Existing law requires the Employment Development Department to implement and administer the unemployment insurance program in this state and provides for the payment of unemployment compensation benefits to eligible individuals who are unemployed through no fault of their own. Existing law makes it a violation to, among other things, willfully make a false statement or representation to obtain, increase, reduce, or defeat any benefit or payment under the specified provisions administered by the department. Existing law requires that the place of trial for specified violations of unemployment insurance laws be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses. Existing law requires the trial to be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

This bill would additionally require that the place of the trial be in any county where any money or property from the alleged offenses was obtained, and would require that the place of the trial be in the County of Sacramento if no other prescribed counties are applicable. The bill would delete the requirement that the trial be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

Existing law requires the Employment Development Department to implement and administer the unemployment insurance program in this state and provides for the payment of unemployment compensation benefits to eligible individuals who are unemployed through no fault of their own. Existing law makes it a violation to, among other things, willfully make a false statement or representation to obtain, increase, reduce, or defeat any benefit or payment under the specified provisions administered by the department. Existing law requires that the place of trial for specified violations of unemployment insurance laws be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses. Existing law requires the trial to be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

This bill would additionally require that the place of the trial be in any county where any money or property from the alleged offenses was obtained, and would require that the place of the trial be in the County of Sacramento if no other prescribed counties are applicable. The bill would delete the requirement that the trial be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

Existing law requires the Employment Development Department to implement and administer the unemployment insurance program in this state and provides for the payment of unemployment compensation benefits to eligible individuals who are unemployed through no fault of their own. Existing law makes it a violation to, among other things, willfully make a false statement or representation to obtain, increase, reduce, or defeat any benefit or payment under the specified provisions administered by the department. Existing law requires that the place of trial for specified violations of unemployment insurance laws be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses. Existing law requires the trial to be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

This bill would additionally require that the place of the trial be in any county where any money or property from the alleged offenses was obtained, and would require that the place of the trial be in the County of Sacramento if no other prescribed counties are applicable. The bill would delete the requirement that the trial be held in the County of Sacramento if the defendant has no residence or principal place of business in this state.

 CONSENT  

Bill No: AB 2227

Author: Hoover (R)

Introduced: 2/7/24

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 6/5/24

AYES: Smallwood-Cuevas, Wilk, Cortese, Durazo, Laird

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 75-0, 4/25/24 (Consent) - See last page for vote

SUBJECT: Unemployment insurance: violations

SOURCE: Conference of California Bar Associations

DIGEST:

This bill revises existing Unemployment Insurance (UI) provisions regarding the place of trial for violations to allow fraud cases to be prosecuted in the county where any money or property from the alleged offence was obtained.

ANALYSIS:

Existing law:

1. Creates a comprehensive Unemployment Insurance (UI) system, administered by the Employment Development Department (EDD), where employers pay an experienced-based tax on total payroll that are used to fund UI benefits to unemployed workers. (UI Code §§ 301, 602, 675, 926, 970, 977 & 1251)
2. Defines a worker as “unemployed” in any week in which they meet any of the following:
3. Any week during which they perform no services and with respect to which no wages are payable to them;
4. Any week of less than full-time work, if the wages payable to them with respect to the week, when reduced by $25 or 25 percent of the wages payable, whichever is greater, do not equal or exceed the worker’s weekly benefit amount;
5. Any week for which a worker is unable to work due to mental or physical health illness or injury, as specified; or,
6. Any week during which they perform full-time work for five days as a juror, or as a witness under subpoena. (UI Code § 1252)
7. Provides that an individual is disqualified for UI benefits if the individual left their most recent work voluntarily without good cause or that they have been discharged for misconduct connected with their most recent work. (UI Code § 1256)
8. Specifies that it is a violation of UI provisions 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 benefit or payment, whether for the maker or for any other person, under any of the following statutes administered by the department:
   1. The provisions of UI benefits under California law.
   2. The provisions of any unemployment insurance law of the federal government.
   3. The provisions of any training allowance law of the federal government.
   4. The provisions of any trade readjustment allowance law of the federal government.
   5. The provisions of any other allowance law of the federal government. (UI Code §2101)
9. Excepts, as specified, a violation of UI provisions 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. (UI Code § 2122)
10. Specifies that the place of trial for UI offenses shall be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses, except that if the defendant has no residence or principal place of business in this state, the trial shall be held in the County of Sacramento. (UI Code §2124)
11. Requires EDD to report to the Assembly Committee on Insurance, Assembly Committee on Labor and Employment, and the Senate Committee on Labor, Public Employment and Retirement by June 30 of each year on EDD’s fraud deterrence and detection activities. (UI Code §2614)

