Partial jobless benefits soar under little-known California program
dvsmith@sacbee.com
Published Thursday, Sep. 03, 2009
Tough times are driving record demand for a little-known state program that pays partial unemployment benefits to workers whose hours and wages have been cut.
"There have been high periods, but nothing like this – every two or three weeks is a record. It's part of what's happening with the economy right now," said Talbott Smith, a division chief at the Employment Development Department, which runs the Work Sharing Unemployment Insurance program.
Participation in the program may have surged, but it still is utilized by only "a very small percentage" of the approximately 1 million employers in the state, Smith said.
The state of California, with its roughly 400,000 employees, does not participate in the program, so furloughed state workers are not eligible.
Work sharing was a first-in-the- nation safety net when state lawmakers created it in 1978. The intention was to spare workers from total unemployment during downturns and allow employers to avoid the cost of recruiting, hiring and training new employees when the economy improves.
As of July, some $97 million had been paid out in work sharing claims this year. That's already nearly twice the $49.4 million paid out in all of 2008 – the previous record.
The program mirrors the overall growth in jobless benefits. Nearly $11 billion in unemployment insurance has been paid in California through the first seven months of 2009, outdistancing the record $8.1 billion paid in 2008. The state's jobless rate was 11.9 percent in July, and would have been even higher without the work sharing program.
Nearly 3,100 California businesses signed up for work sharing for the first time between January and June, according to the EDD, which estimates the total number of companies currently in the program at about 5,000. Just three years ago, fewer than 500 businesses were in the program.
Claims were covered for nearly 120,000 employees in the first half of 2009, compared with 80,000 in all of 2008.
The increase has stressed the program's ability to meet demand, and more than 60 new
workers have been hired, EDD officials said.
Karen Fulkerson, payroll accountant at the Sacramento-based California Restaurant Association, said she and other association leaders "weren't even aware there was such a plan" until late last year. A staff attorney told them about it as the trade group for the struggling restaurant industry faced the prospect of trimming its staff.
Some staffers were let go, but a monthly furlough day and participation in work sharing in January helped the association avoid more layoffs.
Today, about 40 percent of the association's 32-person Sacramento staff is on work sharing, Fulkerson said.
"It's been a positive. The employer is able to take advantage of cost reductions, but it's not fully passed on to the employee," she said. "Even though it's a difficult time, at least employees know they're not taking as hard a hit."
Angelica Pappas, a restaurant association employee who is furloughed one Friday each month, receives $106 monthly through the program to help offset lost wages.
"I signed up right away," she said. "It's a little something, but it makes it so I don't miss (the lost pay)."
Ralph Perko, controller at commercial heating and air firm Air Systems of Sacramento, said the work sharing program has "helped us to cut costs by cutting hours, and we've been able to retain many of our employees."
For the Rancho Cordova company, which signed up for the plan six months ago, keeping skilled sheet metal workers and pipe fitters during the down time saves later recruiting and training expenses.
"Regardless of how well (new hires) are trained, it's still a lot of money to train them to the company's way," Perko said.
Today, most of Air Systems' workers are on a 24-hour workweek, with the lost 16 hours covered by work sharing benefits.
Perko estimates as many as 70 percent of Air Systems' 105 employees participate in the program at any one time.
"We're a construction company, so needs change every week," he explained.
Work sharing benefits are funded the same way as regular unemployment insurance, through payroll taxes. To participate, employers must fill out an application and submit a plan that meets program requirements.
Among the requirements: 10 percent of an employer's workforce or a unit of that workforce must be affected by at least a 10 percent reduction in wages and work hours.
Because of the application's complexity, forms are checked and processed by hand, which is the primary reason so many new hires have been needed to deal with the growth. Still, EDD's Smith said the majority of claims are paid within seven days of receipt.
Once a plan is approved, benefits are paid to participating employees in proportion to the percentage that hours and wages are reduced.
For example, if the employee's wages and hours were cut by 20 percent, or one day per week, the employee's work sharing benefits would be 20 percent of the unemployment insurance benefits they would have received had they been jobless. (The maximum unemployment benefit for a jobless worker is $450 per week.)
Increasingly, EDD staffers are seeing small service companies and offices filling the work share rolls.
Places like dental offices are closing down on Fridays and workers are collecting unemployment insurance for the lost workday each week, officials said.
Other companies facing downsizing or closure are using the work sharing plan as a transition to full unemployment, Smith said.
Prominent among such companies is the NUMMI auto plant in Fremont, which is being phased out by Toyota Motor Corp.
"We don't see anything that would show any trend downward," Smith said. "There's an awareness because businesses haven't seen a downturn like this."
Call The Bee's Darrell Smith, (916) 321-1040.
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