BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 23, 2010 2009-2010 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 2538
Author: Niello
Version: As Amended April 28, 2010
SUBJECT
Unemployment insurance: eligibility for benefits: notification.
KEY ISSUE
Should the Legislature remove the requirement that the
Employment Development Department to pay all Disability
Insurance benefits by check, as well as clean-up out-of-date
statute in the Unemployment Insurance Code?
PURPOSE
To allow the Employment Development Department to contract with
a vendor to deliver Disability Insurance benefits through direct
deposit and debit card, as well as to remove and clarify certain
dated sections of the Unemployment Insurance Code.
ANALYSIS
Existing law:
a) Authorizes the Director of EDD to collect delinquent tax
contributions or penalties from a person or an employing
unit no later than three years after these taxes or
penalties become delinquent by levy served personally or by
certified mail to any person who has possession of any
personal property belonging to the delinquent person or
employing unit.
b) Specifies that if the levy is made on a deposit or
personal property in the possession or control of a bank or
savings and loan association, the notice of levy shall be
delivered or mailed to the branch or office of the bank or
savings and loan association at which the deposit or
personal property is held.
c) Specifies that the place of trial for violations of the
laws governing the Unemployment Insurance (UI) Program and
the Disability Insurance (DI) Program shall be the county
of residence or principal place of business of the
defendant.
d) References obsolete provisions in two sections of law
that formerly established eligibility and benefit levels in
the DI Program when a person completed a vocational
rehabilitation plan, received a maintenance allowance, or
received permanent disability indemnity under the workers'
compensation system.
e) Requires the Director of EDD to deposit moneys from the
Disability Fund into a bank or public depository in order
to pay DI benefits by checks drawn on a disability benefit
payment account.
This Bill:
1) Authorizes the Director of EDD to collect delinquent tax
contributions or penalties from a person or an employing
unit by levy served personally or by first-class mail to
any person who has possession of any personal property
belonging to the delinquent person or employing unit.
2) Specifies that if the levy is made on a deposit or
personal property in the possession or control of a bank or
savings and loan association, the notice of levy shall be
delivered or mailed to the centralized processing unit or
location designated by that bank or savings and loan
association where the credits or other property are held.
3) Authorizes EDD to serve notice to an "address" for any
Hearing Date: June 23, 2010 AB 2538
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
bank or savings and loan by means of magnetic media,
electronic transmission, or other electronic technology.
"Address" is defined as a telephone or modem number,
facsimile machine, or any other reference number designated
by the bank or savings and loan to receive data by
electronic means.
4) Specifies that the place of trial for violations of the
laws governing the Unemployment Insurance (UI) Program and
the Disability Insurance (DI) Program can also occur in any
county where the defendant was transacting business that
resulted in the alleged violations.
5) Repeals obsolete references in two sections of law that
formerly determined eligibility for, and the amount of, DI
benefits in connection with people who were covered under
the workers' compensation program.
6) Repeals the requirement that the Director of EDD pay DI
benefits by checks drawn on a disability benefit payment
account, allowing for electronic pay cards or other pay
methods.
COMMENTS
1. Need for this bill?
The sponsor of the bill, the Employment Development Department
(EDD), states that AB 2538 will clean up the Unemployment
Insurance Code and ensure the proper operation of the
Unemployment Insurance Program. EDD reports that the current
process of serving the Notice of Levy (NOL) personally or by
certified mail is time consuming and expensive. Certified
mail costs $3.24 per NOL compared with 44 cents for
first-class mail, or minimal cost if sent electronically.
Current law only allows for the prosecution of violations of
the California Unemployment Insurance Code to take place in
the county where the defendant resides or conducts business.
According to EDD, in 2007 and 2008 prosecutors cited
Hearing Date: June 23, 2010 AB 2538
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Senate Committee on Labor and Industrial Relations
limitations in current law as the cause for rejecting several
EDD criminal investigative cases. The suspects in these cases
were owners of construction and other businesses who were
suspected of payroll tax fraud. However, their actions took
place in counties other than the place of their business. EDD
states that clarifying where prosecutions can take place will
aid enforcement action.
The Unemployment Insurance Code contains outdated references
to sections of the Labor Code that formerly determined
eligibility for, and the amount of, DI benefits to claimants
that had been eligible for benefits under the workers'
compensation system. Removal of these sections will clean-up
the Unemployment Insurance Code.
Finally, EDD currently issues Unemployment Insurance (UI) and
Disability Insurance (DI) benefits to eligible claimants by
check. However, it is more expensive to issue individual
checks to claimants than the use of electronic payments such
as direct deposit. Current law already provides the
flexibility to modernize UI benefit delivery, but requires
checks for DI benefit delivery. This bill would allow
electronic benefit delivery for DI benefits.
2. Electronic Benefit Delivery and the Bank of America Contract:
Earlier this month, EDD selected Bank of America (BOA) as its
vendor for the electronic delivery of Unemployment Insurance
(UI), Disability Insurance (DI), and Paid Family Leave (PFL)
benefits, which met or exceeded all of the standards included
in AB 2188. This included BOA charging virtually no fees for
use of the debit cards, allowing unlimited ATM withdrawals
within the BOA network, cash access at point-of-sale
terminals, and use of the debit card wherever Visa is
accepted. Moreover, Bank of America will not charge a fee for
the providing this service, but rather make their money
through fees paid by businesses that utilize debit cards.
Noting that this measure and AB 2188 are virtually identical
and share the same goal, the Committee may wish to consider if
it makes sense to pass out both measures and risk possible
Hearing Date: June 23, 2010 AB 2538
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Senate Committee on Labor and Industrial Relations
chaptering-out issues which could endanger the Bank of
American contract.
3. Proponent Arguments :
The Employment Development Department (EDD) notes that this
bill would align the Notice of Levy (NOL) with other state tax
agencies such as the Franchise Tax Board and the Board of
Equalization which are authorized to send NOL's to financial
institutions by first-class mail, or electronic transmission,
instead of certified mail. This bill would enhance EDD's
ability to increase collections and decrease costs. Each
year, EDD collects more than $42 billion in payroll taxes,
including nearly $35 billion in Personal Income Taxes.
EDD also argues that amending current law to allow for greater
flexibility in the location for prosecuting cases would
enhance EDD's ability to help law enforcement agencies
prosecute cases and recover tax payments due the state. This
bill would assist local district attorneys as cases could be
prosecuted in locations where the crime occurred.
Finally, EDD has negotiated a contract for direct deposit and
debit card services in connection with the Unemployment
Insurance (UI) Program. This bill would give EDD the legal
authority to also issue DI payments by direct deposit or debit
cards. These would provide eligible claimants with a faster
and more convenient way to receive payments, and a more secure
and less costly means for EDD to disburse these payments.
4. Opponent Arguments :
None on file.
5. Similar Legislation :
AB 2188 (Bradford), which will also be heard today in this
committee, also removes the requirement that the Employment
Development Department pays all Disability Insurance benefits
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Senate Committee on Labor and Industrial Relations
with a check.
SUPPORT
The Employment Development Department (Sponsor)
OPPOSITION
None on file.
* * *
Hearing Date: June 23, 2010 AB 2538
Consultant: Gideon L. Baum Page 6
Senate Committee on Labor and Industrial Relations