This bill:

1. Expands on existing Unemployment Insurance (UI) provisions regarding the place of trial for violations to allow fraud cases to be prosecuted in the county where any money or property from the alleged offence was obtained.
2. Deletes a provision specifying that defendants that have no residence or principal place of business in this state must be tried in the County of Sacramento, thereby allowing prosecutors to take on cases with defendants outside of California in their jurisdictions.

Background

1. Unemployment Insurance Program. Created as part of the Social Security Act of 1935, the UI program is a unique federal-state program, created by federal law and administered under state and federal laws by EDD. UI provides weekly benefits, for up to a maximum of 26 weeks, unless extended by law, to workers who are unemployed (or underemployed) through no fault of their own and who are able to, available for, and actively seeking work.
2. Claimant Benefit Calculations: A claimant's eligibility for benefits depends on their attachment to the labor force determined by computing a minimum earnings test. This requirement denies benefits to claimants whose earnings in a 12-month "base period" are below a specified minimum. The quarter in which the highest wages were received determines the weekly benefit amount. UI benefits range from $40 to a maximum of $450 per week. In 2023, the California average UI benefit amount was $368 per week. The United States total for the 12-month average of weekly benefit amount ending on February 29, 2024 was $443.85.^[1]
3. Financing Structure. The UI program is financed by employers who pay unemployment taxes on the first $7,000 in wages paid to each worker. The tax rates are set based on schedules laid out in state law, which require higher rates, up to a maximum of 6.2 percent, when the condition of the UI trust fund is poor.^[2] Working much like other insurance programs, the actual tax rate varies for each employer, depending in part on the amount of UI benefits paid to former employees. Referred to as being “experience rated,” this method of taxing ensures that employers who lay off or otherwise discharge more workers bear more of the costs of paying for the UI system. An employer may earn a lower tax rate when fewer claims are made on the employer's account by former employees.
4. COVID-19 Pandemic and EDD Fraud: The COVID-19 pandemic and the shutdown orders to mitigate the spread of the virus led to a dramatic increase in unemployment beginning in March 2020. Millions of Californians were left unemployed and in critical need of assistance to replace some of the income in which they relied to pay for essentials. Supplemental benefits authorized by the federal CARES Act, including Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, further increased the volume and dollar amount of payments. By April 2020, the unemployment rate had surpassed previous peaks observed during the Great Recession. At its peak, the unemployment rate in California reached 16 percent in April 2020. According to EDD, since March 2020, 31.5 million UI claims have been filed and EDD has paid more than $194 billion in UI benefits.^[3]

EDD struggled to service this unprecedented volume of claims and because of the new populations of unemployed individuals eligible for UI under the Pandemic Unemployment Assistance program (the self-employed), EDD was exposed to a range of fraudulent activity. According to EDD, from March 2020 to January 2021, of California’s confirmed fraudulent payments, 95 percent was associated with the federal Pandemic Unemployment Assistance (PUA) program, which the U.S. Department of Labor stated was particularly susceptible to fraud. The remaining 5 percent was associated with California's UI program. By comparison, in 2019 fraud accounted for about 6 percent of the state's total UI payments. According to EDD, since 2020, EDD has opened over 2,000 investigations of UI fraud, hundreds of suspects have been arrested, and many more have been criminally charged and convicted. As of May 2024, EDD reports a total of 2,075 investigations, 731 arrests, and 432 convictions.^[4] Many of these fraud cases involve fraud schemes perpetrated by sophisticated organized crime groups in and outside of the country.

