Trial Court: San Francisco Superior Court Trial Judges: Hon. Charlotte Walter Woolard Hon. Paul H. Alvarado (San Francisco County Super. Ct. No. CPF-08-508192)
CERTIFIED FOR PUBLICATION
Appellants, unemployed California residents previously employed as farmworkers or in other low wage or minimum wage jobs, experienced significant delays in receiving benefits due them under the California Unemployment Compensation Program (Unemp. Ins. Code, § 100 et seq.), suffering significant hardships as a result. In 2008, they sought a writ of mandate from the San Francisco Superior Court directing the Governor and other state officials*fn1 to ensure in specified ways that appellants and others eligible for such benefits received them within the time periods specified in federal regulations. Declining to do so under a state doctrine of judicial abstention, the trial court granted respondents' motion for judgment on the writ. (Code Civ. Proc., § 1094.) Appellants timely appealed that ruling. We affirm.
The California Unemployment Insurance Program
The California Unemployment Insurance Program is part of a national program established under the Social Security Act (42 U.S.C. § 501 et seq.), the Federal Unemployment Tax Act (26 U.S.C. § 3301 et seq.) (FUTA), and the California Unemployment Insurance Code (Unemp. Ins. Code, §§ 100-101). FUTA imposes a federal tax on employers based on the total wages paid employees. (26 U.S.C. § 3301; 42 U.S.C. §§ 1101, 1104.) Employers receive a credit against that federal tax for payments made to a federally approved state unemployment insurance fund which finances the actual cost of benefits provided unemployed persons. (26 U.S.C. § 3302.) Administrative costs incurred by the state are paid for by the federal government if the state complies with certain federally mandated requirements. (42 U.S.C. §§ 502, 503, 1101.) One of these requirements is the adoption of administrative measures "reasonably calculated to insure full payment of unemployment compensation when due." (42 U.S.C. § 503(a)(1).) Additionally, appeals from the denial of unemployment benefits must be heard and decided by a designated state agency with the "greatest promptness that is administratively feasible." (20 C.F.R. §§ 650.1, 650.3(a).)
In California, the unemployment insurance (UI) program consists of three phases: (1) UI claims are submitted to and initially processed by the Employment Development Department (EDD) (Unemp. Ins. Code, § 1326 et seq.); (2) any appeal from EDD's benefit determination is heard by an administrative law judge (ALJ) employed and assigned by the California Unemployment Insurance Appeals Board (CUIAB) (referred to as the "first-level appeal"); and (3) any appeal of the ALJ's determination is submitted to and decided by the appellate division of the CUIAB based upon the record, including the transcript of the hearing before the ALJ (referred to as the "second-level appeal"). (Unemp. Ins. Code, §§ 401, 404, 409.)
Pursuant to the Social Security Act (42 U.S.C. §§ 503(a)(1) and (b)(2), and 1302), and implementing federal regulations (20 C.F.R. §§ 640.1-640.9), state UI programs' compliance with federal standards for prompt payment of unemployment compensation is annually reviewed by the United States Department of Labor (DOL). (20 C.F.R. § 640.6(a).) To facilitate such review, EDD and CUIAB, in conjunction with the Labor and Workforce Development Agency (LWDA) (which oversees six departments, boards and panels serving California businesses and workers, including EDD and CUIAB), jointly submit for DOL review and approval an annual State Quality Service Plan reporting on their performance in the processing of UI claims and appeals. The state agencies additionally submit for review and approval quarterly "corrective action plans" (CAPs) describing the steps CUIAB has taken to improve performance, and identifying other methods that can be designed to achieve that goal.
Under DOL regulations prescribing the timely processing of UI claims, a state is in substantial compliance with the federal timeliness requirements if at least 87 percent of benefit payments are made within 14 days following the end of the first compensable week after filing (20 C.F.R. § 640.5),*fn2 and the responsible state agency resolves "at least 60 percent of all first level benefit appeal decisions within 30 days of the date of appeal, and a least 80 percent of all first level benefit appeal decisions within 45 days." (20 C.F.R. § 650.4(b).)
California Does Not Comply With the Federal Timeliness Requirements
The trial court received abundant undisputed evidence California has been unable to meet federal timeliness standards for processing UI claims and appeals for more than a decade.
The third amended petition alleges, and respondents acknowledge, that in none of the 13 months between March 31, 2008 and March 31, 2009, did EDD process 87 percent of benefit payments within 14 days following the end of the first compensable week, as required by the regulatory definition of "substantial compliance" with the federal timeliness requirements. In March 2008, it processed only 66.90 percent of such claims and in March 2009 the percentage was 70.40 percent. EDD's performance thereafter continued to be deficient. In a letter dated April 26, 2010, Jane Oates, Assistant DOL Secretary for Employment and Training, informed the Secretary of the California Labor and Workforce Agency (a cabinet level agency which includes EDD and CUIAB) that the state had been designated by DOL as being "At Risk" with regard to its ability to fulfill federal statutory requirements applicable to the administration of its UI program, in part because California made only 62.8 percent of payments within 14 days of the first compensable week and out of the 53 states and jurisdictions, California ranks 53rd for the performance year ending March 31, 2010." She also pointed out that California had failed to achieve the 87-percent regulatory standard for nine of the past ten years.
