BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 944

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                        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  

          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),  


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            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"  

               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


           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  


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            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.   


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            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.  


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               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  

               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.  



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          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


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          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


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          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  

          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


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          California Labor Federation

          California School Employees Association (CSEA), AFL-CIO

          Numerous individuals

          Analysis Prepared by:Paul Riches / INS. / (916) 319-2086