BILL NUMBER: AB 664	CHAPTERED
	BILL TEXT

	CHAPTER  827
	FILED WITH SECRETARY OF STATE  SEPTEMBER 28, 2004
	APPROVED BY GOVERNOR  SEPTEMBER 28, 2004
	PASSED THE SENATE  AUGUST 27, 2004
	PASSED THE ASSEMBLY  AUGUST 27, 2004
	AMENDED IN SENATE  AUGUST 25, 2004
	AMENDED IN SENATE  AUGUST 24, 2004
	AMENDED IN SENATE  JUNE 21, 2004
	AMENDED IN SENATE  FEBRUARY 18, 2004
	AMENDED IN ASSEMBLY  JANUARY 6, 2004
	AMENDED IN ASSEMBLY  SEPTEMBER 29, 2003

INTRODUCED BY   Assembly Member Lowenthal
   (Coauthor:  Senator Kuehl)

                        FEBRUARY 19, 2003

   An act to amend Sections 976.5, 976.8, 977, 982, 1036, and 1052
of, and to add Sections 336, 1061, 1145, and 2101.6 to, the
Unemployment Insurance Code, relating to unemployment insurance, and
making an appropriation therefor.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 664, Lowenthal.  Unemployment insurance:  contribution rates.
   (1) Existing law requires every employer, with specified
exceptions, to pay contributions to the Unemployment Fund at
specified rates.
   This bill would require the Director of the Employment Development
Department (EDD) to assign an employer the maximum contribution rate
plus 2% for specified rating periods if that employer had previously
obtained a favorable rate of contributions due to deliberate
ignorance, reckless disregard, fraud, intent to evade,
misrepresentation, or willful nondisclosure.
   (2) Existing law also generally authorizes employers to submit to
the EDD voluntary unemployment insurance contributions for the
purposes of redetermining its unemployment insurance contribution
rate, unless specifically excluded from this authorization.  Existing
law excludes from this authorization an employer whose reserve
account has been subject to benefit charges, as specified.
   This bill would additionally exclude from this authorization an
employer who is assigned the maximum contribution rate plus 2% for
certain rating periods, as specified, because that employer had
previously obtained or attempts to obtain a favorable rate of
contributions due to deliberate ignorance, reckless disregard, fraud,
intent to evade, misrepresentation, or willful nondisclosure.
   (3) Existing law requires specified employers to contribute 0.1%
of specified wages into the Employment Training Fund but provides a
relief from this requirement to an employer who has a negative
reserve account balance on the computation date.
   This bill would specify that an employer who has a negative
reserve account balance on the computation date would, nonetheless,
be required to contribute 0.1% of specified wages into the Employment
Training Fund if the director assigned the employer the maximum rate
plus 2% for certain rating periods, as specified, because that
employer had previously obtained or attempted to obtain a favorable
rate of contributions due to having engaged in specified acts.
   (4) Existing law requires the director to furnish to each
employer, at least annually, with an itemized statement of the
charges to the employer's account and a statement of the account
showing the credits and charges, the net balance of the employer's
reserve, and the employer's contribution rate for the applicable
rating period, and requires, prior to the expiration of the rating
period to which the statements relate, to provide an employer with a
notice of correction of any error in the statement of account or
statement of charges and to assess a deficiency in, or refund an
overpayment of, contributions paid.
   This bill would not require that the notice of correction of any
error must be mailed before the expiration of the rating period in
the case where fraud, intent to evade, misrepresentation, or willful
nondisclosure is found by the director.
   (5) Existing law allows an employing unit, as defined, that
acquires an organization, trade, or business, and continues that
organization, trade, or business without substantial reduction of
personnel to apply for transfer of the predecessor's reserve account,
as specified, to the successor employer for purposes of determining
the employer's rate of contribution, unless the acquisition was
undertaken by the employing unit solely or primarily for the purpose
of obtaining a more favorable rate of contributions.
   This bill would delete the requirement that obtaining a more
favorable rate of contributions be the sole or primary purpose for
the acquisition, and instead, would provide that a transfer of the
predecessor's reserve account to the successor employer would not be
allowed if the acquisition of the predecessor occurred for the
purpose of obtaining a more favorable rate of contributions for the
successor employer.
   (6) Existing law also authorizes the Director of the Employment