Under scrutiny for its handling of claims and ensuing fraudulent activity, EDD has been the subject of several State Auditor reports, Legislative Analyst’s Office reports and a Governor-directed EDD Strike Team to set a path for needed reforms at EDD. In addition, the Legislature held several oversight hearings on the department and passed into law numerous bills that addressed the various issues facing EDD. EDD has begun implementing many of the recommendations put forth by the various reports and teams.

1. UI Trust Fund Status. California’s unemployment rate increased to 5.3 percent in February 2024, up from 5.2 percent in January, and compared to January 2023 where it stood at 4.5 percent. Due to the sudden and immense impact of COVID-19, the UI Fund became temporarily insolvent on April 29, 2020, and fluctuated in and out of solvency until maintaining a deficit starting June 3, 2020. As a result, in 2020, California began borrowing from the federal government to pay regular UI benefits, and ended the year with a federal loan balance of $17.8 billion. The loan balance is estimated to be $21 billion by the end of 2025.^[5]
2. Need for this bill? According to the author, “existing law limits the venue for Unemployment Insurance fraud prosecutions to the County of Sacramento, if the defendant does not reside in or have a principal place of business in California. Meaning, a non-resident individual who traveled to California to commit unemployment insurance fraud can only be on trial in Sacramento. Thus, requiring local law enforcement to travel to Sacramento to present a case rather than prosecuting in the county where the crime was committed. AB 2227 would amend Section 2124 of the Unemployment Insurance Code to allow Unemployment Insurance fraud to be prosecuted in the county where the defendant was transacting business that resulted in the alleged offense or where any money or property from the alleged offenses was obtained.”

Related/Prior Legislation

SB 1116 (Portantino, 2024) authorizes workers involved in a trade dispute to collect unemployment insurance (UI) benefits, after a two-week wait period, while they are on strike. The bill is hearing in the Assembly Insurance Committee.

SB 227 (Durazo, 2023) would, upon an appropriation by the Legislature, establish the Excluded Workers Program within the Employment Development Department (EDD) to provide income assistance to unemployed excluded workers who are not eligible for regular state or federal unemployment insurance benefits due to their immigration status. The bill is pending in the Assembly Appropriations Committee.

SB 232 (Nielsen, 2021) would have required the EDD to meet specified timelines for troubleshooting and improving its claims processing and fraud prevention processes to ensure efficient customer service and timely unemployment insurance benefits payment. The bill was held under submission in the Assembly Appropriations Committee.

SB 390 (Laird, Chapter 543, Statutes of 2021) required the EDD to develop and implement a comprehensive plan to prepare for an increase in unemployment insurance compensation benefits due to an economic recession.

AB 56 (Salas, Chapter 510, Statutes of 2021) codified various recommendations from the State Auditor reports related to the Employment Development Department practices pertaining to personal information on outgoing mail, cross-matching against incarcerated individuals’ information, overpayments and backlogged claims.

AB 400 (Petrie-Norris, 2021) would have established the Unemployment Insurance Oversight Advisory Board within the Labor and Workforce Development Agency. The bill was held under submission in the Assembly Appropriations Committee.

