their vocation, employment or affiliations” must be equal, and it also allows
members “representing the general public that the commissioner may designate.” There are currently
six members, including: the AFL-CIO, auto union, National Federation of Independent Business, and
state chamber of commerce. The council is required to meet twice a year with the UI division’s chief
administrative officer, who must provide information on UI operations.
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Appendix G: Prioritized list of unemployment insurance
communications to review
The Virginia Employment Commission (VEC) has various unemployment insurance (UI) forms, no-
tices, instructions, and guidelines that cause confusion among UI claimants, employers, and other
stakeholders. These items require review and clarification to ensure better understanding of the UI
program, eligibility criteria, and the application process.
A prioritized list of items in need of revision are included below. Additional VEC communications
would benefit from review and revision when agency resources become available.
VEC website content:
“Apply for Benefits” page
“UI Home” page
“Benefits Information” and all linked pages
“Benefit Rights and Responsibilities” page
“Waiver of Overpayment Action” page
“The UI Claims Process” page
“UI Claimant Handbook” page
“UI FAQs” page
“I'm Unemployed, Now What?” page
“Unemployment Insurance Information for Employers” page
“FAQ - Employer UI Tax” page
VEC forms, notices, and other guidance documents:
Benefit Rights and Responsibilities letter
Monetary Determination letter
Denial letter (sections that explain appeal rights)
Letters to claimants seeking additional information about “able and available to work” sta-
tus, separation eligibility, or good cause for voluntary quits
Letters to employers delinquent on UI tax payments (e.g., billing statements, notices of
lien)
Virginia Employer’s handbook
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Appendix H: Work search activities and verification strategies
State unemployment insurance (UI) laws are federally required to include a requirement that claimants
make an active search for work during each week of their unemployment period to be eligible to
receive benefits. States vary in how they define qualifying work search activities in their UI laws, but
many states have traditionally relied on employer contacts or job applications as acceptable work
search activities.
The U.S. Department of Labor (DOL) issued guidance encouraging state workforce agencies to adopt
model UI state work search legislation in 2020. The model legislation was intended to help states more
effectively achieve the rapid reemployment of UI claimants and to better align states’ requirements
with the modern practices individuals use to search for work. The model legislation included a list of
acceptable work search activities that was developed by a workgroup made up of staff from state
workforce agencies, the National Association of State Workforce Agencies, and DOL. States can in-
corporate this list of work search activities into their work search requirements. Fully implementing
the proposed model legislation would represent a significant shift in Virginia’s work search policies
because of the broadened definition of what constitutes an acceptable work search activity.
Acceptable work search activities outlined in the DOL model legislation include:
creating a reemployment plan;
creating a resume*;
uploading a resume to online job boards;
registering for work with the state’s labor exchange system, placement firm, temporary
work agencies, or educational institution with job placement offices*;
using online career tools;
logging on and looking for work in the state’s labor exchange or other online job matching
systems;
using reemployment services in [American Job Centers] or completing similar online or
self-service activities (e.g. obtaining and using labor market and career information, partici-
pating in Reemployment Services and Eligibility Assessment (RESEA) activities, partici-
pating in a skills assessment for occupational matching, instructional workshops, or other
specialized activities);
completing job applications for employers that have (or are reasonably expected to have)
job openings, or *following through on job referrals or job development attempts, as di-
rected by state workforce or UI staff;
applying for and/or participating in employment and training services provided by partner
programs in [American Job Centers];
creating a personal user profile on a professional networking site;
participating in work-related networking events (e.g. job clubs, job fairs, industry associa-
tion events, networking groups, etc.);
Commission draft
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making contacts or in-person visits to employers that have, or are reasonably expected to
have, job openings;
taking a civil service exam;
going to interviews with employers (virtually or in-person); or
any other work search activities prescribed by the state in [regulation and/or policy].
*Activities that are part of the Virginia Employment Commission’s current work search requirements
The workgroup of state workforce agencies, the National Association of State Workforce Agencies,
and DOL also developed a set of strategies that state workforce agencies can use to monitor and
verify UI claimants’ work search activities (Table H-1). These strategies are intended to help states
improve the efficiency and effectiveness of their work search verification efforts.
