Total and Partial Unemployment TPU 5
This category of the Total and Partial Unemployment (TPU) Division of the BDG contains a discussion of the general principles involved in determining whether a claimant is "unemployed" within the meaning of Section 1252 of the UI Code, and the amount of benefits payable under Section 1279 to an unemployed claimant who has earnings allocated to a week claimed.
For more detailed discussions of these general principles, refer to the appropriate categories in this division.
A. Legal Provisions
- Section 1252
Under the provisions of the Unemployment Insurance Code, a person must be "unemployed" to be eligible for unemployment insurance benefits. The definition of "unemployed" for benefit eligibility purposes, is contained in Section 1252 of the Code which, in part, provides as follows:
" (a) An individual is 'unemployed' in any week in which he or she meets any of the following conditions:
(1) Any week during which he or she performs no services and with respect to which no wages are payable to him or her.
(2) Any week of less than full-time work, if the wages payable to him or her with respect to the week, when reduced by twenty-five dollars ($25) or 25 percent of the wages payable, whichever is greater, do not equal or exceed his or her weekly benefit amount . . .
(4) Any week during which he or she performs full-time work for five days as a juror, or as a witness under subpoena."
Based on the above provisions, an individual would not be unemployed in any week in which:
- He/she performs services on a full-time basis (excluding work as a juror or as a witness under subpoena).
- He/she performs no services, or only works part time, but he/she has wages payable which when reduced by $25 or by 25 percent of the wages (whichever is greater) equal or exceed his/her weekly benefit amount (WBA).
It should be noted that a person may be employed, as that term is commonly construed, and still be "unemployed" for a UI eligibility purposes.
- Section 1279
If a claimant is unemployed, as defined above, but he/she has earnings allocated to a week claimed, and is otherwise eligible, the amount of benefits payable is calculated according to the provisions of Section 1279 of the UI Code. This section provides, in pertinent part:
"(a) Each individual eligible under this chapter who is unemployed in any week shall be paid with respect to that week an unemployment compensation amount less the smaller of the following:
(1) The amount of wages in excess of twenty-five dollars ($25) payable to him or her for services rendered during that week.
(2) The amount of wages in excess of 25 percent of the amount of wages payable to him or her for services rendered during that week.
(b) The benefit payment, if not a multiple of one dollar ($1), shall be computed to the next higher multiple of one dollar ($1)."
This means that the first $25 or 25 percent (which is greater) of the wages allocated to a week will be disregarded. The amount remaining (i.e., earnings over $25 or 75 percent of the earnings, whichever is smaller) is deducted from the claimant’s weekly benefit amount. If the deductible amount equals or exceeds the WBA, Section 1279 would not apply since the claimant would not be unemployed within the meaning of Section 1252.
NOTE: Sections 1252 and 1279 do not apply to individual's claiming benefits under the Work Sharing Program. For such individuals, Section 1279.5 of the UI Code provides a separate definition of unemployed and a different method for calculating the reduced amount payable. See the Work Sharing Handbook for a complete discussion and special claim processing procedures.
B. Services Performed
One area to be examined in determining whether an individual is unemployed within the meaning of Section 1252 is whether "services" were performed and, if so, whether such services were performed on a full-time basis.
- "Services" Defined
In People v. Nest, the court examined the meaning of "services" in order to determine whether a self-employed claimant was unemployed for UI purposes. At the time this case was decided, the applicable provisions of the law (Section 9.2 of the Unemployment Insurance Act) read: "An individual shall be deemed 'unemployed' in any week during which he performs no services with respect to which no wages are payable, or in any week of less than full-time work if wages payable with respect to such week are less than his weekly benefit amount." Although this provision of the law has been replaced by Section 1252 of the UI Code, there has been no change in the language interpreted by the court in People v. Nest. Therefore, the following definition, as provided in that decision, is still applicable:
"The word 'service', not being defined in the act, must be given its common meaning, unless the context requires otherwise, which it does not. Merriam-Webster's New International Dictionary defines 'service' as, 'The occupation, condition, or status of a servant. Performance of labor for the benefit of another, or at another's command; - hired helper; - duty done or required."
The court concluded that this definition did not cover the activities of the claimant in the running of his own business. Therefore, a self-employed person (or an independent contractor) would be considered unemployed regardless of the number of hours devoted to the operation of his/her business if the earnings from self-employment are not excessive ( XE ).
(For a further discussion of self-employment, including guidelines for determining whether an individual is an employee or self-employed, see TPU 415. For a discussion of self-employment in terms of availability for work, see AA 415).
In accordance with the definition of services provided above, an employer-employee relationship must exist before an individual can be held to be performing services. This does not mean, however, that if an individual is still attached to an employer, from the standpoint that there has not been a complete severance of the employer-employee relationship, he/she is necessarily performing services.
Generally, the matter of whether services are being performed will be obvious since the individual will be engaged in some productive activity which is required or controlled by the employer. In some cases, however, the performance of services will be less apparent in that it will consist of some form of inactive duty. That services can also include periods of apparent inactivity or idleness is a principle of relative long-standing, and one which has been applied by the United States Supreme Court in a number of cases dealing with a variety of employment-related issues.
For example, in Missouri, Kansas, & Texas Railway Co. v. United States, the U.S. Supreme Court held that periods of time in which employees were inactive because of problems with the employer's equipment should be counted in determining whether the employees had worked over the legally permitted number of hours. In discussing the periods of inactivity the court said:
"One of the delays was while the engine was sent off for water and repairs. In the meantime the men were waiting, doing nothing. It is argued that they were not on duty during this period . . . But they were under orders, liable to be called upon at any moment, and not at liberty to go away. They were none the less on duty when inactive. Their duty was to stand and wait."
