Faced with increasing gaps between taxes collected and benefits paid, in its recent session, the North Carolina General Assembly adopted a new law making it more difficult for some unemployment benefit recipients to collect and maintain benefits. The new law takes effect November 1, but earlier this month, Governor Perdue announced suspension of certain provisions deemed to conflict with federal rules for reimbursement to states for certain UI expenditures.

Specifically, the new law would have granted employers more time to respond to certain claims for benefits, reduced benefits in some cases, and limited appeal rights for denied claims. The federal Department of Labor informed North Carolina that these changes violate federal guidelines for state unemployment insurance practices. In addition to jeopardizing federal funds paid to the state, these changes could result in increased federal unemployment tax obligations for North Carolina employers.

In anticipation of some of these issues, the General Assembly granted Governor Perdue the right to suspend portions of the new law based on federal objections. The legislature will now be tasked with changing the law to make it conform with these federal guidelines. Non-conflicting portions of the new law will take effect November 1 as scheduled.