TABLE H-1
Documentation and verification strategies for states’ proposed work search activities
Proposed work search activity Documentation/verification strategy
Plans could be submitted electronically or on paper
Creating a Reemployment Plan using a state-provided
when initially developed and revised and/or when re-
electronic tool
quested by the state UI agency
Creating a resume and/or uploading resumes to an Print out of the resume or a confirmation email from
online job board the site used
Registering for work with:
“Full” registration (work history, resume, job prefer-
ences, etc.) could be considered a work search activity
state’s labor exchange system
that is easily verified by electronic cross-match
placement firms
Registration with private employment agencies can be
temporary work agencies
documented by providing an electronic or paper copy
educational institutions that have placement
of the registration form or a copy of an email confirm-
offices
ing registration
Using on-line career tools, such as:
job match advisors
Print out or screen shot of the results from tools used
other national job boards
My Skills My Future
Logging in and looking for work:
Print out of a resume or job application or a confirma-
in the state labor exchange
tion email from the site that was used
in any other online job matching system
Using reemployment services in one-stops, such as:
obtaining and using labor market and ca- Use of these services is documented in state and/or lo-
reer information cal case management systems, which are generally ac-
participating in profiling (if required) cessible to state UI agencies electronically
participating in instructional workshops (re- One-Stops frequently have sign-in logs when customers
sume, interviewing, job searching, etc.) participate in events or use the resource room that may
participating in other activities/specialized also be a source of documentation
services, e.g., job clubs, job fairs, etc.)
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Completing job applications for employers that have (or
Can be documented by the individual’s attestation and
are reasonably expected to have) job openings, or fol-
potentially verified by follow-up contacts with employ-
lowing through on job referrals or job development at-
ers to whom an application was made
tempts, as directed by workforce center staff
Applying for and/or participating in:
partner-sponsored reemployment services Generally documented by the individual’s attestation
non-WIOA-related/sponsored training, such along with any documents issued by the sponsor or
as digital literacy, GED, or ESL, when the training provider showing enrollment, participation, or
training is job-related and the individual re- completion
mains available for work
Printed screen shot of the profile which could be veri-
Creating a personal user profile on a professional net-
fied by the state agency through access to LinkedIn or
working site (e.g., LinkedIn)
other sites
Participating in work-related networking events (e.g., Registration confirmation, ticket, or name badge show-
job clubs, industry association events) ing the name and date of the event
Making in-person visits to employers that have or are Individual’s attestation may be the only documentation
reasonably expected to have job openings available
Going on interviews with employers (virtually or in-per- Generally documented by attestation and can be poten-
son) tially verified by contact with the employer
SOURCE: “Documentation and Validation of Required Work Search for Unemployment Insurance Eligibility in the 21st Century Labor
Market” white paper from the Pathway to Reemployment Framework (2016). Accessed from: https://rc.workforcegps.org/re-
sources/2016/10/03/05/36/Pathway_to_Reemployment_Framework.
Additionally, DOL’s guidance encouraged states to use automation to capture claimant work search
activities as part of the weekly UI claim filing process and to use other innovative strategies to docu-
ment work search activities by leveraging case management systems and partnering with private work-
force partners, like LinkedIn. DOL asserts that integration of work search documentation with online
weekly claims filing processes enables states to immediately know whether the claimant has satisfied
requirements prior to payment of benefits for the week. DOL found that states have lower incorrect
payment rates related to work search requirements when they:
include reemployment service activities as acceptable work search activities;
support claimant compliance with work search requirements by connecting them to
reemployment services; and
have automated systems that document claimants’ participation in reemployment service
activities to support verification of completed work search activities.
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Appendix I: Unemployment insurance recipients and
Virginia’s modern workforce
Federal law requires states to provide unemployment insurance (UI) benefits to individuals who are
unemployed through no fault of their own while they search for reemployment. The Virginia Em-
ployment Commission (VEC) administers UI benefits in Virginia. This appendix provides descriptive
information about Virginia’s UI benefits and recipients (called “claimants”), including (1) the demo-
graphic characteristics (e.g., race, age, gender) of UI claimants, (2) the distribution of UI benefits they
have received, (3) Virginia’s UI eligibility requirements compared to neighboring and peer states’ eli-
gibility requirements, and (4) recent changes to Virginia’s workforce.
