Miscellaneous MI 15 - Monetary Determinations
This section discusses the concept of the "base period" and describes earnings in the base period that may or may not be used as the basis of the claim. The "lag period" and its effect on later claims is also discussed. All references in this section are to the Unemployment Insurance Code, unless otherwise indicated.
A. Benefit Year
A "benefit year" is the 52-week period following the filing of a valid claim. Filing a valid claim and establishing a benefit year is the "starting point" for all claims.
Benefit year is defined in Section 1276, which states in part:
"Benefit year," with respect to any individual, means the 52-week period beginning with the first day of the week with respect to which the individual first files a valid claim for benefits. . . ."
This means that a benefit year will begin on Sunday and end on Saturday.
B. Base Period
The term "base period" refers to the four calendar quarters on which the claim is based. Which four quarters are to be considered base period quarters is determined by Section 1275.
|If the Claim begins in:||The Base Period is the four calendar quarters ending the last day of the previous:|
|January - February - March||September|
|April - May - June||December|
|July - August - September||March|
|Ocober - November - December||June|
C. Base Period Wage Credits
The majority of employers doing business in the State of California must register with the Department (Section 1086) and make reports of wages paid to employees and any taxes due (Section 1088). In addition, an employer must pay quarterly taxes (Section 1110) upon his gross payroll, subject to certain adjustments to the employer’s balance (Section 977 and following sections) in a reserve account (Section 1025 and following sections). The employer may not deduct "in whole or in part from the wages of individuals in his employ" (Section 976). The wages paid by the employer are reported to EDD by name and Social Security number (Title 22, Section 1088-1).
Nonprofit employers, including school districts, may choose elective coverage (Sections 701 through 713) or reimbursement financing (Sections 801 through 832); self-employed persons may choose elective. Procedures are similar to those shown above for employers opting for either reimbursement financing or elective coverage.
Refer to MI 75 for information regarding wages based on Military Service and MI 50 for information on alien base period wage credits.
1. Services Excluded From Coverage
The following types of service are considered "excluded" for purposes of establishing an unemployment insurance award.
- Domestic service performed in a private home, if the employer paid less than $1,000 in any quarter in the current or preceding calendar year (Section 629).
- Service performed as a transcriber of depositions, court proceedings, and hearings performed away from the office of the requesting individual or entity (Section 630).
- Service performed by a child under age 18 in the employ of his father or mother (Section 631).
- Service performed by an individual in the employ of son, daughter, or spouse (Section 631).
- Service performed in the employ of a church or association of churches, or organization operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church or association of churches (Section 634.5).
- Services performed by an ordained, commissioned, or licensed minister in the exercise of his/her ministry, or other member of a religious order performing his/her duties as required by the order (Section 634.5).
- Services performed for a public entity as:
- An elected official.
- A member of a legislative body or of the judiciary.
- A member of a State National Guard or Air National Guard Unit.
- An employee serving on a temporary emergency basis (fire, snow, earthquake, etc.).
- In a position which is designated by State law as either of the following:
a. An individual serving in a major nontenured policymaking or advisory position.
b. An individual serving in a policymaking or advisory position not ordinarily requiring more than eight hours per week to perform.
- A recipient of rehabilitation services.
- A recipient of an unemployment work-relief program if financed wholly or in part by a federal or State agency.
- An inmate in a custodial or penal institution.
- An individual under age 18 performing services in delivery and distribution of newspapers (but excluding delivery or distribution to a point for subsequent delivery).
- An individual selling newspapers at a fixed price and who retains the profit over his/her cost (Section 634.5).
- Services performed for employers covered under an unemployment compensation system established by a law of the United States, e.g., railroad workers under the Railroad Retirement Unemployment Insurance program (Section 635).
- Service performed for the election campaign of a candidate for public office or a committee (Section 637).
- Service performed as an officer or director of a corporation, by the sole shareholder when the corporation is not subject to FUTA (Section 637).
- Domestic service performed in a local college club or college fraternity/sorority if the employer paid less than $1,000 in quarter during current or preceding calendar year (Section 639).
- Services performed which are not in the employing unit’s regular trade or business and which paid less than $50, or required less than some portion of 24 days’ service and was not in the course of the employer’s regular business (Section 640).
- Services performed in the employ of a school, college, or university:
- By a student who is enrolled and regularly attending classes.
- By the spouse of such student if the spouse is informed in advance that the employment is provided under a financial aid program, and the employment will not be covered for UI or DI purposes (Section 642).