Development Department to treat 2 or more entities as one employing
unit, as defined, if they are united because of ownership, operation,
and use, and specifies factors and conditions pursuant to which
ownership, operation, and use of 2 or more entities are considered to
be united.
   This bill would require the director to establish procedures that
would allow the department to identify the transfer or acquisition of
a business that is undertaken for purposes of obtaining a lower
unemployment insurance contribution rate.  This bill would also
require that, in the case where an employer transfers all or part of
its business or payroll to another employer, and both employers, at
the time of transfer, are under common ownership, management or
control, the reserve account of the transferred business must be
combined with the reserve account of the transferee employer.
   (7) Existing law, with limited exceptions, provides that every
person who willfully violates the Unemployment Insurance Law or
regulations implementing that law is guilty of a misdemeanor.
   This bill would impose a penalty of either $5,000 or 10% of the
amount of any resulting underreporting of contributions, penalties,
and interest, whichever is greater, on a person or business entity
that knowingly advises another person to violate any provision of the
Unemployment Insurance Code. This bill would also make it a
violation for any person to willfully counsel, advise, procure, or
coerce anyone to willfully make a false statement or representation,
or knowingly fail to disclose a material fact for the purpose of
lowering or avoiding any required contribution, or to avoid being or
remaining subject to specific requirements, as provided, and would
thereby establish a new crime.
   (8) By providing for the deposit of additional moneys into the
Unemployment Fund, a continuously appropriated fund, this bill would
make an appropriation.
  (9) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 336 is added to the Unemployment Insurance
Code, to read:
   336.  The director shall establish procedures to identify the
transfer or acquisition of a business that is undertaken for purposes
of obtaining a lower unemployment insurance contribution rate.
  SEC. 2.  Section 976.5 of the Unemployment Insurance Code is
amended to read:
   976.5.  (a) Except as provided in subdivision (b), in addition to
other contributions required by this division, every employer, except
an employer to which subdivision (c) is applicable, may submit a
voluntary unemployment insurance contribution for the purpose of
redetermining its unemployment insurance contribution rate.  No
redetermination of a contribution rate shall be made unless the
voluntary contribution is submitted as required in subdivision (c) of
Section 1110.  No redetermination shall reduce an employer's
unemployment insurance contribution rate by more than three rates as
provided in Section 977.
   (b) This section shall not be operative in calendar years in which
Contribution Rate Schedules E and F in Section 977 are in effect, or
in calendar years to which the emergency solvency surcharge provided
in Section 977.5 is in effect.
   (c) This section does not apply to any of the following:
   (1) An employer not eligible for a contribution rate other than
that provided pursuant to Section 982 or subdivision (c) of Section
977.
   (2) An employer with a negative reserve account balance on the
computation date.
   (3) An employer who was notified prior to September 1 of any
unpaid amount owed to the department which is not the subject of a
timely petition for reassessment pending before the appeals board on
September 30 preceding the year to which a contribution rate is
applicable.
  SEC. 3.  Section 976.8 of the Unemployment Insurance Code is
amended to read:
   976.8.  (a) Section 976.6 does not apply to any employer who has a
negative reserve account balance on the computation date.
   (b) Subdivision (a) does not apply to an employer assigned the
maximum rate pursuant to subdivision (c) of Section 977.
  SEC. 4.  Section 977 of the Unemployment Insurance Code is amended
to read:
   977.  (a) Except as provided in subdivision (c), if, as of the
computation date, the employer's net balance of reserve equals or
exceeds that percentage of his or her average base payroll which
appears on any line in column 1 of the following table, but is less
than that percentage of his or her average base payroll which appears
on the same line in column 2 of that table, his or her contribution
rate shall be the figure appearing on that same line in the
appropriate schedule, as defined in subdivision (b), which shall be a
percentage of the wages specified in Section 930.


