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Employment Development Department
Employment Development Department

Miscellaneous MI 15 - Monetary Determinations

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.

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:

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.

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:

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:

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:

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.