Action Alert: Small Nonprofit UI Exemption

Does your organization employ THREE or fewer employees?

If so, this is important information you need to know (as an employer OR as an employee):

  • Under current Statute (21 V.S.A. § 1301), nonprofit organizations that employ fewer than four employees are exempt from unemployment insurance law, meaning that they do not have to pay state unemployment taxes or self-insure (though they may elect to, voluntarily). They also do not need to inform employees that they are NOT eligible for unemployment insurance (UI) benefits.
    • Many nonprofit employees are not aware that the wages they are earning do not make them eligible to file unemployment benefit claims.
  • The Unemployment Insurance Study Committee has been exploring this issue this fall. Their draft Committee Report (11/18/21) recommends two options:
    • Eliminating the exemption in its entirety to cover all employees under unemployment insurance law; or,
    • Requiring employers to notify current and new employees that they are not covered by unemployment law (though the VDOL testified that this option would not be easy to enforce as exempt nonprofits are not required to register with the state).

UPDATE 1/20/22: Legislation eliminating the small nonprofit exemption has already been introduced. See THIS UPDATE for more information and TAKE ACTION by following the next steps laid out below.

Next Steps:

  • Make sure relevant members of your leadership team are aware of these proposed changes, and discuss their organizational impact internally. THEN:
  • Email the House Commerce and Economic Development Committee (and CC/BCC [email protected]) to let them know what these proposed changes would mean for your organization. You can find a list of committee member emails HERE. Not sure what to say? Here are some prompts to guide your thinking around these issues:
    • For small nonprofits with <4 employees: What impact would a requirement to provide UI coverage have on your budget? (Try using this tool developed by LCC (shared with their permission) to evaluate the cost for your organization of providing UI as a reimbursable vs. taxable employer.) How would this additional expense impact services and programming? How much lead time would you need to plan for this change? Would an effective date of July 1, 2022 be feasible for your organization? What additional information or resources would you need to implement this change?
    • For reimbursable employers: Why did you choose to be a reimbursable employer? How was your experience as a reimbursable employer impacted by COVID? Did you need to pay out more for benefit claims? If so, were you prepared and able to cover them? How would a bonding requirement impact your decision to be a reimbursable employer? What feedback or suggestions do you have regarding the proposed bonding amount (two percent of wages paid in the last four quarters)? If a bonding requirement were enacted, how much time would you need to plan for the additional cost?
  • Are you interested in testifying? We expect House Commerce (and possibly other committees) to be taking testimony on this issue in the near future. If you are interested in providing written testimony and/or appear in person if called upon, please email [email protected]. We are also happy to support you in preparing testimony. Please note that committee schedules are often set/change last minute, so we will keep you updated.
  • Keep in touch: Common Good VT will be following this issue closely this session and will share information as we learn more.