       Reserve Ratio                  Contribution Rate
      Column   Column                     Schedules
Line     1       2       AA     A      B      C      D      E      F

01   less than -20     5.4    5.4    5.4    5.4    5.4    5.4    5.4

02      -20 to -18     5.2    5.3    5.4    5.4    5.4    5.4    5.4

03      -18 to -16     5.1    5.2    5.4    5.4    5.4    5.4    5.4

04      -16 to -14     5.0    5.1    5.3    5.4    5.4    5.4    5.4

05      -14 to -12     4.9    5.0    5.3    5.4    5.4    5.4    5.4

06      -12 to -11     4.8    4.9    5.2    5.4    5.4    5.4    5.4

07      -11 to -10     4.7    4.8    5.1    5.3    5.4    5.4    5.4

08      -10 to -09     4.6    4.7    5.1    5.3    5.4    5.4    5.4

09      -09 to -08     4.5    4.6    4.9    5.2    5.4    5.4    5.4

10      -08 to -07     4.4    4.5    4.8    5.1    5.3    5.4    5.4

11      -07 to -06     4.3    4.4    4.7    5.0    5.3    5.4    5.4

12      -06 to -05     4.2    4.3    4.6    4.9    5.2    5.4    5.4

13      -05 to -04     4.1    4.2    4.5    4.8    5.1    5.3    5.4

14      -04 to -03     4.0    4.1    4.4    4.7    5.0    5.3    5.4

15      -03 to -02     3.9    4.0    4.3    4.6    4.9    5.2    5.4

16      -02 to -01     3.8    3.9    4.2    4.5    4.8    5.1    5.4

17      -01 to  00     3.7    3.8    4.1    4.4    4.7    5.0    5.4

18       00 to  01     3.4    3.6    3.9    4.2    4.5    4.8    5.1

19       01 to  02     3.2    3.4    3.7    4.0    4.3    4.6    4.9

20       02 to  03     3.0    3.2    3.5    3.8    4.1    4.4    4.7

21       03 to  04     2.8    3.0    3.3    3.6    3.9    4.2    4.5

22       04 to  05     2.6    2.8    3.1    3.4    3.7    4.0    4.3

23       05 to  06     2.4    2.6    2.9    3.2    3.5    3.8    4.1

24       06 to  07     2.2    2.4    2.7    3.0    3.3    3.6    3.9

25       07 to  08     2.0    2.2    2.5    2.8    3.1    3.4    3.7

26       08 to  09     1.8    2.0    2.3    2.6    2.9    3.2    3.5

27       09 to  10     1.6    1.8    2.1    2.4    2.7    3.0    3.3

28       10 to  11     1.4    1.6    1.9    2.2    2.5    2.8    3.1

29       11 to  12     1.2    1.4    1.7    2.0    2.3    2.6    2.9

30       12 to  13     1.0    1.2    1.5    1.8    2.1    2.4    2.7

31       13 to  14     0.8    1.0    1.3    1.6    1.9    2.2    2.5

32       14 to  15     0.7    0.9    1.1    1.4    1.7    2.0    2.3

33       15 to  16     0.6    0.8    1.0    1.2    1.5    1.8    2.1

34       16 to  17     0.5    0.7    0.9    1.1    1.3    1.6    1.9

35       17 to  18     0.4    0.6    0.8    1.0    1.2    1.4    1.7

36       18 to  19     0.3    0.5    0.7    0.9    1.1    1.3    1.5

37       19 to  20     0.2    0.4    0.6    0.8    1.0    1.2    1.4

38       20 or more    0.1    0.3    0.5    0.7    0.9    1.1    1.3


   (b) (1) Whenever the balance in the Unemployment Fund on September
30 of any calendar year is greater than 1.8 percent of the wages (as
defined by Section 940) in employment subject to this part paid
during the 12-month period ending upon the computation date,
employers shall pay into the Unemployment Fund contributions for the
succeeding calendar year upon all wages with respect to employment at
the rates specified in Schedule AA.
   (2) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is equal to or less than 1.8 percent and greater
than 1.6 percent of the wages (as defined by Section 940) in
employment subject to this part paid during the 12-month period
ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year upon
all wages with respect to employment at the rates specified in
Schedule A.
   (3) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is equal to or less than 1.6 percent and greater
than 1.4 percent of the wages (as defined by Section 940) in
employment subject to this part paid during the 12-month period
ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year upon
all wages with respect to employment at the rates specified in
Schedule B.
   (4) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is equal to or less than 1.4 percent and greater
than 1.2 percent of the wages (as defined by Section 940) in
employment subject to this part paid during the 12-month period
ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year upon
all wages with respect to employment at the rates specified in
Schedule C.
   (5) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is equal to or less than 1.2 percent and greater