State UI benefits are awarded to a variety of Virginians
Demographic data for UI benefits through Virginia’s traditional state UI program in 2018, 2019, and
2020 shows that, on average, Virginia’s UI claimants are largely white, male, and middle-aged (Table
I-1). Black Virginians are represented at higher rates among claimants than they are in Virginia’s pop-
ulation. The largest occupational group among claimants was office and administrative support posi-
tions. The lower wages and temporary nature of many back-office or other support positions (which
are included in this broader group) likely contribute to this. A significant number of claimants do not
report their occupation to the VEC.
The VEC provided demographic data for approximately 118,000 UI claims filed in 2018, 124,000 UI
claims filed in 2019, and over 1.3 million UI claims filed in 2020. A significant number of UI claims
were filed beginning in March 2020 during the COVID-19 pandemic and the recession that followed.
A large number of UI claimants both before and during COVID-19 received the maximum weekly
benefit amount of $378 under the traditional state UI program. In 2019, a relatively low number of
UI claims were filed and paid, but the amount of UI benefits awarded skewed heavily toward the
higher end of allowable weekly benefits. Specifically, over 46 percent of all claimants received the
maximum allowable weekly benefit amount of $378, and the average weekly benefit was slightly over
$320. In 2020, a higher number of UI claims were filed, but the amount of UI benefits awarded still
skewed heavily toward the higher end of the allowable weekly benefits. Nearly 30 percent of all claim-
ants received the maximum UI benefit, and the average weekly benefit was slightly over $270. In the
first three quarters of 2021, the percentage of claimants receiving the maximum benefit amount had
returned nearly to 2019 levels, with 44 percent of claimants receiving a weekly benefit amount of
$378.
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TABLE I-1
Virginia state UI descriptive statistics
% of VA
2018 2019 2020 population
Demographic characteristic (%) (%) (%) (2020)
Race
White 49.1% 48.4% 50.4% 65.7%
Black 37.1 38.0 30.4 20.3
Asian 2.6 2.5 6.5 7.8
Hispanic or Latino a 0.9 0.8 0.3 n/a
American Indian or Alaskan Native 0.5 0.5 0.5 0.5
Native Hawaiian or Other Pacific Islander 1.4 1.2 0.4 0.1
Other 3.3 2.6 0.8 5.6
Unknown (“Race INA”) b 8.4 8.7 11.5 n/a d
Ethnicity a
Hispanic 5.3 5.3 8.6 10.5
Non-Hispanic 76.2 79.1 86.1 89.5
Unknown (“Ethnicity INA”) b 18.5 15.6 4.7 n/a d
Gender
Female 48.1 47.7 55.9 50.8
Male 51.9 52.3 44.1 49.2
Age
Younger than 22 0.1 0.3 4.7 6.5
22–24 1.5 2.4 8.8 6.6
25–34 18.2 20.1 28.1 13.8
35–44 23.7 24.0 20.3 13.8
45–54 22.3 22.2 16.8 12.8
55–64 24.3 22.4 14.9 13.1
>65 10.0 7.9 6.5 15.9
Educational Attainment
Some School 10.4 7.2 8.7 9.9
High School Graduate/GED 39.5 41.5 45.2 24.9
Some College/Associate’s Degree 21.1 22.3 25.5 28.8
Bachelor’s Degree 13.7 14.8 14.5 21.2
Some Graduate School 0.5 0.6 0.4 n/a d
Postgraduate Degree 6.0 6.3 4.5 15.2
Unknown (“Education INA”) b 8.8 7.4 1.1 n/a d
Top Local Workforce Development Areas (LWDAs)
Southern Virginia (LWDA XIV) 21.2 21.1 22.2 n/a
Northern Virginia (LWDA XI) 11.9 11.7 19.2 n/a
Capital Region (LWDA IX) 12.5 12.7 13.2 n/a
Out-of-State Work Location 15.0 14.0 7.8 n/a
Bay Consortium (LWDA XIII) 5.7 5.7 5.4 n/a
Top occupational groups
Office and Administrative Support 11.9 12.8 16 10.5
Management 10.6 11.4 10.1 11.2
Production 9.7 8.5 9.2 4.3
Sales and Related 8.9 9.6 6.3 9.5
Information not provided (“Occupation INA”) b 11.0 11.1 10.9 n/a d
SOURCE: Virginia Employment Commission claims data (2018–2021). U.S. Census Bureau, American Community Survey, 5-year estimates.
