BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: March 24, 2010 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: SB 1472
Author: Leno
Version: February 19, 2010
SUBJECT
Unemployment insurance: shared work.
KEY ISSUE
When facing a potential layoff, are employers in California
adequately informed of their options for assistance available
through the Employment Development Department?
PURPOSE
To require EDD to develop and implement an outreach plan to
inform employers in California of the Shared Work program.
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. California's Work
Sharing program was created in 1978 and was the first program of
its kind in the nation. This program allows for the payment of
benefits to individuals whose normal weekly hours of work for
the regular employer are reduced, in lieu of layoff, and which
result in a reduction in wages of at least 10 percent.
Employers seeking approval to participate in the Work Sharing
program must have a minimum of two employees, comprising at
least 10 percent of the employer's regular workforce or a unit
of the workforce, that will be affected by a reduction in wages
and hours worked.
Existing law requires the application from an employer for
approval of participation in the program to include a brief
description of the circumstances requiring the use of work
sharing to avoid layoff. A plan approved by the director of EDD
shall expire six months after the effective date of the plan.
EDD is authorized to terminate a shared work plan for good cause
if the plan is not being carried out according to its terms and
intent.
This Bill would require the Employment Development Department to
develop and implement an outreach plan designed to provide
information and inform employers in California of the Shared
Work program.
Specifically, this bill would require EDD, as part of its
outreach plan, to:
Outreach to statewide and local chambers of commerce,
employer advisory councils, and small business advisory
councils;
Collect and compile data on the effectiveness of the
shared work program in reducing the state's total
expenditures on unemployment insurance and shall target its
outreach efforts based on the results of that data;
Not later than June 30, 2011, prepare and submit to the
Legislature a report analyzing the data compiled and
evaluating the effectiveness of the outreach plan;
Lastly, this bill would require EDD to use existing funds and
personnel to implement the provisions of this bill.
Hearing Date: March 24, 2010 SB 1472
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. Need for this bill?
According to EDD, in calendar year 2009, there were 6,400
employers who participated in the Work Sharing program. Also
in 2009, EDD filed 219,580 Work Sharing claims and processed
1.9 million weekly claims for benefits. This was a
significant increase when compared to previous years. In
2008, EDD filed 80,402 Work Sharing claims and processed
505,543 weekly claims for benefits. In 2007, EDD filed 45,276
Work Sharing claims and processed 302,109 weekly claims for
benefits.
In January of this year, EDD had 619 employers sign up or
renew their six month plan for participation in the Work
Sharing program. In February, EDD had 831 employers sign up
or renew their plans for the Work Sharing program. The Work
Share program is a temporary and practical alternative to
layoffs. With our unemployment rate currently at record
highs, for some employers participating in such a program can
mean surviving the crisis. 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. This
bill is necessary to develop and implement an outreach plan
that will distribute the necessary information on this program
for employers throughout the state.
2. Similar Efforts in other States :
States throughout the country are struggling during this
economic downturn and efforts to assist businesses to survive
have been widely sought. Seventeen states in the country have
similar Work Sharing programs tied to their unemployment
insurance system which encourage employers to reduce workers'
hours in lieu of lay offs. According to the Center for
Economic and Policy Research, the work-sharing programs in
these seventeen states have saved an estimated 300,000 jobs.
Hearing Date: March 24, 2010 SB 1472
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
In the state of New York, in the year 2008, 462 employers
statewide participated in the Shared Work program, up from 291
in 2007. This translates to 14,775 employees enrolled in
Shared Work in 2008, up from 10,300 in 2007.
Several states, including Colorado, Hawaii, Ohio, Oklahoma,
New Hampshire, New Jersey and Pennsylvania, have introduced
legislation this year to create similar work-share programs.
In addition, there are bills before Congress that would
provide funding to expand work-sharing in the states that
already have it and to provide start-up money in the states
that do not.
3. Proponent Arguments :
According to proponents, as California's small businesses
continue to face the most significant economic recession in
more than 50 years, they are often forced to make the
difficult decision to layoff valued employees as a last resort
when faced with expenses that exceed revenue. Proponents
argue that laying off employees in a recession, while
necessary at the time, creates a potential delay in a
business' recovery when product demand returns as the employer
hires and trains new employees. Therefore, proponents believe
that the EDD needs a more aggressive outreach plan for the
existing California Work Share program and needs to establish
a data collection process for accurate tracking and reporting.
In addition, proponents argue that through this program,
employers can retain highly trained employees, workers are
assisted financially, and the costs to the UI fund are reduced
when a worker is not relying entirely upon unemployment
benefits. According to proponents, after the state of New
York heavily marketed a version of this program last year,
businesses using Shared Work increased 557 percent and a
greater number of workers needed only partial unemployment
benefits. Proponents believe that expanding the use of
work-share in California could help stop the state's
skyrocketing unemployment rates and ease economic hardship for
thousands of workers.
Hearing Date: March 24, 2010 SB 1472
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations
4. Opponent Arguments :
None received to date.
SUPPORT
California Labor Federation, AFL-CIO
National Federation of Independent Business
OPPOSITION
None received to date.
Hearing Date: March 24, 2010 SB 1472
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations