BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1845| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1845 Author: Solorio (D) Amended: 8/7/12 in Senate Vote: 21 SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 5-0, 6/27/12 AYES: Lieu, DeSaulnier, Leno, Padilla, Yee NO VOTE RECORDED: Wyland, Runner SENATE APPROPRIATIONS COMMITTEE : 6-0, 8/16/12 AYES: Kehoe, Alquist, Dutton, Lieu, Price, Steinberg NO VOTE RECORDED: Walters ASSEMBLY FLOOR : 77-0, 5/29/12 - See last page for vote SUBJECT : Unemployment compensation benefits: overpayment assessments: termination: income tax withholding SOURCE : Employment Development Department DIGEST : This bill conforms the states unemployment insurance (UI) program administered by the Employment Development Department (EDD) to changes in federal 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 CONTINUED AB 1845 Page 2 is totally or partially unemployed during the week for which a claim is filed. (Unemployment Insurance Code (UIC) Section 1251-1253) Existing law provides that the EDD Director must keep separate records of the amounts paid into the fund by each employer in his/her own behalf, or chargeable to him/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. (UIC Section 1025 and 1026) Existing law provides that EDD 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. (UIC Section1327) Existing law allows 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/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/her leaving to return to school at the close of, his/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/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. CONTINUED AB 1845 Page 3 5. The claimant left the employer's employ to protect his or her family or himself/herself from domestic violence abuse. (UIC Section 1030) Existing law provides that if the EDD Director finds that any employer or any employee, 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 two nor more than 10 times the weekly benefit amount of that claimant. (UIC Section 1142) Existing law provides that if the Director finds that an individual has been overpaid unemployment compensation benefits because he/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% of the overpayment amount. Assessments collected under this section shall be deposited in the Benefit Audit Fund. (UIC Section 1375.1) This bill: 1. Provides that an employer's reserve account is not relieved of charges relating to a benefit overpayment if the EDD determines that the employer was at fault for failing to respond to any request for information relating to the individual claim for unemployment compensation benefits, as provided. 2. Provides that the cost of benefits charged to an employer electing to pay the cost of benefits into the Unemployment Fund in lieu of paying contributions CONTINUED AB 1845 Page 4 required of employers include credits of benefit overpayments actually collected by the department, unless the EDD determines that the payment was made because the entity was at fault for failing to respond to any request of the EDD for information relating to the individual claim for unemployment compensation benefits. This provision would apply to overpayments after October 22, 2013. 3. Requires employers to report the hiring of any employee who previously worked for the employer, but had been separated from such prior employment for at least 60 days. 4. Expands the reasons on notification of termination lists to include the claimant leaving the employer for reason of a substantially better job or to protect his/her family or himself/herself from domestic violence abuse. 5. Requires in order to cancel a claim for unemployment compensation benefits, that the person requests to cancel the claim during the benefit year of that claim or the extended duration period of that claim. 6. Provides that the penalty assessments be assessed on an employer or agent of the employer, depending on who the Director finds was at fault for willfully making a false statement or representation or for willfully failing to report a material fact concerning that termination or the reasonable assurance of that reemployment. 7. Provides that if both the employer and the agent of the employer were at fault, this penalty would be assessed against the employer and another penalty would be assessed against the agent of the employer. 8. Provides that the additional penalties that are assessed against an agent of the employer be available for the specified purposes upon appropriation by the Legislature for those purposes. Comments The Trade Adjustment Assistance Extension Act of 2011 and CONTINUED AB 1845 Page 5 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: 1. 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. 2. 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. 3. States are required to include employees rehired after 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. Benefit Audit Fund . The Benefit Audit Fund provides financial support for the EDD'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. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No CONTINUED AB 1845 Page 6 SUPPORT : (Verified 8/16/12) Employment Development Department (source) ARGUMENTS IN SUPPORT : The bill's sponsor, the Employment Development Department (EDD), states that this bill 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 this bill contains minor, nonsubstantive amendments to the Unemployment Insurance Code to ensure consistency and accuracy throughout the Code. ASSEMBLY FLOOR : 77-0, 5/29/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, Hagman, Halderman, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Cedillo, Fletcher, Hall PQ:m 8/20/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 1845 Page 7 CONTINUED