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NOTE: a VEC’s racial demographic data for UI claimants includes a “Hispanic” category. This has been relabeled here to reflect U.S. Census Bureau
terminology, but reflects VEC”s data output. Both the Census Bureau and the VEC (in a separate question) offer respondents the opportunity to
provide specific information about Hispanic or Latin origin. This data is provided in the Ethnicity category. b VEC’s data provides an “Is Not Availa-
ble” (or INA) response for certain demographic categories. d Category does not align with Census Bureau data.
Virginia’s eligibility criteria largely align with other states
Virginia’s UI eligibility requirements and policies were compared to UI eligibility requirements and
policies in 12 other states (Table I-2). Five states (Maryland, Tennessee, Kentucky, North Carolina,
and West Virginia) were selected because of their geographic proximity to Virginia. Three states with
high average recipiency rates over the last 20 years were also selected (New Jersey, Massachusetts, and
Pennsylvania), along with four states with low average recipiency rates (Florida, Georgia, Arizona, and
South Dakota). Table I-2 provides the comparative analysis for the full list of 22 policy factors exam-
ined. An abbreviated version of this table reflecting the results for eight of these policy factors (itali-
cized in the table) is included in Chapter 7 as Table 7-1.
For 19 of the 22 policies, Virginia’s eligibility requirements and policies generally aligned with require-
ments in at least half of the selected states. In two of the three identified instances when Virginia’s
policies did not align with the other states, Virginia’s policies made benefits more accessible to claim-
ants. In some cases, Virginia’s policies were different but no more or less restrictive.
The primary policy where Virginia’s benefits stood out among the compared states was its lower max-
imum weekly benefit ($378). Eight of the 12 states have higher maximum benefit amounts that exceed
$400 per week.
Self-employed workers and independent contractors
represent a growing share of Virginia’s workforce but are
ineligible for traditional state UI
Workers who are self-employed or who provide contract services to businesses (many of these work-
ers are often called “gig workers”) are making up a growing share of Virginia’s modern workforce.
These workers are not hired and paid by specific, single employers, but rather perform services on a
job-by-job or contractual basis. Because of their status, these workers are categorically ineligible for
standard UI benefits. As the number of self-employed workers or independent contractors grows, a
smaller share of the overall labor force will receive the temporary, partial income support provided to
traditional employees under state UI programs. This has prompted some states to begin studying and
recommending policy options to offer temporary financial support to self-employed workers and in-
dependent contractors who are temporarily out of work.
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TABLE I-2
Virginia’s eligibility policies largely align with those in a sample of 12 other states
Eligibility-related policies Policy exists # peer states (of 12)
in Virginia where policy exists
Requires earnings across 2 quarters Yes 7
Allows most recent quarter’s earnings to be counted for eligibility Yes 8
Calculates earnings required for individuals to requalify for UI No 10
after voluntarily quitting as a factor of weekly benefit amount a
Allows voluntary quit separations for “good cause” Yes 12
Misconduct disqualification (10 weeks or less) b Yes 11
1-3 work search contacts required per week Yes 11
Accepts part-time work search Yes 8
Disqualification because of illegal drug use Yes c 6
Multiple quarterly earnings used to calculate benefits Yes 12
Benefit levels achieve high income replacement rates on average No 2
Minimum weekly benefit amount >= $100 No 2
Maximum weekly benefit amount >= $400 No 8
Maximum weekly benefit amount >= $600 No 2
Allowance for dependents No 4
Partial earnings allowed while receiving benefits Yes 9
Maximum duration >= 26 weeks Yes 10
Mixed duration levels based on earnings Yes 9
Reduces benefit amount to account for employee pension contributions No 11
Short-time compensation (or “worksharing”) Yes 7
Self-Employment Assistance program No 2
Optional extended benefit triggers Yes 8
Offers additional state benefits d No 4
SOURCE: U.S. Department of Labor, Employment and Training Administration, 2020 Comparison of State Unemployment Laws; Code of Virginia.