than 1.0 percent of the wages (as defined by Section 940) in
employment subject to this part paid during the 12-month period
ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year upon
all wages with respect to employment at the rates specified in
Schedule D.
   (6) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is equal to or less than 1.0 percent and greater
than or equal to 0.8 percent of the wages (as defined by Section
940) in employment subject to this part paid during the 12-month
period ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year
upon all wages with respect to employment at the rates specified in
Schedule E.
   (7) Whenever the balance in the Unemployment Fund on September 30
of any calendar year is less than 0.8 percent and greater than or
equal to 0.6 percent of the wages (as defined by Section 940) in
employment subject to this part paid during the 12-month period
ending upon the computation date, employers shall pay into the
Unemployment Fund contributions for the succeeding calendar year upon
all wages with respect to employment at the rates specified in
Schedule F.
   (c) For each rating period beginning on or after January 1, 2005,
in which an employer obtains or attempts to obtain a more favorable
rate of contributions under this section due to deliberate ignorance,
reckless disregard, fraud, intent to evade, misrepresentation, or
willful nondisclosure, the director shall assign the maximum
contribution rate plus 2 percent for each applicable rating period,
the current rating period, and the subsequent rating period.
  SEC. 5.  Section 982 of the Unemployment Insurance Code is amended
to read:
   982.  (a) Except as provided in subdivision (b), no employer shall
be eligible for a contribution rate of more or less than 3.4 percent
for any rating period unless his or her reserve account has been
subject to benefit charges during the period of 12 complete
consecutive calendar quarters ending on the computation date for that
rating period and he or she is qualified under Sections 977 and
977.5.
   (b) No new employer shall be eligible for a contribution rate of
more or less than 3.4 percent unless his or her reserve account has
been subject to benefit charges during the period of 12 complete
consecutive calendar months ending on the computation date and the
new employer is qualified under Sections 977 and 977.5.
   (c) For the purposes of this section "new employer" means any of
the following:
   (1) An employer who first qualifies as an employer after the 1969
calendar year, and whose account is continuously subject to benefit
charges from the date of first chargeability, except that a successor
employer under Section 1051 is not a new employer if the successor
applies for or obtains the transfer of the reserve account or part
thereof of a predecessor who is not a new employer.
   (2) An employer whose entire reserve account has been transferred
to a successor under Article 5 (commencing with Section 1051) of
Chapter 4 of this part.
   (3) An employer whose reserve account has been canceled pursuant
to Section 1029.
   (d) Section 905 applies to a new employer, except that for the
purposes of this section "average base payroll" means:
   (1) The payroll in the calendar year immediately preceding the
computation date for a new employer with a payroll only in that
calendar year.
   (2) The quotient obtained by dividing by two the total amount of
taxable wages paid by a new employer during the most recent period of
two consecutive calendar years immediately preceding the computation
date, for a new employer with a payroll only in each of, or only in
the first of, the two consecutive calendar years.
   (e) The contribution rate of an employer, for any period prior to
January 1, 1988, shall not be changed, other than by the provisions
of Sections 977 and 977.5, when the director makes a determination,
pursuant to Section 135.1 or 135.2, because of arrangements entered
into or business activities conducted between January 1, 1984, and
January 1, 1986.
   (f) This section does not apply to an employer assigned the
maximum rate pursuant to subdivision (c) of Section 977.
  SEC. 6.  Section 1036 of the Unemployment Insurance Code is amended
to read:
   1036.  (a) The director shall give notice, pursuant to Section
1206, to the employer of the correction of any error which the
director finds in any statement of account or statement of charges.
Except in the case where fraud, intent to evade, misrepresentation,
or willful nondisclosure is found, the notice of correction shall be