- Service performed by a full-time student for an organized camp, if the worker is either enrolled in school full-time, or is between academic years or terms and there is reasonable assurance that the student will re-enroll as a full-time student in the succeeding academic year or term (Section 642.1).
- Service performed in the employ of a foreign government (Section 643).
- Service performed in the employ of an instrumentality wholly-owned by a foreign government which does not have exchange provisions with the U.S. (Section 644).
- Service performed for an international organization.
- Service performed as a student nurse in employ of State-approved hospital or nurse’s training school, if enrolled and regularly attending classes (Section 645).
- Service performed by an intern in a hospital (Section 645).
- Service performed by an individual under age 22 in a work-experience program administered through a school (Section 646).
- Service performed for a hospital by a patient of the hospital (Section 647).
- Service performed outside the U.S. on a vessel or aircraft not of American registry (Section 648).
- Service performed by an individual under the age of 18 in delivery and distribution of newspapers, etc., unless his/her principal occupation is full-time work and whose attendance at school is incidental to full-time employment (Section 649).
- Service performed by an individual under the age of 18 in sale of newspapers, etc., to the ultimate consumer, who sells the product at a fixed price and who retains the profit over his/her cost (Section 649).
- Service performed as a real estate, mineral, oil and gas, or cemetery broker, if the individual is licensed or selling other than in a retail establishment by demonstration or in the home, is paid essentially on a commission basis rather than on the basis of hours worked, and a written contract exists between the individual and the person for whom the services are performed to provide that the individual will not be treated as an employee (Section 650).
- Service performed as a real estate, cemetery, or direct sales salesperson, if the individual is licensed or selling other than in a retail establishment by demonstration or in the home, is paid essentially on a commission basis rather than on the basis of hours worked, and a written contract exists between the individual and the person for whom the services are performed to provide that the individual will not be treated as an employee (Section 650).
- Service performed as a golf caddy or club-carrier (Section 651).
- Service performed as an elected or appointed official in the employ of a nonprofit fraternal corporation or association which is not subject to FUTA, if earnings do not exceed $100 per month (Section 652).
- Service performed in the employ of a baseball club while on profit/expense sharing status rather than fixed salary (Section 653).
- Service performed by a free-lance jockey or exercise boy who is licensed by the Horse Racing Board (Section 654).
- Service performed for occasional or incidental professional engagements in California by a professional athlete who is not a citizen or resident of the U.S. (Section 655).
- Professional services performed by a consultant working as an independent contractor; generally requires a degree from a four-year institution of higher education and is limited to attorneys, physicians, dentists, engineers, architects, accountants, and scientists in physical, chemical, natural, and biological sciences (Section 656).
2. Wages Excluded From Coverage
The Unemp. Ins. Code specifically excludes certain wages from use for the purpose of establishing a claim. The result of the exclusion is that the employer is not required to consider such payments as "UI taxable." Even though these wages are excluded from establishing a claim, some must be declared as earnings by the claimant when he or she certifies for benefits (See BDG TPU section which discusses the specific type of payment.). Excluded wages include:
- Business expenses connected with the employment (Section 929).
- Limitation on maximum taxable wages (over $7000) in a calendar year (Section 930).
- Insurance or annuities paid under a plan or system that provides for employees generally (Section 931).
- Sickness or accident disability, including medical, hospital, or death benefits received under a Worker’s Compensation law (Section 931).
- Third-party sick pay (Section 931.5).
- Certain federally-protected retirement trusts, annuities, pensions, deferred compensation, and employee welfare plans (Section 934).
- Employer contributions for Social Security (Section 935).
- "Other than cash" payments unless the employee’s work is considered as being in the course of the employer’s trade or business, but excluding domestic service in a private home, college club, or fraternity or sorority (Section 936).
- Moving expenses, unless the employee is not taking the same deduction (Section 937).
- Disability retirement or death benefits, if the employer’s plan makes provision for employees generally (Section 938).
- Contributions, payments, or service toward a group legal plan (Section 938.1).
- Payments for educational assistance programs, dependent care programs, cafeteria plan, or other benefit that the employee would not have to claim as income on his or her federal income tax (Section 938.3).
- Reserve or National Guard payment for inactive duty training, annual training, or emergency state active duty (Section 938.5),
- Survivor’s benefits on behalf of a deceased person, whether paid to an estate or to an individual, paid in the calendar year after death (Section 938.7).