NOTE: JLARC staff reviewed this set of 22 eligibility and accessibility-related policy factors for a sample of 12 other states to produce comparisons.
Other states reflect a mixture of high-recipiency, low-recipiency, and neighboring states. See Appendix B for additional information on this analysis.
a
If individuals are found to have voluntarily quit without good cause, they are disqualified from receiving UI benefits. Most states calculate the
amount individuals need to earn to requalify for UI as a number of weeks multiplied by the weekly benefit amount for which the individual would
have been eligible. b If individuals are discharged (or separated) from work because of misconduct, they are ineligible for UI. States generally specify
the number of hours or weeks an individual must work before they can file for UI again. c If confirmed by positive U.S. Department of Transporta-
tion screen. d A number of states have provisions for extending the potential duration of benefits during periods of high unemployment for individ-
uals in approved training who exhaust benefits, for example. Although some states call these programs “extended benefits,” this table uses the
term “additional benefits” to avoid confusion with the federal-state Extended Benefit program.
Self-employed workers and independent contractors are growing portion of labor
force
Experts generally agree that self-employed workers and independent contractors represent a small but
growing component of the labor force in the U.S. Several experts—including Gallup and the McKin-
sey Global Institute—estimate that the percentage of workers performing task-based work as self-
employed, independent contractors could be as high as 30 percent of the U.S. workforce and could
grow to roughly 50 percent of the U.S. workforce between 2030 and 2032. While many of these
workers may continue to work full-time or part-time for traditional employers, some experts, including
researchers at the Brookings Institution, estimate that payroll growth for self-employed workers or
independent contractors grew over three times that of normal payroll employment, indicating that a
larger share of workers could be supplementing their wages by participating in the modern workforce.
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The percentage of self-employed workers and independent contractors is growing because some em-
ployers and industries are shifting away from conventional full-time, salaried employment to self-em-
ployed workers or independent contractors.
There is evidence that self-employed workers and independent contractors are a growing portion of
Virginia’s labor force. Based on JLARC staff ’s analysis of American Community Survey data through
2019, the estimated number of self-employed workers (including those at both incorporated and un-
incorporated establishments) as a share of Virginia’s economy grew significantly in recent years, grow-
ing from less than 5 percent in 2014 to over 8 percent in 2019 (Figure I-1). This rate of growth (over
9 percent) is more robust than the nearly 3 percent growth calculated for the U.S. as a whole, which
more closely aligns with standard growth rates for payroll employment. In addition, Virginia has con-
sistently had a higher share of workers who are self-employed than the nation as a whole. Close to 5
percent of these workers were self-employed at incorporated establishments, while over 3 percent
were self-employed at unincorporated establishments. The ACS data likely underestimates the full
population of workers who are self-employed or work as independent contractors, since it only counts
workers as self-employed if independent work is their primary source of income. Workers who rely
on independent, task-based work to supplement their incomes are not counted in this data.
Many of Virginia’s self-employed workers and independent contractors are concentrated in several
industries. The U.S. Census Bureau calculates data for “nonemployer establishments,” which it defines
as businesses that have no paid employees and have annual business receipts of $1,000 or more (except
for the construction industry). Analysis of the Census Bureau’s nonemployer statistics also shows a
stronger growth rate for nonemployer establishments in Virginia than in the U.S. overall. As of 2018,
over 70 percent of Virginia’s “nonemployer establishments” were concentrated in 10 North American
Industry Classification System (NAICS) categories (Figure I-2), including professional, scientific, and
technical services (nearly 16 percent), real estate rental and leasing (over 11 percent), other services
(over 10 percent), and transportation and warehousing (over 10 percent).
