(July 26, 2019) A California Chamber of Commerce-opposed job killer bill that would charge employers to provide unemployment insurance (UI) compensation to striking employees during labor disputes awaits action in the state Senate next month.
AB 1066 (Gonzalez; D-San Diego) overturns more than 70 years of precedent and creates solvency issues for California’s UI system by providing unemployment benefits to striking workers even though they are not looking for work and have a job waiting for them once the labor dispute is resolved.
The bill would allow employees on strike to receive UI benefits if the strike lasts more than four weeks, and contains no end date or qualifications for the receipt of such benefits, meaning that benefits would continue for up to 26 weeks for the entire union, regardless of the facts of the labor dispute.
The CalChamber identified AB 1066 as a job killer because it will expose employers to a significant cost increase during a time in which they are already struggling with the financial impact of labor negotiations and a strike, thereby jeopardizing the employers’ ability to maintain existing jobs and wages as well as the increased wages and benefits demanded by the union.
Estimated Costs to Businesses: ‘As High As $6 Million’
AB 1066 potentially adds the entire membership of striking unions to UI benefits for an employer, creating unpredictable and considerable ongoing costs in the event of a strike. Whereas a business with 100 workers might previously have paid for 3–4 employees’ UI benefits at any given point, AB 1066 creates the potential for hundreds of simultaneous claims on that very same employer, multiplying UI costs tenfold. This cost applies equally to public entities, such as school districts, which also pay for UI benefits, although their repayment method differs from private businesses. For this reason, the Assembly Appropriations Committee staff estimates AB 1066’s costs could go as high as $6 million per year for California businesses and public entities.
A look at the Marriott Hotel strike of 2018 provides one recent example of the huge potential effects of AB 1066. The hotel staff of 2,500 in San Francisco went on strike for two months, from early October 2018 until early December. After two months, an agreement was reached, with labor groups heralding the resulting contract as a success. Assuming every worker in the strike was paid San Francisco’s minimum wage—which is a conservative assumption—that strike would have resulted in payments totaling $3.1 million under AB 1066’s terms.
Notably, the above calculation related to the 2018 Marriott Hotel strike is in many ways a low estimate of AB 1066’s potential costs:
- The strike resolved itself after only one month (four weeks) of payments—but AB 1066 would allow the full duration of unemployment payments to striking workers, meaning that the duration of payments could be as many as 12 to 26 weeks.
- The calculation assumes minimum wage payments, but if the striking workers were paid more, that could increase the cost of the payments.
- This estimate does not take into account the long-term effect of increased experience ratings to employers’ payments to the UI fund.
- The strike was limited to one relatively small city—San Francisco—but a union strike in a larger city or in a larger industry, such as education, could result in far higher costs to businesses.
In opposing AB 1066, the CalChamber and a coalition of employer groups, public entities, and local chambers of commerce also point out that:
- AB 1066 politicizes unemployment benefits. Whereas the UI system had previously been a neutral factor in labor disputes, AB 1066 will penalize employers for strikes, regardless of the facts of the labor dispute.
- AB 1066 would create additional solvency issues for the California UI system. After 2008, California’s UI Trust Fund became insolvent and was forced to take out federal loans. Those loans added hundreds of millions of dollars in costs to the state’s general fund each year, and were finally repaid in 2018. By potentially adding the members of entire unions to the unemployment rolls, AB 1066 will push California’s UI fund toward insolvency once again.
- AB 1066 will burden even nonstriking workplaces. Because AB 1066 burdens the entire UI fund, even employers whose workers do not strike will face increased costs from being forced to pay increased UI premiums.
AB 1066 is scheduled to be considered by the Senate Appropriations Committee when legislators return from their summer recess on August 12.
Los Angeles Times
On July 10, the Los Angeles Times published an editorial opposing AB 1066, stating that the bill goes “too far.” In “No, we shouldn’t dip into California’s unemployment funds to help striking workers,” the Los Angeles Times writes:
To supporters of AB 1066, employers should bear the extra costs that the bill would impose because strikes are invariably the employers’ fault. But it goes too far in tipping the scales. Asking employers to subsidize their striking workers from funds that are already insufficient to help the unemployed is not a fair or appropriate way to help rebuild a robust labor movement.
Staff Contact: Robert Moutrie