AB 402 (Wicks and Petrie-Norris, 2021) would have (a) created the Office of the Claimant Advocate (OCA) within EDD for the purpose of protecting Californians’ rights in seeking benefits administered by EDD, including unemployment and disability insurance, and (b) created a Stakeholder Advisory Group within EDD, as specified. The bill died on the Senate inactive file.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/17/24)

Conference of California Bar Associations (source)

Western Electrical Contractors Association

OPPOSITION: (Verified 6/17/24)

None received

ARGUMENTS IN SUPPORT: According to the sponsors of the measure, the Conference of California Bar Associations: “Out-of-state fraudsters have stolen millions of dollars via fraudulent unemployment insurance claims, which depletes state coffers and impedes legitimate claims by unemployed Californians. AB 2226 would remedy the logistical quagmire that arises when out-of-state fraudsters are apprehended outside of Sacramento County but can only be tried there due to a quirk in existing law. Like every other criminal case, judicial venue should be based on where the crime occurred, including where any criminal proceeds were obtained.”

ASSEMBLY FLOOR: 75-0, 4/25/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Boerner, Megan Dahle, Gallagher, Hart, Mathis

Prepared by: Alma Perez-Schwab / L., P.E. & R. / (916) 651-1556

6/18/24 13:52:36

**** END ****

1. https://oui.doleta.gov/unemploy/DataDashboard.asp ↑

2. Alamo, Chas. “Repaying the State’s Federal Unemployment Insurance Loan,” Legislative Analyst’s Office, May 26, 2021. https://lao.ca.gov/Publications/Report/4442 ↑

3. https://edd.ca.gov/en/newsroom/facts-and-stats/dashboard/ ↑

4. https://edd.ca.gov/en/about_edd/fraud-response/ ↑

5. EDD January 2024 UI Fund Forecast. https://edd.ca.gov/siteassets/files/unemployment/pdf/edduiforecastjan24.pdf ↑

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2023 - 2024 Regular

Bill No: AB 2227 Hearing Date: June 5, 2024

SUBJECT: Unemployment insurance: violations

KEY ISSUE

This bill expands on existing Unemployment Insurance (UI) provisions regarding the place of trial for violations to allow fraud cases to be prosecuted in the county where any money or property from the alleged offence was obtained.

ANALYSIS

Existing law:

1. Creates a comprehensive Unemployment Insurance (UI) system, administered by the Employment Development Department (EDD), where employers pay an experienced-based tax on total payroll that are used to fund UI benefits to unemployed workers. (UI Code §§ 301, 602, 675, 926, 970, 977 & 1251)
2. Defines a worker as “unemployed” in any week in which they meet any of the following:
3. Any week during which they perform no services and with respect to which no wages are payable to them;
4. Any week of less than full-time work, if the wages payable to them with respect to the week, when reduced by $25 or 25 percent of the wages payable, whichever is greater, do not equal or exceed the worker’s weekly benefit amount;
5. Any week for which a worker is unable to work due to mental or physical health illness or injury, as specified; or,
6. Any week during which they perform full-time work for five days as a juror, or as a witness under subpoena. (UI Code §1252)
7. Provides that an individual is disqualified for UI benefits if the individual left their most recent work voluntarily without good cause or that they have been discharged for misconduct connected with their most recent work. (UI Code §1256)
8. Specifies that it is a violation of UI provisions 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 benefit or payment, whether for the maker or for any other person, under any of the following statutes administered by the department:
   1. The provisions of UI benefits under California law.
   2. The provisions of any unemployment insurance law of the federal government.
   3. The provisions of any training allowance law of the federal government.
   4. The provisions of any trade readjustment allowance law of the federal government.
   5. The provisions of any other allowance law of the federal government. (UI Code §2101)
9. Except as specified, a violation of UI provisions 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. (UI Code §2122)
10. Specifies that the place of trial for UI offenses shall be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses, except that if the defendant has no residence or principal place of business in this state, the trial shall be held in the County of Sacramento. (UI Code §2124)
11. Requires EDD to report to the Assembly Committee on Insurance, Assembly Committee on Labor and Employment, and the Senate Committee on Labor, Public Employment and Retirement by June 30 of each year on EDD’s fraud deterrence and detection activities. (UI Code §2614)

This bill:

1. Expands on existing Unemployment Insurance (UI) provisions regarding the place of trial for violations to allow fraud cases to be prosecuted in the county where any money or property from the alleged offence was obtained.
2. Deletes a provision specifying that defendants that have no residence or principal place of business in this state must be tried in the County of Sacramento, thereby allowing prosecutors to take on cases with defendants outside of California in their jurisdictions.

