BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Senator Ben Hueso, Chair
Date of Hearing: June 11, 2014 2013-2014 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 2362
Author: Grove
As Introduced/Amended: April 21, 2014
SUBJECT
Unemployment insurance benefits: disqualifications: convictions.
KEY ISSUE
Should the Legislature suspend a recipient's unemployment or
disability insurance benefits if the recipient is charged with
forgery, grand theft, fraudulent insurance claim, or mail fraud?
ANALYSIS
Existing law 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)
Existing law makes it a violation of the law to willfully make a
false statement or representation, to knowingly fail to disclose
a material fact, or to use a false name, false social security
number, or other false identification to obtain, increase,
reduce, or defeat any unemployment insurance or disability
insurance benefit or payment, whether for the maker or for any
other person. (Unemployment Insurance Code �2101)
Existing law provides that a false statement or representation
to obtain, increase, reduce, or defeat any unemployment
insurance or disability insurance benefit or payment is
punishable by imprisonment in the county jail not to exceed one
year, or in the state prison, or by a fine of not more than
twenty thousand dollars ($20,000), or by both the fine and
imprisonment, at the discretion of the court. (Unemployment
Insurance Code �2122)
Existing law also provides that:
1) Anyone convicted of making a false statement or
representation to obtain, increase, reduce, or defeat any
unemployment insurance or disability insurance benefit or
payment be ineligible for unemployment insurance benefits
for one year, including applicable federal extensions of
benefits; and
2) Upon the filing of a criminal complaint, EDD must
suspend the payment of benefits or payments to the charged
individual.
(Unemployment Insurance Code �1263)
Existing law provides that every person who, with the intent to
defraud, knowing that he or she has no authority to do so, signs
the name of another person or of a fictitious person to a
request for payment of money is guilty of forgery. (Penal Code
�470)
Existing law provides that any individual who steals more than
$950 in money, labor, or personal property, or steals an
automobile or a firearm, is guilty of grand theft. (Penal Code
�487)
Existing law provides that it is unlawful to knowingly prepare,
make, or subscribe any writing, with the intent to present or
use it, or to allow it to be presented, in support of any false
or fraudulent insurance claim or to aid, abet, solicit, or
conspire with any person to make such a false claim. (Penal
Code �550)
Existing federal law provides that anyone who devises or intends
to devise any scheme or artifice to defraud, or for obtaining
money or property by means of false or fraudulent pretenses,
and, for the purpose of executing such scheme or attempting so
Hearing Date: June 11, 2014 AB 2362
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Senate Committee on Labor and Industrial Relations
to do, uses the federal mail system is guilty of mail fraud.
(18 U.S.C. �1341)
This bill would require that individuals convicted of forgery,
grand theft, fraudulent insurance claim, or mail fraud to
obtain, increase, reduce, or defeat any unemployment insurance
or disability insurance benefit or payment would be ineligible
for unemployment or disability insurance benefits for one year,
including applicable federal extensions of benefits.
This bill would also suspend the payment of unemployment
insurance or disability insurance benefits upon being charged
with forgery, grand theft, fraudulent insurance claim, or mail
fraud, irrespective of if the crimes were committed in the
collection of unemployment insurance benefits.
This bill would require court of this state to report any
forgery, grand theft, fraudulent insurance claim, or mail fraud
convictions willfully making a false statement or knowingly
failing to disclose a material fact to obtain or increase any
benefit or payment under this division to the department.
COMMENTS
1. Need for this bill?
Unemployment Insurance Code Section 2101 specifies that
utilizing deception to receive unemployment insurance or
disability insurance benefits is illegal. With a penalty of a
year in prison or jail, as well as a possible a $20,000 fine,
such a violation comes with serious penalties. However, some
District Attorneys are pursuing more stringent penalties found
in Penal Code: for example, grand theft penalties can run as
high as 3 years in prison.
Since Penal Code sections are not included in the relevant
Unemployment Insurance Code sections, EDD cannot suspend
disputed unemployment insurance or disability insurance
benefits. Nor, in the event of a conviction, can EDD bar an
individual so convicted of receiving benefits for a year, as
can be done with a violation of Unemployment Insurance Code
Hearing Date: June 11, 2014 AB 2362
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Senate Committee on Labor and Industrial Relations
Section 2101. AB 2362 addresses this discrepancy by requiring
individuals convicted of the above-discussed Penal Code
sections would also be ineligible for unemployment or
disability insurance benefits.
2. Areas of Concern with AB 2362:
AB 2362, however, goes beyond addressing a discrepancy between
Unemployment Insurance Code and Penal Code. In both scope and
implementation, AB 2362 poses significant challenges for EDD
and the California courts which the Committee may wish to
consider. These will be discussed below.
