BILL ANALYSIS �
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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Senate Committee on Labor and Industrial Relations
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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Senate Committee on Labor and Industrial Relations
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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Senate Committee on Labor and Industrial Relations
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
Hearing Date: June 12, 2013 AB 1392
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations
None received
Hearing Date: June 12, 2013 AB 1392
Consultant: Alma Perez Page 6
Senate Committee on Labor and Industrial Relations