BILL ANALYSIS
AB 2030
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2030 (Yamada) - As Amended: April 12, 2010
SUBJECT : Unemployment: Self-Employment Assistance Program
SUMMARY : Establishes the Self-Employment Assistance Program to
enable unemployed people to engage in self employment
preparation activities on a full-time basis while receiving
unemployment insurance (UI) benefits. Specifically, this bill :
1)Establishes the Self-Employment Assistance Program (SEA
Program) in which unemployed people approved under the terms
of this bill would become enabled to engage in self-employment
assistance activities on a full-time basis that will lead to
establishing a business and becoming self-employed.
2)Defines "self-employment assistance activities" as activities
approved by the Director of the Employment Development
Department (EDD) in which an individual, identified through a
worker profiling system as likely to exhaust UI benefits,
participates for the purpose of establishing a business and
becoming self-employed. These shall include entrepreneurial
training, business counseling, and technical assistance.
3)Requires that the weekly allowance payable to people
participating in self-employment activities be equal to the
weekly benefit amount for regular unemployment insurance (UI)
benefits.
4)Requires the weekly allowance payable to people participating
in self-employment activities be payable on the same terms and
intervals as regular UI benefits, except as follows:
a) The requirements regarding availability for work, active
search for work, and refusal to accept work shall not apply
to any week that the individual is in training or engaged
in self-employment activities as authorized by this bill.
b) Income earned by a person while engaged in
self-employment assistance activities shall not be
construed to be wages or compensation for personal
services, and UI benefits shall not be denied or reduced
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because of those payments.
c) A person who fails to participate in self-employment
assistance activities or who fails to actively engage on a
full-time basis in activities, which may include training,
regarding the establishment of a business and becoming
self-employed shall be disqualified for the week the
failure occurs.
5)Specifies that a person is eligible to be paid a
self-employment assistance allowance if he or she meets all of
the following conditions:
a) Is eligible to receive regular UI benefits;
b) Has been identified pursuant to an automated profiling
system as likely to exhaust regular UI benefits;
c) Has been approved for participation in the
Self-Employment Assistance Program by the Director of EDD;
and
d) Is engaged on a full-time basis in self-employment
assistance activities which may include entrepreneurial
training, business counseling, and technical assistance
related to establishing a business and becoming
self-employed.
6)Limits the aggregate number of individuals receiving the self
employment assistance allowance at any time to 5 percent of
the number of people receiving UI benefits.
7)Requires the self-employment assistance allowances to be
charged to employers as currently charged for UI benefits.
8)Provides that the costs of administering the self-employment
assistance allowances shall be payable from grants received by
EDD for administration of the UI Program under federal law,
and the costs of providing self-employment assistance
activities such as business training, business counseling,
and technical assistance shall be payable from federal
Workforce Investment Act (WIA) and other federal grants.
9)Prohibits an individual from participating in the
Self-Employment Assistance Program if his or her prior
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employer is the primary user of the new business services.
10)Prohibits employers from coercing any employee into
participating in the Self-Employment Assistance Program.
11)Requires the EDD Director to review the implementation of
this bill and provide a summary of its operation and
effectiveness to the Assembly Insurance Committee and the
Senate Labor and Industrial Relations Committee by the end of
2016.
12)Sunsets the Self-Employment Assistance Program on January 1,
2017.
EXISTING LAW :
1)Makes a legislative finding that the traditional system of
unemployment compensation is primarily designed to provide
income support for workers who are temporarily laid off or
expect to be unemployed for only a short time.
2)Declares that increasing numbers of workers are losing their
jobs permanently due to rapid technological change,
elimination of trade barriers, and similar causes. These
workers need additional tools besides the basic income
maintenance provided by the unemployment compensation system
in order to reenter the workforce. For some of these workers,
access to a self-employment program would be the best path for
them to do so.
3)States that it is the purpose of this law to authorize the
payment of unemployment compensation benefits, and to provide
appropriate training and support services for eligible
dislocated workers who wish to become self-employed in their
transition back into the workforce.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . The purpose of this bill is to conform to federal
law and establish a Self Employment Assistance Program to help
unemployment compensation claimants start a business.
2)Background . The unemployment insurance (UI) program is a
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federal-state partnership in which the outline of the program
is based on federal law but most of the specifics are
contained in state law. Federal law sets broad coverage
provisions, some benefit provisions, the federal tax rate, and
administrative requirements. State laws establish the benefit
structure, including eligibility and disqualification
provisions, benefit amounts, and the state tax structure.
The author states that a provision of the federal North-Atlantic
Free Trade Agreement (NAFTA) gives states the option to
establish a Self Employment Assistance (SEA) Program to allow
UI claimants to collect a SEA allowance and receive training
and support services necessary for dislocated workers to start
a business. To exercise this option, a state must enact
conforming legislation. Federal law limits participation in
this program to 5 percent of the total number of people
receiving regular UI benefits. Federal law provides that the
costs of administering the SEA allowances are payable from
grants received to administer the UI Program from the federal
government. The author also states that federal law
establishes various eligibility requirements on individuals
including: being eligible to receive regular UI benefits,
being identified pursuant to a profiling system as likely to
exhaust their UI benefits, participating in self employment
assistance activities which are approved by the state agency,
and being actively engaged on a full-time basis in activities
relating to the establishment of a business and becoming self
employed.
This bill limits the aggregate number of individuals receiving
the self employment assistance allowance at any time to 5
percent of the number of people receiving UI benefits. At the
present time, that would be 37,500 people (5% of 750,000
people receive regular UI benefits). Individuals who have
exhausted their regular UI benefits are ineligible for SEA
allowances.
3)Arguments in Support . The California Association for Micro
Enterprise Opportunity (CAMEO) states this bill promotes self
employment and direct job creation by establishing a self
employment assistance program as component of the state's
unemployment insurance program. CAMEO states that the self
employment assistance program has been pioneered in 17
European countries and proven to be a successful reemployment
option in seven American states. By allowing UI claimants to
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start small businesses, this measure will enhance California's
economic climate through the direct creation of new jobs, will
reduce the number of people who are unemployed, and convert
tax receivers to taxpayers.
4)Arguments in Opposition . The California Chamber of Commerce
states this bill will cost the Unemployment Fund a significant
amount of money at a time when that fund is insolvent. The
Chamber states that this bill does not have adequate controls
on who would be able to take advantage of the program. It
mandates costs to EDD to implement the program but the prior
instance this program was enacted, during the 1990's, the
program did not work.
5)Previous Legislation . SB 1482 (Watson), Chapter 1116,
Statutes of 1994, authorized the establishment of the
Self-Employment Assistance Program in 1994. This program
sunset in December of 1988.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association for Micro Enterprise Opportunity
Opposition
California Chamber of Commerce
California Manufacturers and Technology Association
California Framing Contractors Association
California Retailers Association
The Engineering Contractors' Association
The Marin Builders Association
The California Fence Contractors' Association
The Flasher/Barricade Association
The California Chapter of the American Fence Association
Western Growers
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086