Employment Insurance

Unemployment Insurance

California participates in a joint federal/state unemployment insurance program designed to reduce the effect of economic fluctuations and to help those who become unemployed through no fault of their own.

With few exceptions, all California employers are covered by the unemployment insurance law and must pay the applicable unemployment insurance tax. A former employee is ineligible for benefits if he or she is out of work for any of these reasons:

1. Voluntary quit without good cause;

2. Discharge for willful misconduct; or

3. Refusal of suitable work.

Employers may respond to a claim for unemployment insurance by a former employee. An employer may appeal a final benefit-payment determination with which it disagrees.

Covered Employers: Under the California Unemployment Insurance Code, the term "employer" includes any individual, joint venture, partnership, association, trust, estate, joint stock company, insurance company, corporation (whether domestic or foreign), community chest fund, foundation, receiver, trustee in bankruptcy, trustee or successor thereof, or the legal representative of a deceased person.

An employer becomes subject to UI as an employing unit, if the employer employed within the current calendar year or had within the preceding calendar year one or more employees and paid wages in excess of $100 during any calendar quarter.

Employers with less than $100 of quarterly payroll are exempt from state unemployment insurance (UI) law. New employers register by filing Form DE-1 and pay a 3.4 percent UI tax on wages up to $7,000 per worker per calendar year. When an employer receives an identification number, it also will receive information concerning all state-required employment taxes and reporting requirements.

Experience Rating: Employers are usually in business 2-3 years before they are experience rated, with individual state UI tax rates ranging from 0.7 to 5.4 percent, depending on the employer's unemployment experience. The experience ratings for employers hiring seasonal agricultural labor frequently rise to the 5.4 percent ceiling.

Employer Account Number: Employers are required to register within 15 days after becoming subject to the Code. Registration forms are available at the nearest Employment Tax District Office or at headquarters in Sacramento. All registered employers must report any change in business name, form or entity.

Each liable employer is assigned an eight-digit employer account number. This number appears on the Quarterly Contribution Return (DE 3) and other documents sent to the employer that are related to the collection of unemployment and disability insurance contributions and used in the determination of benefits. Employers should use this number on all correspondence, forms, and remittances submitted to the Department.

Required Records: Every registered employer is required to keep a true and accurate record of:

1. All workers and their status, (i.e., employed, on layoff or leave of absence.)

2. The wages paid by the employer to each worker.

3. The period covered by all payrolls.

4. For each employee:

A. Name.

B. Social Security Account Number.

C. The date on which the individual was hired, rehired, or returned to work after temporary layoff, and the date when the individual's name was removed from the payroll.

5. The wages paid to each employee for each payroll period, showing separately:

A. Money wages;

B. Cash value of all other remuneration received from the employer;

C. Special payments in cash or kind for services rendered exclusively in a given pay period such as annual bonuses, gifts, prizes, etc., showing the nature of such payments and the period during which the services were performed for which such special payments were made.

Time Limits of Records: Employers subject to the Code must keep required records for at least four years after the date the contributions to which they relate become due, or the date they are paid, whichever is later.

Posting and Notice Requirements: Employers must post on the premises in places accessible to employees printed statements about benefit rights and other matters as may be prescribed by regulations. These printed statements are furnished by the Department and include posters such as "Notice to Employees" about rights and responsibilities under the Code.

Employers must also make available to each employee when they become unemployed printed statements or pamphlets about benefit rights. These pamphlets are supplied by the Department and include forms DE 2320 and DE 2515 on unemployment insurance and disability insurance benefit claims information.

The poster Notice to Employees of Unemployment Insurance and Disability Insurance (DE-1857A) may be obtained from the local Employment Tax Office of the EDD. See page 104 for more information.

Written Notice to Employee: An employer must give an employee who is laid off or discharged or who takes a leave of absence written notice of the change in status. The notice must include: (1) the employer's name; (2) the employee's name; (3) the employee's social security number; (4) the date of the action; and (5) whether the action was a discharge, layoff, leave of absence, or change in status from employee to independent contractor.

No written notice is required in any of these situations:

1. Voluntary quit

2. Promotion or demotion

3. Change in work assignment or work location

4. Cessation of work due to a trade dispute

Penalties: Employers are subject to a penalty of $100 per employee for the failure to register with EDD as an employer when the failure is due to "intentional disregard or an intent to evade employment taxes." This penalty applies only to the calendar quarter in which the employer had the highest number of employees.

Disability Insurance and Paid Family Leave

California State Disability Insurance (SDI) is a partial wage-replacement insurance plan for California workers. The SDI program is state-mandated and funded by employee payroll deductions. SDI provides affordable, short-term benefits to eligible workers who suffer a loss of wages because they cannot work due to an illness or injury that is not work-related, or a medically-disabling condition resulting from pregnancy or childbirth.

Payroll deductions for all covered workers are based on the same contribution rate.

Benefits of California SDI Coverage:

1. SDI coverage "travels" with the worker. Coverage is not dependent on staying with a specific employer.

2. SDI coverage is mandatory for most California workers.

3. SDI is non-exclusionary. An eligible worker's coverage cannot be canceled or denied because of health risk factors, pre-existing medical conditions, or hazardous employment.

4. SDI may pay up to 52 weeks of benefits with a waiting period of only seven days.

Employers must provide a new employee with an SDI pamphlet. See page 104 for more information.

Paid Family Leave Program: California is the first state to provide employees with paid family-care leave. The paid family leave (PFL) program is incorporated into the state disability insurance (SDI) program. The program is financed entirely by an increase in employee payroll contributions to the SDI fund and is administered by the Employment Development Department (EDD).

Under the PFL program, an employee is eligible for up to six weeks of PFL benefits during a 12-month period, at rates up to 55 percent of the employee's wages, while taking time off work for a purpose specified under the federal Family and Medical Leave Act (FMLA) and California Family Rights Act (CFRA). Those purposes are caring for a child, spouse, parent, or domestic partner with a serious health condition and bonding with a new child.

PFL does not create any new leave entitlement. Rather, it merely provides that an employee who takes a leave for a purpose specified under the FMLA and CFRA can receive PFL benefits. Accordingly, an employer not covered by the FMLA or CFRA--simply stated, one with fewer than 50 employees--won't have to hold the employee's job open, although the employee would still be entitled to PFL benefits.

Employers must give a PFL notice (DE 2511) to all employees hired after Jan. 1, 2004, and to each employee leaving work on or after July 1, 2004, due to pregnancy or non-occupational injury or illness, or to care for a family member.

EDD has updated its UI/SDI poster (DE 1857A) by incorporating PFL information into the poster. EDD requires the notice to be posted at the workplace and a flyer (DE 2511) to be given to each employee. The poster and flyer, in English and Spanish, may be downloaded for printing by visiting www.edd.ca.gov/direp/dipub.htm#pfll