Judging from their pleadings below and the briefs they have filed here, it appears that appellants' major concern is not EDD's delay in processing benefit payments to eligible claimants, who file no CUIAB appeal, but CUIAB's much greater delay in processing first and second level appeals from adverse EDD determinations. As indicated, CUIAB is required by federal regulations to resolve "at least 60 percent of all first level benefit appeal decisions within 30 days of the date of appeal, and a least 80 percent of all first level benefit appeal decisions within 45 days." (20 C.F.R. § 650.4(b). The CUIAB's failure to meet these timelines is egregious.
As long ago as 2001, when the problem arose, the CUIAB was able to resolve only about 59.3 percent of first-level appeals within 30 days, and only 77.3 percent of first-level appeals within 45 days. The situation has since become much worse.
In a declaration, Alberto Roldan, then Chief ALJ and Acting Director of the CUIAB, described and explained the growing backlog of unresolved UI claims and the remedial actions jointly taken by CUIAB and DOL. Beginning in 2007, Roldan stated, high unemployment rates dramatically increased CUIAB's workload and diminished its ability to meet DOL's timeliness requirements. As the economy worsened and thousands of newly unemployed persons became eligible for UI benefits, federal authorities approved four extensions of the time within which the benefits must be provided. The number of appeals thereupon increased significantly. In 2007, 256,817 new appeals were filed. By 2009, the annual increase had grown to 389,194, and during the first six months of 2010, 225,621 new appeals had been filed.
These numbers, Roldan stated, "overwhelmed California's UI program." For example, he said, first-level appeal statistics dropped from about 31.1 percent of appeals disposed of within 45 days in 2007, to approximately 5.6 percent in December 2009. The average case age for first-level appeals went from 25 days in June 2005 to 57 days in August 2009. At the end of June 2010, it had improved to 46 days.
CUIAB's ability to process first level appeals was also undermined when, on July 1, 2009, in response to an extended budgetary impasse, Governor Arnold Schwarzenegger directed state employees, including CUIAB staff, to take three furlough days per month through June 2010. The effect of the mandated furloughs was a 14-percent reduction in the work time available to process appeals, which reduced the number of cases CUIAB was able to resolve by 8,620 cases per month. On February 23, 2012, we granted respondents' motion for judicial notice of the fact that, insofar as it related to employees of EDD and the CUIAB, the furlough program implemented in 2009 ended on July 28, 2010 when then Governor Arnold Schwarzenegger issued Executive Order No. S-12-10, which exempted those employees from the program.*fn3
In response to the worsening situation DOL, CUIAB and EDD intensified their collaborative corrective efforts. On February 5, 2010, after reviewing these efforts, DOL issued a10-page study entitled "California Unemployment Insurance Appellate Board Review Report," a copy of which was received in evidence by the trial court. The report identified DOL's "concerns" and made responsive recommendations.
Several of these concerns sufficiently illustrate the nature and consequences of the many problems DOL perceived. A major DOL concern was that ALJ reversals of the denial of benefits, or determinations of the amount of overpayment where denials were upheld, were not communicated, or "transferred," by a CUIAB "appeals office" to an "adjudication center," on average, for 18 days, which is much longer than the five days most states take to act on such administrative decisions. The DOL recommended rectification of the problem by electronically transferring ALJ decisions to the adjudication centers. Another DOL concern was that although hearings are conducted entirely by telephone in many states, including large ones like Texas and Florida, and the practice has been upheld by the courts and shown to save significant amounts of time and money, in California only 10 percent of hearings are conducted by telephone. DOL recommended that "CUIAB should conduct a higher percentage of hearings by telephone." DOL was also concerned that "decision processing from dictation to the typing pool and back" could take as long as 55 days. DOL recommended diminishing the time by "[g]reatly expanding the use of voice-to-text software," and noted that DOL had recently awarded the CUIAB $147,679 to provide 60 workstations with the necessary hardware and software to facilitate use of this technology. DOL was also critical of the fact that ALJ caseloads were inflexibly determined by collective bargaining agreements and could not be easily adjusted to accommodate "swings in the workloads." Its report recommends that the negotiation of these contracts should provide for such flexibility through the adoption of "maximum workloads." Finally, DOL expressed concern about the relationship between EDD and the CUIAB, and recommended that the agencies "work collaboratively to improve processes and implement a continuous improvement cycle to gather feedback from the field and to evaluate any processes implemented."
When Assistant DOL Secretary Oates informed California it had been placed "At Risk," nearly three months after DOL issued its report, she noted that the percentage of appeals decided within 30 days was 2.5 percent, far below the 60 percent federal standard, ranking California last among the 50 states. She also observed that California had failed to meet the federal promptness standard since 2002, demonstrating that the State's performance "has continued to be consistently and significantly below acceptable performance standards . . . ."
Hilda Solis, Secretary of the DOL, has declined to pursue federal defunding of nonconforming state UI programs--the only sanction available to the federal government to insure compliance with its timeliness regulations (42 U.S.C. § 503(b)) --because she feels it would be inimical to the interests of the beneficiaries of such programs, and DOL is ...