BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 27, 2012 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 1845
Author: Solorio
As Introduced/Amended: June 18, 2012
SUBJECT
Unemployment compensation benefits: overpayment assessments:
termination:
income tax withholding.
KEY ISSUE
Should the Legislature implement new federal requirements
related to Unemployment Insurance (UI) program?
PURPOSE
To conform California's Unemployment Insurance system to federal
requirements, as well as make minor, technical changes to the
law.
ANALYSIS
Existing law provides that an unemployed person is eligible for
UI benefits if he or she becomes unemployed through no fault of
their own, has worked in UI-covered employment, is able and
available to work, and is totally or partially unemployed during
the week for which a claim is filed. (Unemployment Insurance
Code §§1251-1253)
Existing law provides that the Director of the Employment
Development Department must keep separate records of the amounts
paid into the fund by each employer in his or her own behalf, or
chargeable to him or her as benefits. Additionally, the
Director must maintain a separate reserve account for each
employer, and shall credit each reserve account with all the
contributions paid on his or her behalf. (Unemployment
Insurance Code §§1025 & 1026)
Existing law provides that the Employment Development Department
must give a notice of the filing of a new or additional claim
for UI benefits to the employing unit that last employed the
unemployed worker immediately preceding the filing of the claim,
unless certain circumstances apply. (Unemployment Insurance
Code §1327)
Existing law any employer who is entitled to receive notice of
the filing of a new or additional claim may, within 10 days
after mailing of the notice, submit to the department any facts
within its possession disclosing whether the claimant left the
employer's employ voluntarily and without good cause or left
under one of the following circumstances:
1) The claimant was discharged from the employment for
misconduct connected with his or her work.
2) The claimant's discharge or quitting from his or her
most recent employer was the result of an irresistible
compulsion to use or consume intoxicants including
alcoholic beverages.
3) The claimant was a student employed on a temporary basis
and whose employment began within, and ended with his or
her leaving to return to school at the close of, his or her
vacation period.
4) The claimant left the employer's employ to accompany his
or her spouse or domestic partner to a place or to join him
or her at a place from which it is impractical to commute
to the employment, and to which a transfer of the claimant
by the employer is not available.
5) The claimant left the employer's employ to protect his
or her family or himself or herself from domestic violence
abuse.
(Unemployment Insurance Code §1030)
Existing law provides that if the director of Employment
Development Department finds that any employer or any employee,
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Senate Committee on Labor and Industrial Relations
officer, or agent of any employer, in submitting facts
concerning the termination of a claimant's employment, willfully
makes a false statement or representation or willfully fails to
report a material fact concerning that termination, the director
shall assess a penalty against the employer in an amount not
less than 2 nor more than 10 times the weekly benefit amount of
that claimant.
(Unemployment Insurance Code §1142)
Existing law provides that if the director finds that an
individual has been overpaid unemployment compensation benefits
because he or she willfully, for the purpose of obtaining
unemployment compensation benefits, either made a false
statement or representation, with actual knowledge of the
falsity thereof, or withheld a material fact, the director shall
assess against the individual an amount equal to 30 percent of
the overpayment amount. Assessments collected under this section
shall be deposited in the Benefit Audit Fund.
(Unemployment Insurance Code §1375.1)
This bill would implement new federal requirements related to
Unemployment Insurance (UI) program integrity and makes
technical changes to UI and tax collection programs administered
by the Employment Development Department (EDD).
Specifically, this bill would:
1)Prohibits crediting an employer's UI reserve account for
benefit overpayments resulting from the employer's failure to
respond timely to claim notifications or requests for
information from EDD.
2)Adds 'The claimant left the employer's employ to take a
substantially better job' to the list of circumstances that
will not trigger a charge against the employer's reserve
account.
3)Corrects inconsistencies between sections allowing employers
to submit additional information regarding a UI claim.
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4)Requires reporting an employee who returns to an employer
after more than 60 days as a new hire.
5)Clarifies and specifies the circumstances under which an
employer or his or her agents may be assessed a penalty due to
willfully making a false statement or representation or
willfully failing to report a material fact concerning that
termination.
6)Permits a claimant to cancel a UI claim within one year of
submitting the claim.
7)Redirects one-half of the penalties assessed for the
fraudulent overpayment of UI benefits from the Benefit Audit
Fund to the Unemployment Fund.
8)Specifies that the redirection of revenue from the Benefit
Audit Fund takes effect on October 21, 2013.
9)Conforms EDD's tax collection calendar to the federal tax
collection calendar.
COMMENTS
1. The Trade Adjustment Assistance Extension Act of 2011 and the
Unemployment Insurance System:
The Trade Adjustment Assistance Extension Act of 2011 (PL
112-40) included three new federal requirements for UI program
integrity efforts:
a) States must impose a minimum 15% penalty on individuals
whose fraudulent acts resulted in overpayment of UI
benefits and that those penalty funds are to be deposited
in the state's UI fund.
b) States are prohibited from providing relief from charges
to an employer's UI reserve account when the
action/inaction of the employer led to the UI overpayment.
c) States are required to include employees rehired after
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60 days in the National Directory of New Hires.
Under the Federal legislation, states must implement these
provisions by October 1, 2013. Failure to implement these
requirements could result in the state losing its
administrative grant funds to operate the UI program ($340
million in the 2012 federal fiscal year) and California
employers could also lose a federal tax credit resulting in
approximately $6 billion of additional taxes.
2. What is the Benefit Audit Fund?
The Benefit Audit Fund provides financial support for the
department's UI fraud investigation program. In recent years
the fund has generated between $25 and $30 million per year
through the collection of assessments on fraudulent UI claims.
In response to ongoing fiscal shortfalls, annual budget acts
have provided approximately $15 million annually to support
the UI fraud investigation program and used the remaining
revenue to support the General Fund. The new federal
requirements have the effect of reducing Benefit Audit Fund
revenue by 50% which will result in reduced support for either
(or both) the department's UI fraud investigation program or
the General Fund. Consistent with the Federal requirements,
the bill delays implementation of this change until October
21, 2013 which defers any budgetary impact until the 2013-14
fiscal year.
3. Proponent Arguments :
The Employment Development Department (EDD), which is the
sponsor of this bill, states that AB 1845 will ensure that the
state conforms with federal law on California's unemployment
insurance program. EDD states that recent federal legislation
requires penalties on individuals that commit fraudulent acts,
provides relief for an employer's reserve account, and
requires the reporting of rehired employees to the National
Directory of New Hires. Finally, EDD notes that AB 1845
contains minor, non-substantive amendments to Unemployment
Insurance Code to ensure consistency and accuracy throughout
the Code.
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SUPPORT
Employment Development Department (Sponsor)
OPPOSITION
None on file.
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