COMMENTS

1. Background: Unemployment Insurance Program

Created as part of the Social Security Act of 1935, the UI program is a unique federal-state program, created by federal law and administered under state and federal laws by EDD. UI provides weekly benefits, for up to a maximum of 26 weeks, unless extended by law, to workers who are unemployed (or underemployed) through no fault of their own and who are able to, available for, and actively seeking work.

Claimant Benefit Calculations

A claimant's eligibility for benefits depends on their attachment to the labor force determined by computing a minimum earnings test. This requirement denies benefits to claimants whose earnings in a 12-month "base period" are below a specified minimum. The quarter in which the highest wages were received determines the weekly benefit amount. UI benefits range from $40 to a maximum of $450 per week. In 2023, the California average UI benefit amount was $368 per week. The United States total for the 12-month average of weekly benefit amount ending on February 29, 2024 was $443.85.^[1]

Financing Structure

The UI program is financed by employers who pay unemployment taxes on the first $7,000 in wages paid to each worker. The tax rates are set based on schedules laid out in state law, which require higher rates, up to a maximum of 6.2 percent, when the condition of the UI trust fund is poor.^[2] Working much like other insurance programs, the actual tax rate varies for each employer, depending in part on the amount of UI benefits paid to former employees. Referred to as being “experience rated,” this method of taxing ensures that employers who lay off or otherwise discharge more workers bear more of the costs of paying for the UI system. An employer may earn a lower tax rate when fewer claims are made on the employer's account by former employees.

2. COVID-19 Pandemic and EDD Fraud:

The COVID-19 pandemic and the shutdown orders to mitigate the spread of the virus led to a dramatic increase in unemployment beginning in March 2020. Millions of Californians were left unemployed and in critical need of assistance to replace some of the income in which they relied to pay for essentials. Supplemental benefits authorized by the federal CARES Act, including Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation, further increased the volume and dollar amount of payments. By April 2020, the unemployment rate had surpassed previous peaks observed during the Great Recession. At its peak, the unemployment rate in California reached 16 percent in April 2020. According to EDD, since March 2020, 31.5 million UI claims have been filed and EDD has paid more than $194 billion in UI benefits.^[3]

EDD struggled to service this unprecedented volume of claims and because of the new populations of unemployed individuals eligible for UI under the Pandemic Unemployment Assistance program (the self-employed), EDD was exposed to a range of fraudulent activity. According to EDD, from March 2020 to January 2021, of California’s confirmed fraudulent payments, 95 percent was associated with the federal Pandemic Unemployment Assistance (PUA) program, which the U.S. Department of Labor stated was particularly susceptible to fraud. The remaining 5 percent was associated with California's UI program. By comparison, in 2019 fraud accounted for about 6 percent of the state's total UI payments. According to EDD, since 2020, EDD has opened over 2,000 investigations of UI fraud, hundreds of suspects have been arrested, and many more have been criminally charged and convicted. As of May 2024, EDD reports a total of 2,075 investigations, 731 arrests, and 432 convictions.^[4] Many of these fraud cases involve fraud schemes perpetrated by sophisticated organized crime groups in and outside of the country.

Under scrutiny for its handling of claims and ensuing fraudulent activity, EDD has been the subject of several State Auditor reports, Legislative Analyst’s Office reports and a Governor-directed EDD Strike Team to set a path for needed reforms at EDD. In addition, the Legislature held several oversight hearings on the department and passed into law numerous bills that addressed the various issues facing EDD. EDD has begun implementing many of the recommendations put forth by the various reports and teams.