issued prior to the expiration of the rating period to which a
statement relates.
   (b) Any additional amount of contributions resulting from an
increased contribution rate caused by the correction of any error
that the director finds in any statement of reserve account or
statement of charges shall be assessed within 180 days from the
postmarked date of the notice of correction. These assessments shall
be issued in accordance with Article 8 (commencing with Section
1126).  However, these assessments shall become final on the last day
of the calendar month following the calendar quarter in which the
assessment is issued.
   (c) Any overpaid amount of contributions resulting from a reduced
rate caused by the correction of an error that the director finds on
any statement of reserve account or statement of charges shall be
refunded within 180 days of the postmarked date of the notice of
correction.  These refunds shall be issued in accordance with Article
9 (commencing with Section 1176).
  SEC. 7.  Section 1052 of the Unemployment Insurance Code is amended
to read:
   1052.  Upon receipt of the application the separate account,
actual contribution and benefit experience and payrolls of the
predecessor or that part thereof, as determined by authorized
regulations, which pertains to the organization, trade, or business,
or portion thereof acquired, shall be transferred to the successor
employer for the purpose of determining its rate of contribution
after such acquisition with the same effect for such purpose as if
the operations of the predecessor had at all times been carried on by
the successor.  Such separate account shall be transferred by the
director to the successor employer and, as of the date of the
acquisition, shall become the separate account or part of the
separate account, as the case may be, of the successor employer, and
the benefits thereafter chargeable to the predecessor employer on
account of employment relating to the transferred organization,
trade, or business or transferred portion thereof prior to the date
of the acquisition shall be charged to the separate account.  This
section shall not apply to any acquisition which is determined by the
director to have been made for the purpose of obtaining a more
favorable rate of contributions under Section 977.
  SEC. 8.  Section 1061 is added to the Unemployment Insurance Code,
to read:
   1061.  (a) For purposes of this article, the reserve account
attributable to a transferred business shall also be transferred to,
and combined with, the reserve account attributable to the employer
to whom that business is transferred, if both of the following are
satisfied:
   (1) An employer transfers all or part of its business or payroll
to another employer.
   (2) At the time of transfer, both employers are under common
ownership, management, or control.
   (b) This section shall be applied to meet the minimum requirements
contained in any guidance or regulations issued by the United States
Department of Labor.
  SEC. 9.  Section 1145 is added to the Unemployment Insurance Code,
to read:
   1145.  (a) If the director finds that a person or business entity
knowingly advises another person or business entity to violate any
provision of this chapter, the director may assess the greater of:
   (1) A penalty of five thousand dollars ($5,000).
   (2) Ten percent of the combined amount of any resulting
underreporting of contribution, penalties, or interest required by
law.
   (b) For purposes of this section, "business entity" means a
partnership, corporation, association, limited liability company, or
Indian tribe, as described in subsection (u) of Section 3306 of Title
26 of the United States Code, or any other legal entity.
  SEC. 10.  Section 2101.6 is added to the Unemployment Insurance
Code, to read:
   2101.6.  (a) It is a violation of this chapter for any person to
procure, counsel, advise, or coerce anyone to willfully make a false
statement or representation, or to knowingly fail to disclose a
material fact in order to lower or avoid any contribution or to avoid
being or remaining subject to this division.
   (b) It is a violation of this chapter for any person to willfully
aid or assist anyone in making a false statement or representation,
or in knowingly failing to disclose a material fact, in order to
lower or avoid any contribution, or to avoid being or remaining
subject to this division.
  SEC. 11.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.