The federal Pandemic Unemployment Assistance (PUA) program, which provided temporary income
support to individuals not traditionally eligible for state UI during COVID-19, recently demonstrated
the large portion of self-employed workers and independent contractors in Virginia. Between March
2020 and September 2021, over half of those filing for PUA payments (more than 780,000 individuals)
in Virginia self-identified as “gig economy workers.”
American Community Survey data shows that self-employed workers differ from the overall civilian
workforce in several key ways, which have informed discussions about unemployment support needed
for these workers in other states (Table I-3). Self-employed individuals working at non-incorporated
establishments work fewer hours and earn lower incomes and are more likely to work in service and
construction (although they do perform jobs in other skilled fields) than those in the broader labor
pool. These individuals are also less likely to have earned a high school diploma or received bachelor’s
or graduate degrees. Rates of poverty and receipt of needs-based assistance for self-employed workers
are generally higher than the rest of the workforce, and self-employed workers are nearly twice as
likely to lack health insurance.
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FIGURE I-1
Self-employed workers or independent contractors grew to over 8 percent of Virginia’s work-
force in 2019 and represent a larger portion of workers than in the U.S. overall
SOURCE: U.S. Census Bureau, American Community Survey, Integrated Public Use Microdata Series (IPUMS), 2019.
NOTE: Using American Community Survey data to estimate the portion of self-employed workers and independent contractors is
likely an underestimate. Many self-employed workers or independent contractors do not rely on revenues from their independent
work as their primary source of income and would not be counted in this data.
FIGURE I-2
Self-employed workers participating in the modern economy are concentrated in several core
industries
SOURCE: U.S. Census Bureau, Nonemployer statistics, 2018.
In quantifying the size of Virginia’s self-employed population and assessing demographic trends, both
data sources—the American Community Survey and the Census Bureau’s nonemployer statistics—
have limitations. Self-employed workers may register multiple nonemployer establishments, leading to
duplications and overstating the size of the population. American Community Survey only reports
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individuals as self-employed when independent work is their primary source of income. As a result,
individuals who participate in independent, task-based work to supplement income earned from tra-
ditional employers will not be captured by this data.
TABLE I-3
Self-employed workers in Virginia work fewer hours, earn lower incomes, and are nearly twice as
likely to be uninsured
Virginia workers
Self-employed
workers All civilian
Demographic characteristics (non-inc.) (2019) workers (2019)
Median hours worked (weekly) 37 hrs 39 hrs
Median personal income (annual) $32,000 $43,680
Unemployment rate 3% 2%
Below poverty level 22% 14%
Uninsured 18% 10%
Receives Medicaid 7% 5%
Receives SNAP 7% 6%
Receives TANF 1% 1%
SOURCE: U.S. Census Bureau, American Community Survey, Integrated Public Use Microdata Series (IPUMS), 2019.
NOTE: JLARC staff reviewed the analysis produced by Virginia’s Future of Work Task Force (established in 2019) and analyzed Census Bureau data,
using an approach modeled on the task force’s work. The analysis relied on the latest data available (five-year estimates from the 2019 ACS) and
demographic characteristics shown represent those for the self-employed workforce working at non-incorporated establishments in Virginia. Num-
bers for self-employed workers as a whole and self-employed workers working at incorporated establishments align much more closely with or
outperform those for the civilian workforce as a whole.
Other states offer temporary financial support to unemployed self-employed
workers but largely do not use the traditional state UI structure
Several states have set up taskforces or work groups to study the changing composition of their work-
forces and propose ways to support modern workers. In many cases, these states have not fully taken
action, but are instead studying issues affecting self-employed workers and independent contractors
before they decide how to design programs or benefits. Importantly, none of these states have ex-
tended traditional state UI benefits to self-employed workers and independent contractors. Most rec-
ommendations to offer temporary income support to self-employed workers and independent con-
tractors call for the creation of an entirely new program and are often packaged with other issues
related to self-employed workers or independent contractors, such as misclassification, workers’ com-
pensation, or health insurance benefits. In some cases, states have called upon the federal government
to enact proposals for a Jobseeker’s Allowance, which would provide partial income support and
reemployment services for individuals who are unemployed through no fault of their own, are actively
seeking work, and are ineligible for traditional UI.
