(September 26, 2023) The California Chamber of Commerce is leading a broad coalition of more than 110 businesses, associations and local chambers of commerce in urging the Governor to veto a job killer bill, SB 799 (Portantino; D-Burbank), that in effect requires employers to subsidize striking workers at unrelated businesses.

By forcing employers to pay unemployment insurance (UI) payments to striking workers, SB 799 would also raise taxes on employers across California, overturn more than 70 years of precedent, and put California’s UI program at risk of violating federal law.

The UI Fund from which payments to UI claimants are made is paid for entirely by employers. UI payments are intended to assist employees who, through no fault of their own, are forced to leave their employment.

Federal law sets out the basic requirements for individuals to qualify, including being “ready and willing to immediately accept work” and “totally or partially unemployed,” and “actively looking for work.”

In seeking the veto, the coalition points out that UI claimants are paid from their former employer’s reserve account in the UI Fund. In other words, each employer is incentivized to minimize turnover in their workforce because they pay for any individuals whom they terminate that end up seeking UI benefits — and employees who lose employment through no fault of their own are assisted in their transition to other work.

If the fund becomes insolvent, all employers face steadily increasing UI taxes. These taxes increase by $21 per employee per year, until they reach a maximum of $434 per employee.

The California fund is in historic debt — approximately $18 billion — due to the COVID-19 pandemic and subsequent statewide shutdown. As a result, California employers already are paying increased UI taxes pursuant to federal law, and are likely to face ongoing tax increases until approximately 2032.

SB 799 would give striking workers the ability to claim unemployment after two weeks of striking, thereby adding the cost of those benefits to California’s outstanding $18 billion in federal loans. Although the amount that such strikes would add to the UI Fund debt is hard to calculate specifically — due to uncertainty as to how many strikes occur, how long they last, and how many workers take part – it is undeniable that SB 799 would add more debt to the state’s federal loans.

The coalition estimates that, if SB 799 had been in effect during the previous 12 months, it would have added approximately $215 million to the UI Fund debt and about $30 million per week if it were in effect now.

In addition to adding to employers’ tax burden, SB 799 will also add to the state’s General Fund obligation regarding the UI Fund because interest on the UI Fund debt is paid by the state. For example, in 2023–2024, the interest payment is expected to cost the state approximately $300 million — and similar payments will continue until the UI Fund returns to solvency. SB 799 will only add to those payments if it becomes law.

SB 799 fundamentally alters the nature of UI by providing UI benefits to workers who still have a job and have chosen to temporarily refuse to work as a negotiating tactic. Striking is a federally protected right and historically has been a key strategy in labor disputes. But being on strike is not the same as being terminated.

Striking workers generally have the right to return to their position at the conclusion of the labor dispute, under both federal law and union contracts. In contrast, an employee who has been terminated has no similar job waiting for them and faces an uncertain future.

SB 799 would be a profound departure from past UI practice and a significant tax increase on California employers, including those which have no involvement in any labor disputes. Moreover, with a recession potentially in the state’s future, the coalition warns, SB 799 risks compounding the insolvency of the state’s UI fund, which will weigh heavily on the state, California employers and truly unemployed persons in California.

Staff Contact: Robert Moutrie