3. UI Trust Fund Status:

California’s unemployment rate increased to 5.3 percent in February 2024, up from 5.2 percent in January, and compared to January 2023 where it stood at 4.5 percent.

Due to the sudden and immense impact of COVID-19, the UI Fund became temporarily insolvent on April 29, 2020, and fluctuated in and out of solvency until maintaining a deficit starting June 3, 2020. As a result, in 2020, California began borrowing from the federal government to pay regular UI benefits, and ended the year with a federal loan balance of $17.8 billion. The loan balance is estimated to be $21 billion by the end of 2025.^[5]

4. Need for this bill?

According to the author:

“Existing law limits the venue for Unemployment Insurance fraud prosecutions to the County of Sacramento, if the defendant does not reside in or have a principal place of business in California. Meaning, a non-resident individual who traveled to California to commit unemployment insurance fraud can only be on trial in Sacramento. Thus, requiring local law enforcement to travel to Sacramento to present a case rather than prosecuting in the county where the crime was committed. AB 2227 would amend Section 2124 of the Unemployment Insurance Code to allow Unemployment Insurance fraud to be prosecuted in the county where the defendant was transacting business that resulted in the alleged offense or where any money or property from the alleged offenses was obtained.”

5. Proponent Arguments:

According to the sponsors of the measure, the Conference of California Bar Associations:

“Out-of-state fraudsters have stolen millions of dollars via fraudulent unemployment insurance claims, which depletes state coffers and impedes legitimate claims by unemployed Californians. AB 2226 would remedy the logistical quagmire that arises when out-of-state fraudsters are apprehended outside of Sacramento County but can only be tried there due to a quirk in existing law. Like every other criminal case, judicial venue should be based on where the crime occurred, including where any criminal proceeds were obtained.”

6. Opponent Arguments:

None received.

7. Prior/Related Legislation:

SB 1116 (Portantino, 2024) would authorize workers involved in a trade dispute to collect unemployment insurance (UI) benefits, after a two-week wait period, while they are on strike. SB 1116 is pending referral in the Assembly.

SB 227 (Durazo, 2023) would, upon an appropriation by the Legislature, establish the Excluded Workers Program within the Employment Development Department (EDD) to provide income assistance to unemployed excluded workers who are not eligible for regular state or federal unemployment insurance benefits due to their immigration status. Pending in Assembly Appropriations Committee.

SB 232 (Nielsen, 2021) would have required the EDD to meet specified timelines for troubleshooting and improving its claims processing and fraud prevention processes to ensure efficient customer service and timely unemployment insurance benefits payment.

SB 232 was held under submission in Assembly Appropriations Committee.

SB 390 (Laird, Chapter 543, Statutes of 2021) requires the EDD to develop and implement a comprehensive plan to prepare for an increase in unemployment insurance compensation benefits due to an economic recession.

AB 56 (Salas, Chapter 510, Statutes of 2021) codified various recommendations from the State Auditor reports related to the Employment Development Department practices pertaining to personal information on outgoing mail, cross-matching against incarcerated individuals’ information, overpayments and backlogged claims.

AB 400 (Petrie-Norris, 2021) would have established the Unemployment Insurance Oversight Advisory Board within the Labor and Workforce Development Agency. AB 400 was held under submission in Assembly Appropriations Committee.

AB 402 (Wicks and Petrie-Norris, 2021) would have (1) created the Office of the Claimant Advocate (OCA) within EDD for the purpose of protecting Californians’ rights in seeking benefits administered by EDD, including unemployment and disability insurance, and (2) created a Stakeholder Advisory Group within EDD, as specified. AB 402 died on the Senate inactive file.

