AB 1731 Offers Much-Needed Reforms to California’s Work Sharing Program

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Signed into law on September 28, 2020, AB 1731 moves California’s work sharing program into the 21st century by mandating an online application process and specific deadlines for delivering claim forms. Work sharing is an unemployment insurance (UI) benefit program that gives employers the option of reducing employee hours during an economic downturn in lieu of layoffs. The employee receives a prorated UI benefit to replace the loss in wages.

Many economists believe that work sharing offers better options than layoffs. Participating employers get to keep trained employees and can recover more quickly when business financial conditions improve. Work sharing also avoids the costs associated with recruiting, hiring, and training new employees after layoffs. Employees get a prorated UI benefit and continued health and retirement benefits without having to look for other work.

AB 1731 highlights the sobering fact that over 40 million Americans have applied for UI benefits since the coronavirus pandemic began. Like most state UI agencies, California’s Employment Development Department (EDD) has been overwhelmed with the number of claims filed due to COVID-19. Recently, Governor Newsom issued a two-week reset to give the EDD an opportunity to catch up on what he has described as an “unacceptable” backlog of UI claims. According to the EDD strike team, manual processing and outdated technology are largely to blame for the delays.  

The main drawback to California’s work sharing program has been the outdated manual process for applying and submitting claims. Until recently, the only way to apply for work sharing was to complete a paper form and send it to EDD by U.S. mail. By law, EDD is supposed to approve or deny a work sharing application within 10 working days of receipt, but many employers reported significantly longer wait times after the pandemic started in March of this year. Employers also complained of further delays caused by EDD’s failure to deliver the required claims forms in paper, which were unavailable online.

AB 1731 outlines a number of positive reforms to address these issues. First, the law requires the EDD to create an online portal for submitting work sharing applications. Second, all work sharing applications submitted between September 15, 2020 and September 1, 2023 are approved for one year unless a shorter period is requested. Third, the EDD must mail claim packets to an eligible employer for each participating employee within five business days following approval of a work sharing application. For employers that submit a work sharing application online, EDD must make online claim forms available to the approved employer for each participating employee within five business days following approval of the application.1

Further, this new law gives the EDD the option to collaborate with the governor’s Office of Business and Economic Development in the California Infrastructure and Economic Development Bank to develop and implement strategic outreach to increase employer participation in the work sharing program and to provide information to employers about their ability to rehire former employees, based on federal guidance.2

AB 1731 benefits both employees and employers, making changes that will decrease the administrative burdens on employers and help reduce the time it takes to submit a claim.  While the law moves in the right direction, many in the business community have asserted that more can be done, including updating EDD publications and FAQs to make it easier for employers and employees to understand the program requirements and application process from the outset. In addition, a fully automated online claims certification and submission process seems to be a logical next step.  Finally, while the new “five business day deadlines” are an improvement, there are no stated consequences if EDD fails to comply. Since March, many employers that submitted applications did not receive timely notice of approval or denial from EDD in 10 working days as required by law.3 Work sharing can be an effective tool to prevent layoffs, but only if employers can obtain approval, employees can submit claims, and EDD can deliver benefits in a reasonable amount of time.

 

Footnotes

1 See UI Code § 1279.7.

2 See Cal. UI Code § 1279.6.

3 See Cal. UI Code § 1279.5(d).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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