Texas law has prohibited SUTA dumping since 2003

For some time, Texas law has only vaguely addressed SUTA dumping. In 2003 the Texas Legislature amended the Texas Unemployment Compensation Act, to provide the TWC with authority to combat some forms of SUTA dumping abuse. In the rush to analyze the recently adopted federal law addressing SUTA dumping, Texas firms should not lose sight of the existing Texas law on this issue.

Section 204.084 of the Texas Labor Code was amended in the 2003 session of the Legislature to provide the Texas Workforce Commission with the regulatory tools necessary to combat SUTA dumping.

Since September 1, 2003 the TWC has had the statutory authority to refuse to recognize corporate transactions that would result in a transfer of UI experience, if the TWC "determines based on credible evidence" that the transaction was "done primarily to qualify for a reduced unemployment tax rate" by circumventing or manipulating the UI exeperience rating system.

Under the 2003 amendement to the UI statute, the TWC can simply refuse to transfer a UI tax rate thus preventing an employer from "buying" an artificially low UI tax rate from a dormant company.