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Employment Law Blog

Friday, February 06, 2009

California EDD Overwhelmed, Short of Funds As Unemployment Reaches 9.3%

As the unemployment rate in California increased to 9.3% statewide in December 2008, the state agency responsible for administering unemployment benefits, the Economic Development Department (EDD) is overwhelmed. It has a significant case backlog and has drained the unemployment insurance fund.

As reported in the L.A. Times, “the state is paying out $30 million to $34 million a day in benefits. During the week of Jan. 5, its balance fell from about $500 million to $270 million.”

In December, reports the Times, California issued $1.1 billion in assistance checks to 429,000 claimants. Unemployed workers are eligible for payments of as much as $450 a week for up to 59 weeks.

According to the EDD, the UI Fund is projected to be in a deficit of $2.4 billion by the end of 2009. The UI Fund is projected to be in a deficit of $4.9 billion by the end of 2010 if changes are not made to the financing structure. The governor and legislature have been discussing increasing employers’ payroll tax contributions. This of course would not be good news for businesses already hit hard by the recession.

When the fund is depleted, the state will be forced to turn to the federal government for loans.

Meanwhile the EDD is overwhelmed by the volume of claims. “Millions of calls to state unemployment insurance processing centers continue to go unanswered,” reports the L.A. Times. “A 30-year-old computer system is overloaded, and stressed clerks are swamped by backlogged applications.”

The backlog is becoming a crisis, reports the L.A. Times. “Although the Unemployment Insurance Appeals Board is supposed to decide within 30 days whether the state wrongly denied an individual’s jobless benefits, less than 4% of complaints are finished by then, the U.S. Department of Labor says.”

In all, a record 68,135 appeals filed by out-of-work people and employers were awaiting action by the board as of Jan. 23.

“California takes longer to resolve unemployment appeals than any other state except Virginia, according to Labor Department data, and the federal government has demanded that the state come up with a plan to fix the mess this month.”

Governor Schwarzenegger’s plan to require state workers to take a two day work furlough each month is expected to exacerbate the problem.

Despite the backlog, employers should continue to promptly review employee claims to determine whether an application should be challenged, and if necessary, an award appealed. An employer has the right to appeal EDD’s decision to pay a claimant. An appeal must be submitted within 20 calendar days of the mailing date of the EDD’s Notice of Determination and/or Ruling.

Submitted by:
Christopher W. Olmsted
Barker Olmsted & Barnier, APLC

Posted by Christopher W. Olmsted on 02/06 at 01:32 AM
California Employment LawEmployment Law