BILL ANALYSIS                                                                                                                                                                                                    Ó






                 Senate Committee on Labor and Industrial Relations
                              William W. Monning, Chair

          Date of Hearing: June 12, 2013               2013-2014 Regular  
          Session                              
          Consultant: Alma Perez                       Fiscal:Yes
                                                       Urgency: No
          
                                  Bill No: AB 1392
                       Author: Assembly Committee on Insurance
                         As Introduced/Amended: May 29, 2013
          

                                       SUBJECT
          
                     Unemployment insurance: work sharing plans 


                                      KEY ISSUE

          Should provisions regulating the Work Sharing - Unemployment  
          Insurance Program be updated to conform to new federal  
          requirements? 
          

                                      ANALYSIS
          
           Existing law  establishes the Unemployment Insurance (UI)  
          program, administered by the Employment Development Department  
          (EDD).  The UI program is a federal-state program that provides  
          weekly unemployment insurance payments to eligible workers who  
          lose their jobs through no fault of their own. The UI program is  
          financed by employers who pay unemployment taxes on the first  
          $7,000 in wages paid to each employee in a calendar year.   The  
          benefits range from $40 to $450 per week depending upon earnings  
          during a 12-month base period.  

           Existing law  permits the payment of a reduced amount of UI  
          benefits to individuals whose employer participates in the Work  
          Sharing Unemployment Insurance program.  A person is eligible  
          for shared work unemployment compensation benefits under the  
          following circumstances: 

               a)     The person works less than his or her normal weekly  
                 hours of work for his or her regular employer during a  
                 particular week;










               b)     The EDD Director finds that the regular employer has  
                 reduced or restricted the person's normal hours of work  
                 or has rehired a person previously laid off and reduced  
                 that person's normal hours of work from those previously  
                 worked;

               c)     The employer has a plan to, in lieu of layoff,  
                 reduce employment and stabilize the work force by a  
                 program of sharing the work remaining after a reduction  
                 of total hours of work and a corresponding reduction in  
                 wages of at least 10 percent; and
               d)     The employer reduces the hours worked of at least  
                 two employees and at least 10 percent of the employer's  
                 regular permanent work force.  

           Existing law  provides that a person who is eligible for a shared  
          work unemployment benefit during any week of partial  
          unemployment shall be paid a benefit equal to the percentage of  
          reduction of the person's wages resulting from the approved plan  
          and multiplied by the person's weekly benefit amount. 

           Existing law  requires employers to apply with EDD for the  
          program and specifies that a plan for shared work unemployment  
          benefits expires in six months.  EDD is authorized to terminate  
          a plan for good cause if the plan is not being carried out  
          according to its terms and intent.  


           This Bill  would revise and recast the provisions covering the  
          Work Sharing Unemployment Insurance Program to conform to new  
          federal requirements.  The current provisions covering the  
          program would be repealed on a specified date, after which the  
          new provisions (below) would apply. 

          Specifically, this bill would: 

          1)Require that the employer identify, in the application for  
            participation in the program, the usual weekly hours of work  
            for employees in the affected unit and the specific percentage  
            by which their hours will be reduced. 

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          2)Provide that the percentage of reduction of hours for which a  
            work sharing plan may be approved shall not be less than 10  
            percent (current law) or more than 60 percent.  

          3)Require participating employers providing health or retirement  
            benefits to continue those benefits for the duration of the  
            program as if the affected employees were working normal  
            hours.

          4)Requires applications for work sharing programs to include:

               a)     A description of how the employer will notify  
                 employees of the work sharing plan.
               b)     An estimate of the layoffs averted by implementing a  
                 work sharing program.
               c)     A certification by the employer that their  
                 participation in a work sharing program is consistent  
                 with the employer's obligations under state and federal  
                 law.

          5)Allow employees in a work sharing program to participate in  
            training approved by the Employment Development Department  
            (EDD) including employer required training or training funded  
            through the Workforce Investment Act.