- Supplemental unemployment benefits (Section 1265).
- Vacation pay earned but not paid prior to termination (Section 1265.5).
- Holiday pay earned but not paid prior to an indefinite layoff (Section 1265.6).
- Sick pay earned but not paid prior to termination (Section 1265.7).
- Severance or "termination" pay paid to an individual displaced because of the expansion of a redwood park (Section 1265.9).
3. Disputed Employment Status
A claimant may discover that he or she has not been credited with wages earned during the base period for a particular employer. In many cases, the employer has reported the wages under a Social Security number other than the one the claimant has used to file the claim, an innocent error on either the claimant’s or the employer’s part. This problem is generally easily corrected when the claimant either recognized that he has given the Department an incorrect Social Security number, or comes to the field office with his or her check stubs or W-2 form indicating that the employer has used another number. The claimant has 20 days in which to protest the accuracy of the computation of wages, but that period may be extended for good cause.
Occasionally, the employer will fail to file a return or to list the employee on the return filed, either because the employer did not know the claimant had to be reported or for other reasons. These are "disputed employment status" cases that are properly referred to the local Employment Tax District Office (ETDO) for resolution. "Disputed employment status" cases are also cases in which the employer does not agree he or she is the correct last employer, or believes the wages should be reported by another entity, or the employer believes the claimant was an independent contractor. Regardless of the reason for the "disputed employment status," the status determination is always made by the ETDO, not the field office interviewer. (Refer to FOMs Determinations, Completion, and Appeals for procedural information.)
4. Wages Earned but not Paid
The claimant may, with a degree of logic, contend that since wages must be reported on the continued claim when earned rather than when paid, the same should hold true for base period wage credits. However, Unemp. Ins. Code, Section 1281(a) (3), provides wages must be paid before they can be included in a particular quarter:
"For new claims filed with an effective date beginning on or after January 1, 1992, . . .
(A) He or she has been paid wages for employment by employers . . . ."
Example: The claimant’s base period is Sunday, April 1, through Saturday, March 31. The claimant’s payday is on Monday. On Monday, March 26, the claimant was paid for her prior week’s work (Monday through Friday, March 19 through March 23). On Monday, April 2, the claimant also received a check for her prior weeks work (Monday through Friday, March 26 through March 30). Only the check for Monday, March 26, is in the base period of the claim. The check paid on Monday, April 2, even though the wages were earned in March, is credited to the following quarter because it was paid in that following quarter.
- Exception: Section 1281(d) also provides, "In determining wages paid, ’wages’ includes wages due to any individual but unpaid within the time limit provided by law." (Emphasis added.) The determination as to whether the wages are to be credited to the claimant for an earlier quarter than the quarter in which the wages were actually paid, will be made by the ETDO. If base period wages are still unpaid at the time the claimant files the claim, the ETDO will allocate the "due but unpaid" wages to the proper base period quarter(s). To achieve fairness, the ETDO will also apportion wages which are paid infrequently or irregularly (Title 22, Section 1282-1).
5. Non-California Wage Credits
A claimant’s weekly benefit amount and/or maximum award may be increased by inclusion of out-of-state wages not previously used on a claim. This is a combined wage claim (CWC), which is subject to the following limitations on filing:
"- The claimant may not elect to file a California CWC if he or she has a claim on file in another state whose benefit year has not ended and on which benefit entitlement remains, unless, the claimant is subject to either an indefinite disqualification or a disqualification that lasts the length of the claim, or the claimant is under disqualification for a seasonal restriction. " Title 22, Section 455.5-7(b).
Refer to FOM Interstate for further information.
6. Wages in Self Employment
A self employed individual, or group of individuals, may apply to the Department for elective unemployment insurance coverage (Elective Coverage). Elective Coverage is subject to various provisions of the Code, including:
- The individual(s) must intend to be in business for at least two calendar years (Section 701).
- The individual(s) is normally and continuously engaged in a regular trade, business, or occupation (Section 704).
- The regular trade, business, or occupation is not seasonal in nature (Section 704).
- The individual(s) has filed returns for the maximum amount of taxable wages (Section 708), paid the contributions (taxes), and has no unpaid tax liability (Section 704).
- The individual(s) has not been convicted under Section 2101 for UI fraud in the preceding eight consecutive calendar quarters (Section 704).
NOTE: The self-employed person may also elect disability insurance coverage.