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Virginia has a task force reviewing various worker-related issues that may address benefits for self-
employed workers and independent contractors. In March 2019, Governor Northam established Vir-
ginia’s Future of Work taskforce to study the changing nature of employment arrangements in Vir-
ginia and recommend strategies to better serve the state’s modern workforce. Specifically, the taskforce
was directed to develop practical, implementable policies and initiatives to support these workers and
their families. The taskforce will issue its final report in November 2021. VEC staff were appointed
as members of the taskforce and provided data analysis for the project. While there was no explicit
mention of serving self-employed workers and independent contractors through the state’s traditional
UI program, nor any recommendation to provide income support to self-employed workers and in-
dependent contractors, the taskforce presented its initial findings in June 2021 and recommended
continued research and efforts to create an “innovative legislative landscape for portable benefits.”
California
California has the most extensive labor protections of any state for self-employed workers and inde-
pendent contractors. Advocates’ efforts to secure these protections culminated in the passage of AB5,
the legislation that first sought to classify certain self-employed workers as employees, rather than as
independent contractors. AB5 was first proposed in December 2018 and ultimately passed by the
Assembly in September 2019. It officially went into effect on January 1, 2020. The law put into place
the three-pronged test to redefine “employees,” known as an “ABC” test. The test, first clarified in a
California Supreme Court decision, essentially allows regulators to presume that a worker is an em-
ployee unless they satisfy all three prongs of the law’s test. In November 2020, however, California’s
voters approved Proposition 22, a ballot initiative that specifically exempted ridesharing and delivery
drivers from most of the protections contained in AB5. Currently, California’s State Assembly is con-
sidering proposals to modify AB5 to ensure minimum wage protections, workers’ compensation in-
surance, and portable employment benefits for qualifying self-employed workers or independent con-
tractors. The Assembly has also directed the California Labor and Workforce Development Agency
to begin studying how it could codify the “ABC” test as regulation.
New York
New York has created a task force to address challenges posed by the modern economy. In early 2020,
New York’s governor announced a goal to produce a detailed policy proposal for adding protections
for self-employed workers and independent contractors. To study the modern economy and make
policy recommendations for worker protections, the governor proposed legislation (still pending a
final funding decision in the state budget) that created the Digital Marketplace Worker Classification
Task Force. The task force was charged with recommending measures to regulate the modern work-
force and cover everything from wages, classification, employment criteria, safety and health regula-
tions, collective bargaining, and anti-discrimination protections. The task force has nine members,
with one appointed by the senate majority leader, one appointed by the Assembly speaker, and seven
appointed by the governor, including a commitment to appointing industry representatives. This pro-
posal is not the first attempt by state officials in New York to offer protections or programs to self-
employed workers that are typically provided only to traditional employees. In 2016, the State Depart-
ment of Labor provided unemployment benefits to two Uber drivers. That same year, the legislature
considered a proposal that would have given workers the option to certify to the state that they are
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aware they are categorized as independent workers and that this categorization is correct. In return,
the state would have levied a 2.5 percent fee on each job worked and place this into an individual
health savings account for each worker, which could be drawn on for health care or as unemployment
insurance.
New Jersey
New Jersey has proposed several mechanisms for funding portable benefit programs, though an ex-
tension of UI benefits to self-employed workers and independent contractors has not yet been passed.