Suspension of Benefits Upon the Filing of Criminal Charges
Under existing law, benefits can be suspended prior to
conviction, but only in cases where someone has been
specifically charged with unemployment or disability insurance
fraud. Under AB 2362, someone charged with a crime unrelated
to unemployment insurance fraud can have his or her benefits
suspended . Such a suspension could be triggered through being
charged and not convicted of crimes, including auto theft,
theft of agricultural goods, or being viewed by the police or
a prosecutor as aiding in a fraudulent activity.
While, in the long run, the suspended benefits would
eventually be paid if the charges were dropped, the severe
economic impacts of losing benefits for struggling working
class Californians would be visited on the recipient in the
short-term: loss of a home, families being split up, and
significant stress and turmoil. As these consequences would
be visited on unemployment and disability insurance recipients
for being charged for crimes unrelated to their benefits, and
for crimes the recipient may or may not have committed, it is
further unclear what public policy goal is being achieved.
The Committee may wish to consider the purpose and efficacy of
such a policy.
California Court Reporting on Fraud Convictions
AB 2362 requires the California Court system to report any
forgery, grand theft, or fraudulent insurance claim
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Senate Committee on Labor and Industrial Relations
convictions to the EDD related to benefit fraud. However, it
is unclear how and in what form the California Court system
would make such a report. What safeguards would be in place
to ensure that benefits would not be accidentally halted?
What appeals process would be in place to ensure, should a
recipient's benefits be inappropriately halted, that the
mistake could be corrected? The Committee may wish to
consider if such a rule should be created in statue prior to
the creation of internal reporting processes between EDD and
the California Court system.
AB 2362 and EDD Resources
AB 2362 comes to the Committee at a time of serious evolution
at EDD. After a long vacancy, EDD has a director who has been
charged by the Governor with the tasking of leading EDD
forward. Additionally, additional resources have been
directed to EDD in order to speed up the processes of
unemployment insurance claims and increasing the phone
response rates. At a time when EDD's greatest challenges are
due to Californians not receiving benefits, rather than
inappropriately receiving benefits, the Committee may wish to
consider if AB 2362 is the most suitable use of EDD's
resources.
3. Estimates of Impacted Recipients by AB 2362:
As was discussed above, AB 2362 has the potential to impact a
large number of Californians. Committee staff was unable to
ascertain the population of unemployment or disability
insurance recipients who are charged with Penal Code
violations unrelated to unemployment or disability insurance
fraud. Noting that theft is a commonly charged crime, the
impacted population could be significant.
EDD was able to provide numbers to the Committee on the number
of individuals who are currently charged with unemployment
insurance fraud but not prosecuted under Unemployment
Insurance Code Section 2101. From January 1, 2009 to December
31, 2013, 277 complaints were filed, leading to the conviction
of 228 individuals of unemployment insurance fraud. During
this period, 49 individuals were convicted of unemployment
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Senate Committee on Labor and Industrial Relations
insurance fraud but were not required to forfeit benefits due
to the use of Penal Code, rather than Unemployment Insurance
Code Section 2101.
However, unrelated to the cases listed above, there were
several significant fraud cases that are being prosecuted by
the United States Attorney under federal criminal statutes.
These cases involve fraud in excess of $3 million. There are
506 individuals in this category.
Assuming these numbers are representative of long term trends,
AB 2362's conviction requirements will impact approximately
550-600 individuals over a four year period.
4. Proponent Arguments :
Proponents argue AB 2362 will bring greater consistency to the
Unemployment Insurance system, as well as take a strong stand
against UI fraud. Specifically, proponents note that, under
existing law, applicants who engage in UI fraud and are
charged and convicted under Unemployment Insurance Code
statutes will forfeit their benefits. However, for the same
fraud, applicants charged under Penal Code do not have their
benefit suspended or forfeited. Proponents believe that AB
2362 would address this by allowing benefits to be suspended
or forfeited if an applicant is charged under Penal Code.
5. Opponent Arguments :
None on file.
6. Prior Legislation :
AB 908 (Bonilla), Statutes of 2013, Chapter 553, allows EDD to
share specified information with the Department of Motor
Vehicles (DMV) in order to assist identity theft
investigations.
7. Double Referral to Senate Committee on Public Safety:
If AB 2362 is passed by this Committee, this bill will then be
referred to the Senate Committee on Public Safety.
Hearing Date: June 11, 2014 AB 2362
Consultant: Gideon L. Baum Page 6
Senate Committee on Labor and Industrial Relations
SUPPORT
Associated Builders and Contractors of California
California Chamber of Commerce
California Farm Bureau Federation
California Manufacturers and Technology Association
California Retail Association
California Taxpayers Association
National Federation of Independent Business
OPPOSITION
None on file.
Hearing Date: June 11, 2014 AB 2362
Consultant: Gideon L. Baum Page 7
Senate Committee on Labor and Industrial Relations