Alabama Department of Workforce

MONTGOMERY - Governor Bob Riley today signed into law the SUTA (State Unemployment Tax Act) Dumping Prevention Act saying it will protect Alabama's economy. The new law amends Alabama's unemployment compensation law so employers in the state avoid the loss of about $630 million in federal unemployment compensation tax credits.

"SUTA Dumping was unfair and placed a greater burden on other businesses that had to pay more to maintain the state's unemployment program," Governor Riley said. "The passage of this legislation was absolutely critical to protecting Alabama's economy from serious disruption."

SUTA Dumping occurs when a company with high layoffs reorganizes as a new company or transfers employees to an affiliated company in order to reduce its unemployment compensation tax rate. Congress passed a law in 2004 to stop this practice on the federal level and required states to pass a similar law on the state level by January 1, 2006.

Failure to pass this legislation would also have resulted in a loss of $30 million in federal funds to operate the Alabama Department of Labor's unemployment program.

"The new law will prevent unfair business advantages for companies engaged in the SUTA-dumping practice. It will keep unemployment insurance taxes lower for all businesses and it will prevent a loss of revenue for the state unemployment compensation trust fund which is used to pay benefits to those who lose their jobs through no fault of their own," said Phyllis Kennedy, Director of the Alabama Department of Labor.

Governor Riley also praised the Alabama Legislature's passage of the bill.

"I commend the Legislature for passing this high priority bill included in my call for the special session with bipartisan support," Governor Riley said.

Representatives from the National Federation of Independent Business (NFIB) and the Business Council of Alabama (BCA) were also invited to participate in the bill signing ceremony in recognition of their support of this legislation.

For more information, contact the Governor's Press Office at (334) 242-7150.