D. The "Lag Period"
Section 1277 of the UI Code prevents an individual from establishing valid claims in two successive benefit years without having reestablished an attachment to the labor market subsequent to the effective date of the first claim.
The "lag period" is the space of time between the end of the base period of the claim and the effective date of the claim itself. Earnings during the lag period are not used in computing the award of the claim. Whenever these "lag period" wages appear in the base period of a subsequent claim, the 1277 test applies.
In enacting Section 1277, the Legislature placed a "test" upon the claimant’s attachment to the labor market before a second claim could be established on "lag period" wages. The test consists of both an earnings and work requirement.
1. The Earnings Requirement
Section 1277(b) requires that the claimant have had, during the old benefit year, sufficient wages of the type required to establish a claim. This requirement means that, for claims established after January 1, 1992, the claimant must have been:
- Paid wages for employment of not less that $1300 during the "high quarter" of the base period of the new claim, or
- Paid wages for employment of not less than $900 in the "high quarter" of the new claim, and have earnings of 1.25 times those "high quarter" earnings in the base period of the new claim. (Example: If "high quarter" earnings are $900, the claimant must have total base period earnings of at least $1125. If "high quarter" earnings are $1200, the total base period earnings required are at least $1500., etc.)
While only earnings in covered employment may be used to establish an award, any and all compensation as an employee may be used to satisfy the earnings requirement for clearing the lag period test of Section 1277. This includes compensation from nonsubject employment, out-of-state employment, and where there is elective coverage, earnings in self-employment. It also includes fees for performance as a juror or court summoned witness, in lieu of notice pay, as well as any vacation pay, backpay, sick leave pay or holiday pay which is not excluded from the definition of Wages in Section 1265.5.
Compensation for any military service, whether on an active duty basis or a member of the reserves, constitutes employment. Therefore, it can be used to satisfy both the earnings test and the "some work" test as described below.
2. The "Some Work" Requirement
The "some work" requirement is in addition to the earnings requirement described above. This requirement guarantees that the claimant has shown some attachment to a labor market during his old benefit year.
"Some work" is defined in Section 1277-2 of Title 22 as follows:
"Work" means services performed by a person for remuneration under a bona fide contract with and payable by another person, including any employing unit, and includes services performed for income or earnings in self-employment, or as an employee as defined in Section 621 of the Code, or as an independent contractor for a principal or as an employee under the usual common law or admiralty rules regardless of whether the services are in employment under the Code."
Thus, if an individual has performed any personal service as an employee or self-employed individual during the test period for which he received remuneration in any amount, the second condition for clearing the lag test is satisfied.
For example, in P-B-156, the claimant received sufficient residual wages during the test period to meet the earnings requirement of Section 1277. Although he had not worked in an employer-employee relationship during the 52 weeks following the effective date of his prior claim, he had earnings from self-employment during this period. In ruling that the claim was valid under Section 1277, the Board said:
". . . The Department’s regulation 1277-2 which was adopted to implement and interpret the "work" requirement of Section 1277 included self-employment. We believe this was a correct interpretation and . . . hold "self-employment" does satisfy the "some work" requirement of Section 1277."
In some cases, the claimant may receive remuneration for a period during which he actually did not work, such as standby, idle-time, backpay, or show-up pay. Such compensation satisfies the requirement for performing "some work" since the claimant was hired to hold himself in readiness to perform services. His time is thus in service of another, even though he is inactive.
On the other hand, the receipt of sick leave, vacation pay, or in lieu-of-notice pay does not satisfy the "some work" requirement for clearing the lag test. While these payments may constitute wages under Section 1252 or lag period earnings for satisfying the first condition of the 1277 test, they do not satisfy the requirement for performing "some work," since they do not constitute remuneration for performance of a service.
3. Using Disability Insurance or Workers’ Compensation
Disability Insurance (DI) and Workers’ Compensation (WC) payments, including benefits paid in or through another state or by the federal government, may be used to satisfy the requirements of Section 1277 under either of the following conditions:
- If the claimant was not paid any benefits on the prior claim, and was disabled and entitled to receive either DI or WC to compensate for wage loss, the claimant may use the amount of DI or WC paid to satisfy the earnings requirement; or
- If the claimant was paid benefits on the prior claim and has satisfied the "some work" requirement, the claimant may use twice the dollar amount of the DI or WC payments to meet the earnings requirement.
NOTE: DI and WC payments are not usable as "wages" to determine the award on the claim, they are usable only for the specific purpose of validating earnings from the lag period.