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Massachusetts Senate unemployment insurance reform may harm SMBs

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Businesses, particularly small businesses, have been clamoring for reforms to the Massachusetts unemployment insurance system, noting that it is too easy for fired employees to file bogus claims, among other complaints. In an article posted yesterday, February 3, the reforms that the Massachusetts Senate plans to vote on Thursday are outlined - but they may harm small businesses and entrepreneurs, particularly those that have seasonal workforces.

S 2001, the bill in question, shifts the rates for unemployment insurance to favor "stable employers," or those that tend to hold on to employees for the long haul, and raises rates for those who are "chronic users of the unemployment system." Those employers that rate the best on the scale, meaning there are few layoffs and firings, would pay $153 per employee per year - while those that are worst-rated would see a rate of $2,337 per year per employee.

While the Associated Industries of Massachusetts (AIM) is pleased with the immediate rate freeze proposal, which is part of the bill as well, it is still studying the rest of the proposal. According to the article, there are a "couple of concerns."

The Massachusetts Senate also plans to close what they call a "loophole," where owners of seasonal businesses like landscaping won't be able to collect unemployment by laying themselves off after the season is over.

As one commenter on the article noted, this is going to devastate small manufacturers. When small manufacturers have slow seasons, they need to lay off employees. But under S 2001, they would need to keep all their employees during slow periods to avoid paying through the nose for unemployment insurance. Another commenter pointed out that this would penalize businesses that are trying to rehire when they rebound, as they may not be able to afford the unemployment insurance for their new employees.

In a state that is already hostile to small businesses, the Massachusetts Senate would do well to reconsider S 2001 and its implications on the nearly-extinct small manufacturing sector.

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