SUPPORT

Conference of California Bar Associations (Sponsor)

Western Electrical Contractors Association

OPPOSITION

None received

-- END --

1. https://oui.doleta.gov/unemploy/DataDashboard.asp ↑

2. Alamo, Chas. “Repaying the State’s Federal Unemployment Insurance Loan,” Legislative Analyst’s Office, May 26, 2021. https://lao.ca.gov/Publications/Report/4442 ↑

3. https://edd.ca.gov/en/newsroom/facts-and-stats/dashboard/ ↑

4. https://edd.ca.gov/en/about_edd/fraud-response/ ↑

5. EDD January 2024 UI Fund Forecast. https://edd.ca.gov/siteassets/files/unemployment/pdf/edduiforecastjan24.pdf ↑

Date of Hearing: April 17, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2227

Author:(Hoover) – As Introduced Ver:February 7, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill revises where a trial for an Unemployment Insurance (UI)-related offense may take place to include any county where money or property from the alleged offense was obtained.

FISCAL EFFECT:

Minor and absorbable costs to the Employment Development Department (EDD), which may incur additional costs to travel to another county to participate in a trial that would otherwise occur in the County of Sacramento.

COMMENTS:

1. Purpose. According to the author, “Existing law suggests that an out-of-state fraudster can only be tried in Sacramento County, which creates a logistical nightmare for law enforcement agencies located elsewhere in the state that happen to apprehend a non-resident committing [UI] fraud.” The author intends this bill to “clarify the limits of the venue for prosecuting a non-resident defendant for [UI] Fraud.” This bill is sponsored by the Conference of California Bar Associations.
2. UI Fraud. During the COVID-19 pandemic, Congress expanded federal UI benefits and relaxed eligibility criteria through the Pandemic Unemployment Assistance (PUA) program, which the U.S. Department of Labor noted was particularly susceptible to fraud. PUA was administered by EDD, which experienced a surge in UI claims filed. Since 2020, EDD has opened over 2,000 investigations of UI fraud, with 731 arrests and 432 convictions as of February 2024. These cases include examples of UI fraud where out-of-state individuals traveled to California to obtain fraudulent EDD debit cards or filed fraudulent claims online.

Existing law requires a UI fraud trial to take place in either the county of residence or principal place of business of the defendant, or any county where the defendant was transacting business that resulted in the alleged offense. If the defendant has no residence or principal place of business in California, existing law requires the trial be held in the County of Sacramento. In light of the scale of UI fraud that occurred following the COVID-19 pandemic, this bill adds any county where money or property from the alleged offense was obtained to the list of trial locations that must be considered prior to setting the trial in the County of Sacramento.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 3, 2024

ASSEMBLY COMMITTEE ON INSURANCE

Lisa Calderon, Chair

ABPCA Bill Id:AB 2227 (

Author:Hoover) – As Introduced Ver:February 7, 2024

SUBJECT: Unemployment insurance: violations

SUMMARY: Allows the trial of unemployment insurance (UI) violations to take place in any county where any money or property from the alleged offenses was obtained.

EXISTING LAW:

1. Provides that the place of trial for UI violations will be in the county of residence or principal place of business of the defendant or defendants, or in any county where the defendant or defendants were transacting business that resulted in the alleged offenses, except that if the defendant has no residence or principal place of business in this state, the trial shall be held in the County of Sacramento. (UI Code, Section 2124)
2. Requires EDD to report to the Assembly Committee on Insurance, Assembly Committee on Labor and Employment, and the Senate Committee on Labor, Public Employment and Retirement by June 30 of each year on EDD’s fraud deterrence and detection activities. (UI Code, 2614)
3. Establishes the Employment Development Department (EDD) within the Labor and Workforce Development Agency with the task of engaging in job creation activities while administering UI and Disability Insurance Programs. (UI Code, Section 301)
4. Creates UI, funded by the state and the federal government and administered by EDD, to provide unemployment insurance benefits to persons unemployed through no fault of their own, and to reduce involuntary unemployment and the suffering caused by it. (UI Code, Section 100)

FISCAL EFFECT: Unknown

COMMENTS:

1. Purpose: According to author, “AB 2227 would clarify the limits of the venue for prosecuting a non-resident defendant for Unemployment Insurance Fraud to include any county where the defendant was transacting business that resulted in the alleged offense or where any money or property from the alleged offense was obtained. Existing law suggests that an out-of-state fraudster can only be tried in Sacramento County, which creates a logistical nightmare for law enforcement agencies located elsewhere in the state that happen to apprehend a non-resident committing unemployment insurance fraud.”
2. Background: California’s UI program is a partnership between the state and federal government that provides temporary wage replacement to eligible unemployed workers. The program helps alleviate economic hardships for Californians who are unemployed, or whose hours have been reduced, through no fault of their own. The UI program is intended to replace half of workers’ wages for up to 26 weeks where state law sets the maximum benefit at $450 per week. According to the Legislative Analyst’s Office (LAO), the average benefit is about $330 per week for eligible Californians. Businesses typically pay state and federal UI payroll taxes that go to the UI trust fund to pay future eligible Californians and cover a portion of the costs for administering the program.

States must operate their UI programs within broad federal guidelines that determine eligibility for benefits. To be eligible for UI benefits, an unemployed worker must be: totally or partially unemployed, unemployed through no fault of your own, physically able to work, available for work, ready and willing to accept work immediately, and actively looking for work. UI covers traditional employees, excluding independent contractors, self‑employed individuals, informal workers, and undocumented workers.

1. UI Fraud: During the COVID-19 pandemic, a surge in the filing of unemployment claims began in March 2020 following the issuance of a statewide stay-at-home order at the start of the COVID-19 pandemic, which resulted in a significant increase in EDD’s workload. During the same time period, Congress expanded federal UI benefits and relaxed the eligibility criteria for receiving those benefits through the Coronavirus Aid, Relief, and Economic Security Act.

According to EDD, from March 2020, to January 2021, of California’s confirmed fraudulent payments, 95% was associated with the federal Pandemic Unemployment Assistance (PUA) program, which the U.S. Department of Labor stated was particularly susceptible to fraud. The remaining 5% was associated with California's UI program. By comparison, in 2019 fraud accounted for about 6% of the state's total UI payments.

EDD, since 2020, has opened over 2,000 investigations of UI fraud. EDD reports as of February 2024, EDD has 2,075 total investigations, 731 arrests, and 432 convictions.

1. Examples: The author’s office provided the following examples, which highlights the need for the measure.

• "Beverly Hills police arrested 44 people suspected of unemployment benefit fraud and identity theft, police said Wednesday.  The suspects were using stolen identities to get benefit cards from the Employment Development Department, and then often using the money on short-term rentals and luxury items, the Beverly Hills Police Department said in a news release.  Since Sept. 3, officers have found and arrested 44 people who had 129 fraudulent EDD debit cards, together holding over $2.5 million, according to police. Officers also seized more than $289,000 and seven handguns found among those arrested.  'Suspects have traveled primarily from out of state to obtain these fraudulent EDD cards in California,' Beverly Hills police said." https://ktla.com/news/local-news/beverly-hills-arrest-44-in-unemployment-benefit-scam-2-5-million-recovered/
• "These sophisticated fraud schemes targeted unemployment insurance agencies across the nation and honed in on the susceptibilities inherent in the federal Pandemic Unemployment Assistance program created by the CARES Act. Security experts working for the state said crime rings based in Russia, China, Nigeria and other countries have used stolen identities to file fraud claims in the names of unsuspecting people, while other schemes have involved claims filed in the names of prison inmates." https://www.latimes.com/california/story/2021-01-28/audit-california-warnings-unemployment-benefit-fraud-covid-19
• https://www.justice.gov/usao-sdca/pr/foreign-national-sentenced-40-months-custody-5-million-unemployment-fraud-scheme

REGISTERED SUPPORT / OPPOSITION:

Support

Conference of California Bar Associations

Opposition

None on file

Analysis Prepared by: Kathleen O'Malley / INS. / (916) 319-2086