The New Jersey legislature is considering several proposals related to benefits for self-employed work-
ers and independent contractors. The primary proposal (Senate Bill 943, first proposed in 2019) would
guarantee portable job benefits to self-employed workers across the state. Under the legislation, self-
employed workers would be defined as those working for rideshare apps, delivery services, and other
app-based platforms that rely heavily on contract labor. Benefits would include unemployment insur-
ance benefits, health insurance, paid time off, and tax-advantaged retirement savings. The bill would
require the contracting agents (e.g., platforms such as Uber or Lyft) to contribute the lesser of $6 per
worker-hour or 25 percent of each consumer transaction fee to cover the cost of these benefits. The
fees would cover the cost of workers’ compensation insurance and any voluntary benefits that the
workers elected to receive, such as health insurance and paid time off. In early 2020, Governor Murphy
signed three modest worker protections laws focused on self-employed workers. These laws increased
penalties for worker misclassification, strengthened the state’s enforcement power against noncompli-
ant businesses, and required businesses to make workers aware of the rules around employee misclas-
sification.
Washington
The Washington legislature is also considering creating a worker protection bill for self-employed
workers that combines elements of proposals for self-employed worker benefits in other states with
aspects of a robust anti-misclassification bill. The proposed legislation would impose civil penalties
and damages on employers that misclassify employees as independent contractors. It would also allow
for the creation of workers’ boards empowered to set minimum pay and other protections in certain
industries. In addition, it would expand protections against retaliation in the workplace and allow eli-
gible self-employed workers to opt into portable benefits programs, including health insurance, retire-
ment benefits, paid time off, and any other benefits offered by workers’ chosen benefits providers.
The portable benefits proposal, first put before the state legislature in 2017, requires employers like
Lyft and TaskRabbit to contribute the lesser of $1 for each worker-hour or 5 percent of the total
transaction charge paid by consumers. It also requires covered employers to provide adequate workers’
compensation insurance.
Oregon
Oregon has addressed the issue of providing benefits to self-employed workers and independent con-
tractors through administrative guidance. State officials broadened the interpretation of the definition
of an employee to extend workplace protections to self-employed workers and independent contrac-
tors. In 2015, Oregon’s Commissioner of the Bureau of Labor and Industries issued administrative
guidance that rideshare workers should be considered employees. (In contrast with other states in this
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section, Oregon makes a distinction between self-employed (or “gig” workers) and independent con-
tractors, having determined that the latter do not qualify for benefits or privileges traditionally afforded
to full-time employees.) This has not yet resulted in these types of workers being extended unemploy-
ment benefits, however. An Oregon legislative taskforce is currently developing policy recommenda-
tions for how state law might be modified to address the attorney general’s administrative guidance.
One of the topics the taskforce has considered is expanding unemployment benefits to these workers.
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Appendix J: Agency responses
As part of an extensive validation process, the state agencies and other entities that are subject to a
JLARC assessment are given the opportunity to comment on an exposure draft of the report. JLARC
staff sent an exposure draft of the full report to the Virginia Employment Commission and the sec-
retary of labor. JLARC staff also sent relevant sections of the report to the Virginia Information
Technologies Agency, the Department of Human Resource Management, and the Department of
General Services.
Appropriate corrections resulting from technical and substantive comments are incorporated in this
version of the report. This appendix includes a response letter from the Virginia Employment Com-
mission and the secretary of labor.
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COMMONWEALTH of VIRGINIA
October 29, 2021
Joint Legislative Audit & Review Commission
201 North 9th Street
General Assembly Building, Suite 1100
Richmond, VA 23219
Dear Director Greer:
Thank you for your comprehensive review of the Virginia Employment Commission’s
(VEC) response to the COVID-19 pandemic and for providing a draft copy of your report. I was
appointed in July of this year to serve as the Virginia Secretary of Labor to Governor Ralph
Northam after previously acting as the Chief Workforce Development Advisor. With my
newfound oversight of the VEC, I sincerely appreciate your efforts to analyze the agency’s past
performance as we strive for a more successful future.
We still have a long way to go on this path to organizational transformation. I look
forward to collaborating on the implementation of your recommendations, the protection of
Virginia’s workers, and the reform of this long-neglected but incredibly important system. In the
meantime, we will continue to work diligently to ensure that every Virginian receives the
unemployment benefits that they are eligible for.
Sincerely,
Megan Healy
Virginia Secretary of Labor
JLARC.VIRGINIA.GOV
919 East Main Street Suite 2101 Richmond, VA 23219
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