BILL ANALYSIS Ó AB 944 Page 1 Date of Hearing: April 22, 2015 ASSEMBLY COMMITTEE ON INSURANCE Tom Daly, Chair AB 944 (Obernolte) - As Introduced February 26, 2015 SUBJECT: Unemployment compensation benefits: hearing procedures SUMMARY: Requires all hearings before the Unemployment Insurance Appeals Board (board) to be conducted by telephone. Specifically, this bill: 1)Requires all hearings to be conducted by telephone unless a party to the hearing requests otherwise. 2)Requires the board to adopt regulations specifying the process for considering a request for participating in-person. EXISTING LAW: 1)Establishes the board to hear appeals of administrative decisions made by the Employment Development Department (EDD), AB 944 Page 2 including decisions regarding unemployment insurance eligibility and benefits. 2)Provides for first level appeals of unemployment insurance (UI) determinations to be heard by an administrative law judge (ALJ) employed by the board. 3)Permits a party in a UI appeal hearing to participate by telephone if he or she can show "good cause." 4)Requires the board to adopt regulations defining "good cause." The board's regulations require the ALJ to consider the following factors when determining whether "good cause" exists: a. transportation barriers or travel distance required; b. hardship caused by time away from current employment or other responsibilities that would be required; c. inability to secure care for children or other family members; d. other hardships or impediments as explained by the party making the application for an electronic hearing. FISCAL EFFECT: Undetermined COMMENTS: 1)Purpose . According to the author, electronic hearings are rarely used as a method for conducting appeals in California. In a number of other states, however, hearings conducted by telephone have become the standard practice and are viewed as an effective way to increase efficiency while reducing costs. In 2013, California had the nation's highest number of first-level UI appeals with a caseload of 362,047 and the AB 944 Page 3 nation's highest number of second-level appeals with a caseload of 27,821 within the 48 states and territories which offer second-level appeals. 2)Board Background . The board was created in 1943 as an independent administrative court system for workers and employers seeking to challenge decisions made by the EDD. Appeals are the first opportunity for all parties to present evidence and tell their side of the story before an ALJ and have that ALJ decide the case. The ALJ's decision may be appealed to the board whose decision is final, unless overturned by a Superior Court judge. The board's services are free to the participants, and do not require an attorney. The proceedings are funded almost completely by federal dollars (93%), with state special funds paying for costs related to disability and paid family leave cases (6.6%), and the state General Fund paying for less than one-half of one percent (0.4%) of the costs. In addition to reviewing ALJs' decisions, the Board issues precedent decisions and oversees board operations and its hearing facilities in twelve field offices and 43 satellite facilities around the state. In 2011 alone, CUIAB ALJs rendered decisions in about 467,000 cases for over 250,000 employees and employers. 3)Good Cause . California law was changed in 2009 to require the board to permit telephone participation in appeals hearings before the board if the party could demonstrate "good cause." In accordance with that change, the board adopted regulations implementing the "good cause" requirement. Those regulations specifically require the ALJ to consider burdens caused by travel to the hearing, time away from work, and family care obligations when determining whether "good cause" exists. Furthermore, board regulations require the ALJ to consider any other "hardship or impediment" proffered by the party who wishes to participate by telephone. These regulations provide ample opportunity for any party to participate by telephone. AB 944 Page 4 In the current fiscal year 26% of hearings involve at least one participant on the telephone. Given the relatively low bar for telephone participation, the timeliness of board appeals, and the inherent value of in-person participation in a fact finding process, this bill seems to be a solution in search of a problem. 4)Supporters . The supporters of this legislation contend that the bill is required to lessen the time and travel burden of participation on employers. As noted above, any party to a hearing (including employers) can demonstrate "good cause" for telephone participation because the hardship imposed by travel time or time away from their business. Supporters also assert that the bill would support the board's response to a finding in a 2009 audit report issued by the U.S. Department of Labor that suggests increasing the percentage of telephone hearings to help increase the timeliness of their appeals. However, since 2009 the board has greatly improved the timeliness of its appeals and more than doubled the number of hearings with a party participating by telephone. In 2009, the board was resolving less than 10% of appeals within 45 days, but in 2014 the board was resolving 80-90% of appeals in less than 45 days. The board has dramatically improved its performance through numerous administrative changes (including adopting regulations establishing the "good cause" rule for telephone hearings) which appears responsive to the audit finding cited by the supporters of the bill. 5)Opponents . Among the opponents are numerous individual ALJs employed at the CUIAB. ALJs working for the board consistently cite the benefits attached in-person participation in these hearings. These letters explicitly note that the ALJs were speaking as individuals and not representing the board. These letters make a range of arguments in opposition to the bill. AB 944 Page 5 a. ALJs frequently have to weigh the credibility of the parties and witnesses and telephone hearings deprive the ALJs of the non-verbal information when assessing the credibility of testimony. b. Appeal hearings are the last part of the UI system where claimants and employers can have a face to face conversation with the government. c. Telephone hearings when interpreters are required are very difficult and become more lengthy than necessary. d. Appeal hearings frequently involve the exchange of documents between the parties and the ALJ which is very difficult to impossible in many telephone hearings which slows the process. e. It is much harder to maintain decorum and an orderly hearing process when the parties are not present. ALJs also note that requests for telephone participation are routinely approved, and ALJs liberally construe the "good cause" regulation. ALJs also report that most requests for telephone participation are due to emergency situations (loss of childcare, illness, transportation issues, etc.), but that most participants appreciate the opportunity to speak to someone face to face regarding their claim after struggling through EDD's automated and telephone based UI systems. REGISTERED SUPPORT / OPPOSITION: AB 944 Page 6 Support Agricultural Council of California Air Conditioning Trade Association Associated Builders and Contractors of California California Association for Health Services at Home California Association of Bed and Breakfast Inns California Association of Hospitals and Health Systems California Business Properties Association California Chamber of Commerce California Farm Bureau Federation California League of Food Processors California Manufacturers and Technology Association AB 944 Page 7 California Restaurant Association California Retailers Association California Taxpayers Association CAWA- Representing the Automotive Parts Industry Chamber of Commerce Mountain View El Centro Chamber of Commerce Fresno Area Chamber of Commerce Fullerton Chamber of Commerce Greater Bakersfield Chamber of Commerce Irvine Chamber of Commerce Lake Tahoe South Shore Chamber of Commerce National Federation of Independent Business Palm Desert Area Chamber of Commerce AB 944 Page 8 Plumbing-Heating-Cooling Contractors Association of California Redondo Beach Chamber of Commerce and Visitors Bureau Sacramento Regional Builders Exchange San Jose Silicon Valley Chamber of Commerce Santa Clara Silicon Valley Central Chamber of Commerce and Visitor Bureau Santa Maria Valley Chamber of Commerce Visitors and Convention Bureau Simi Valley Chamber of Commerce Small Business California South Bay Association of Chamber of Commerce The Greater Conejo Valley of Commerce Western Electrical Contractors Association Wine Institute AB 944 Page 9 Opposition California Labor Federation California School Employees Association (CSEA), AFL-CIO Numerous individuals Analysis Prepared by:Paul Riches / INS. / (916) 319-2086