Alabama Department of Labor

H.B. 148 by Rep. McDaniel S.B. 186 by Sen. Barron
On August 9, 2004 the President signed Public Law (P.L.) No. 108-295, the “SUTA Dumping Prevention Act of 2004”.

Background:

In general, some employers and financial advisors have found ways to manipulate their state unemployment experience rate so that they pay lower state UC taxes than their earned experience would otherwise allow. This practice is called SUTA dumping (“SUTA” refers to state unemployment tax acts). Most frequently, it involves merger, acquisition or restructuring schemes, especially those involving shifting of workforce/payroll. P.L. 108-295 establishes a nationwide minimum standard for curbing SUTA dumping and requires all states to pass legislation in order to stay in conformity with federal law. This bill will keep Alabama's unemployment compensation law in conformity with federal law and allow Alabama employers to keep their federal tax credits under the Federal Unemployment Tax Act “FUTA”.

This bill would prevent an employer from setting up a shell company which is under substantial common ownership, management, and control as the first company and then transfer some or all of its workforce from the first company with a high unemployment experience rate to the shell company after the shell company has earned a low unemployment experience rate. This bill would also provide penalties for transfer of employees to another business for the purpose of obtaining a lower UC experience rate. This bill would provide both criminal and civil penalties for violations for SUTA dumping.