BILL ANALYSIS Ó SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS Senator Tony Mendoza, Chair 2015 - 2016 Regular Bill No: AB 2197 Hearing Date: June 22, 2016 ----------------------------------------------------------------- |Author: |Cristina Garcia | |-----------+-----------------------------------------------------| |Version: |May 31, 2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Gideon L. Baum | | | | ----------------------------------------------------------------- Subject: Unemployment insurance: classified employees KEY ISSUE Should the Legislature permit classified school employees to be eligible to collect unemployment insurance (UI) benefits between school years with or without a reasonable assurance of being employed in the next academic year? ANALYSIS Existing law: 1) Vests the Employment Development Department (EDD) with the responsibility of ensuring employers remit appropriate Unemployment Insurance (UI) contributions and to collect the employee wage deductions to the Disability Fund. EDD uses these funds to finance the Unemployment Insurance and Disability Insurance (DI) Programs. (Unemployment Insurance Code §§ 301, 976, 984, 1025-1037, 1555-1562, & 3001-3015) 2) Prohibits employees of public and private non-profit educational institutions from collecting UI benefits between academic years if they have been given reasonable AB 2197 (Cristina Garcia) Page 2 of ? assurance by the employer of being employed in the next academic term. (Unemployment Insurance Code §1253.3) 3) Permits non-professional employees of public and non-profit educational institutions to collect UI benefits retroactively should they not be employed in the next academic term after receiving reasonable assurance of future employment. (Unemployment Insurance Code §1253.3) 4) Requires employers to provide documentation of the reasonable assurance when that notice is given. (Unemployment Insurance Code §1253.3) This bill would allow employees of a public school who are not teachers, researchers, or administrators to be eligible for unemployment insurance benefits in the period between two academic years on the following schedule: 1) Two weeks of benefits during 2017, beginning July 1, provided that funds are appropriated for that purpose in the annual Budget Act. 2) Four weeks of benefits during 2018, beginning July 1, provided that funds are appropriated for that purpose in the annual Budget Act. 3) Six weeks of benefits during 2019, beginning July 1, provided that funds are appropriated for that purpose in the annual Budget Act. 4) Eight weeks of benefits during 2020, and each year thereafter, beginning July 1, provided that funds are appropriated for that purpose in the annual Budget Act. COMMENTS 1. Need for this bill? The sponsor notes that, while classified employees do the essential work our public schools up and running, classified employees are not permitted to collect UI benefits during the summer recess. This places significant hardship on the AB 2197 (Cristina Garcia) Page 3 of ? classified employee and his or her family, and it requires the classified employee finds short-term employment for the summer recess. However, the sponsor argues that classified school employees are often unable to find work during the summer because employers are reluctant to hire and invest in a short-term employee. Additionally, the sponsor argues that a classified school employee's only real option for summer employment is a job with a summer school program, but those jobs are scarce. AB 2197 would address this by allowing classified employees to collect UI benefits through a stepped schedule that would begin in 2017 and top out in 2020. 2. "Reasonable Assurance" and Unemployment Insurance: In Ross v. CUIAB (1981), 178 Cal. Rptr. 421, the Court of Appeals defined "reasonable assurance" as "an agreement which contemplated the re-employment of the affected school employee but which he or she could not enforce." This concept has been concretized in statute and regulation, and statute also requires that a notice of reasonable assurance be in writing. Once an educational district gives a worker a notice of reasonable assurance, that worker cannot request unemployment insurance unless they are not employed in the following year as the notice of reasonable assurance assured. In the case of a tenured teacher, he or she would likely have an option through the governing collective bargaining agreement (CBA) to have his or her wages extended through the summer recess. In the case of classified employees, however, this is not the case, as many are paid hourly, rather than on a salary. Additionally, in some cases such an extension of wages through the summer recess could push wages below the minimum wage, violating existing wage and hour law. 3. School Employees Fund (SEF): From the Assembly Insurance Analysis: "This bill would likely have relatively minor impact to the AB 2197 (Cristina Garcia) Page 4 of ? Unemployment Insurance Trust Fund (trust fund) that pays for most UI benefits because public K-12 school districts and community colleges commonly elect to participate in the School Employees Fund (SEF) in lieu of paying payroll taxes. The SEF is a special reimbursable financing method administered by the Employment Development Department which collects contributions based upon a percentage of total wages paid by public schools and community college districts. Money deposited in the SEF is used to reimburse the trust fund for the cost of benefits paid to former employees. All 72 community college districts and 1,298 county offices of education, public school districts, and charter schools participate in the SEF. The SEF had fund balance of over $582 million at the end of the 2014-15 fiscal year. The costs of paying for these additional benefits from this bill will be borne by the SEF, and the SEF costs will have to be passed on to the participating schools." 3. Proponent Arguments : The proponents argue that classified employees keep our campuses safe, clean, and efficient. Most importantly, they strive to improve the daily lives of our students. Despite the important and hard work of classified school employees, many struggle to support their families with incomes that are often inadequate to pay for food, housing, and health care. And while certified school employees, such as administrators, teachers, librarians, and nurses, earn middle class incomes and benefits that can last through the summer breaks, classified school employees do not. Yet classified school employees are often unable to find work during the summer because employers are reluctant to hire and invest in a short-term employee. AB 2197 removes this serious financial hardship by making classified employees eligible for unemployment insurance benefits during the summer recess. 4. Opponent Arguments : Opponents argue that, despite its phased-in approach, AB 2197 would result in a significant fiscal impact on school districts. Specifically, opponents note that district unemployment accounts are funded through a combination of payroll taxes and quarterly local experience charges. By expanding unemployment insurance (UI) benefit eligibility, AB 2197 would result in decreased School Employers Fund balances, AB 2197 (Cristina Garcia) Page 5 of ? increased local experience charges, and increases in the unemployment insurance payroll tax rate. Opponents also note that districts are not reimbursed for unemployment insurance expenses as they had been in the past, leaving them to absorb the increased costs associated with the requirements of AB 2197. Opponents therefore argue that, noting there is no budget appropriation in this year's budget, they must oppose AB 2197. 5. Prior Legislation : AB 399 (Ridley-Thomas) (2015) was nearly identical to this bill. AB 399 was held on the Assembly Appropriations Committee Suspense File. SUPPORT American Federation of State, County and Municipal Employees, AFL-CIO California School Employees Association OPPOSITION California Association of School Business Officials Orange County Department of Education Riverside County Superintendent of Schools Small School Districts' Association -- END --