          6)Permit EDD to defer implementation of the bill until July 1,  
            2014 if implementation by January 1, 2014 is not feasible.



                                      COMMENTS
          

          1.  Background on the Work Sharing Program:

            The Work Sharing Program was established by the Legislature in  
            1978 - the first of its kind in the nation. The program allows  
            employers to participate in the work sharing unemployment  
            compensation benefits program which makes employees eligible  
            to receive a reduced amount of unemployment compensation  
            benefits if their work hours are reduced by more than ten  
            percent.  For example, a company with 100 employees may need  
          Hearing Date:  June 12, 2013                            AB 1392  
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            to lay off 20 percent of its workforce as business slows. When  
            it chooses to participate in a shared work program, the  
            company keeps its full workforce but moves to a four-day work  
            week. That allows the employer to achieve the same 20 percent  
            savings in payroll costs but without layoffs. Employees not  
            only keep their jobs but they also receive unemployment  
            insurance benefits to make up for part of their reduced wages.  


            The Work Sharing Program benefits both employers and  
            employees. If employees are retained during a temporary  
            slowdown, employers can quickly gear up when business  
            conditions improve.  Employers are spared the expense of  
            recruiting, hiring, and training new employees and employees  
            are spared the hardship of total unemployment.  Participation  
            in the work sharing program has increased dramatically during  
            the recession.  Initial shared work compensation claims rose  
            from 45,276 in 2007 to a peak of 219,580 in 2009.  Claims have  
            declined to 111,347 in 2011. 

          2.  Need for this bill?

            On February 22, 2012, the President signed the Middle Class  
            Tax Relief and Job Creation Act of 2012 (the Act) into law.  
            The Act contains many provisions concerning the unemployment  
            insurance programs, and the U.S. Department of Labor (USDOL)  
            has provided guidance to states about the minimum conformity  
            requirements related to work sharing programs. That guidance  
            includes conforming state work sharing statutes with a revised  
            model developed by the USDOL, in consultation with stakeholder  
            groups.   

            The Act also provides funding for states that bring their work  
            sharing programs into compliance with the new requirements.   
            California is slated to receive over $250 million to help pay  
            for work sharing benefits and will be eligible for  
            approximately $11 million in grant funding for program  
            administration after enactment of the model law.

            This bill addresses federal conformity requirements that are  
            necessary for California's continued operation of the work  
            sharing program.  According to the author, EDD provided the  
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            language to the Committee based on its review of model  
            language provided by the U.S. Department of Labor (USDOL).   
            EDD recognizes that this bill is necessary to retain the work  
            sharing program in California, and it also allows California  
            to qualify for an additional six months of reimbursement by  
            the federal government for work sharing benefits.



          3.  Proponent Arguments  :
            
            According to the author, this bill addresses federal  
            conformity requirements that are necessary for the continued  
            operation of California's work sharing program, and it allows  
            California to qualify for an additional six months of  
            reimbursement by the federal government for work sharing  
            benefits.

          4.  Opponent Arguments  :

            None received 

          5.  Prior Legislation  :

            SB 1472 (Leno) of 2010:Vetoed by the Governor  
            SB 1472 would have required the EDD to develop and implement  
            an outreach plan designed to inform employers in California  
            about the Shared Work program.  In his veto message, Governor  
            Schwarzenegger stated that, "This program has already  
            experienced a significant increase in participation by  
            California employers as a means to retain an experienced  
            workforce during this severe recession.  Therefore, this bill  
            is unnecessary at this time." 



                                       SUPPORT
          
          Employment Development Department  
          

                                     OPPOSITION
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          Consultant: Alma Perez                                   Page 5

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          None received 







































          Hearing Date:  June 12, 2013                             AB 1392  
          Consultant: Alma Perez                                   Page 6

          Senate Committee on Labor and Industrial Relations