In Armour & Co. v. Wantock, the Supreme Court considered whether regularly occurring standby or idle time, which was required by the contract of employment, should be considered working time for the purposes of computing overtime pay. This case dealt with fire fighters who were required to be on the job site for 24-hour shifts, but who were only assigned specific duties for the first 9 hours. During the remaining 15 hours, these workers could eat, sleep, or engage in personal amusement but were required to remain on the employer's premises and to respond to alarms or other emergency situations at any time. In deciding that these 15-hour periods of apparent idleness constituted service to the employer, the court reasoned as follows:
"We think the Labor Standards Act does not exclude as working time periods contracted for and spent on duty in the circumstances disclosed here, merely because the nature of the duty left time hanging heavy on the employees' hands and because the employer and employee cooperated in trying to make the confinement and idleness incident to it more tolerable . . . .
. . . an employer, if he chooses, may hire a man to do nothing or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employment in a stand by capacity. Readiness to serve may be hired as much as service itself, . . . "
The principles illustrated by the above two Supreme Court cases should not be applied to situations in which an individual is subject to be called to work by his/her employer but does not have to report to or remain on the employer premises and is not entitled to compensation for the period during which he/she is on-call.
(For further discussion of situations involving services in a stand-by capacity, see TPU 80.05, TPU 105, and TPU 460.6.)
The principle that inactive duty time can constitute services for an employer was more broadly applied by the Supreme Court in Social Security v. Nierotko. This case dealt with an individual who had received a backpay award because of a wrongful discharge. In holding that the award was remuneration for services performed, and that, therefore, it was wages for the purposes of computing benefits under the Social Security Act, the court stated:
"We think that 'service' means not only work actually done but the entire employer-employee relationship for which compensation is paid to the employee by the employer . . . .
The decision of this Court leaves no doubt that a man's time may, as a matter of law, be in the service of another, though he be inactive . . . . When the employer is liable for backpay, he is so liable because under the circumstances, though he has illegally discharged the employee, he still absorbs his time . . . . he has reduced his employee to enforced idleness."
(For further discussion of backpay awards, see TPU 80.05 and TPU 460.6).
While these three Supreme Court cases did not deal with the payment of unemployment insurance benefits, the principles contained therein have been applied by the Appeals Board and the courts in California to cases involving eligibility for unemployment insurance benefits. Therefore, for purposes of determining eligibility under Section 1252, a claimant will be considered to be performing services during periods in which there is an employer employee relationship, AND:
- The individual engages in productive activity for the employer;
- The individual is required to hold himself/herself in readiness to work for the employer, and he/she receives, or is legally entitled to receive, compensation for such period(s);
- The individual is not permitted to work by the employer, but he/she is granted a backpay award for such period(s).
- Full-Time Work
If an individual is performing services, as defined above, he or she is not unemployed within the meaning of Section 1252 if the services constitute "full-time work".
a. General Principles
There is no definition of "full-time work" in the UI Code, Title 22 of the California Administrative Code, or in precedent decisions of the Appeals Board or the California courts. Therefore, the Department has traditionally given this term its common meaning. Webster's Third New International Dictionary defines "full-time" as:
"Employed for or working the amount of time considered customary or standard."
For the purposes of determining UI eligibility, full-time work in a week consists of the number of hours considered to be the standard or customary workweek for an occupation in a geographic or labor market area. In keeping with this broad, general definition the decision as to what is considered standard or customary would not be based on the employment history of a specific individual or on the practice of a particular employer. Furthermore, to the extent possible, there should be only one standard for each specific occupation in a geographic or labor market area. Therefore, if people who work in an occupation are employed in more than one industry in the area, what is considered the standard workweek should be based on the pattern in all of the industries and not merely on the pattern used by the industry in which the claimant has had the most recent or longest work experience. In attempting to identify the industry wide workweek for an occupation, one should focus on the type of work the claimant is performing (or performed during the week(s) in question) rather than on broad occupational categories. For example, the Dictionary of Occupational Titles groups doctors, accountants, and librarians into the same occupational category. One should not, however, consider the hours worked by other types of professional workers when determining the customary workweek of librarians.
In determining what is the standard or customary workweek (i.e., full-time work) for an occupation, the appropriate factors below should be considered.
(1) One indicator of what constitutes a week of full-time work is the number of hours worked per week by the majority of workers in an occupation during periods of normal workload.
In occupation A, individuals are hired to work hours ranging from 7 to 42 per week; however, the majority of people in this occupation work 35 hours per week year round. In the absence of other indicators, full-time work in this occupation would be 35 hours per week.
In occupation B, the majority of workers are employed 35 hours per week for 10 months of the year and for 42 hours per week in the remaining 2 months due to yearly workload increases. In this case, full-time work would be 35 hours per week, unless other factors indicate a different standard. This would also apply to the two-month period of increased working hours since normal workload periods are to be the basis for determining what is the customary workweek.
In occupation C, the majority of workers are employed 48 hours per week for 9 months of the year and laid off during the remaining 3 months. Some workers are retained - during the off-season and work 20 hours per week. For this occupation full-time work would be 48 hours per week, unless one of the other factors discussed below indicates a different standard. The fact that those employed during the off-season work only 20 hours per week does not result in a finding that the full-time standard would change from 48 to 20 hours during that period, since what is the customary workweek should be based on periods of normal workload and not on conditions during the off-season or periods of low workload. A fluctuating standard is considered particularly inappropriate in cases such as this since, one of the purposes of the unemployment insurance program is to partially alleviate the economic hardships resulting from involuntary loss of, or reduction in, employment.
(2) A second factor to consider in determining what is full-time work in an occupation is whether there are any laws, regulations, collective bargaining agreement provisions, or industry practices concerning the payment of overtime pay for hours worked over a specified limit. If so, full-time work would be the maximum number of hours that an individual could work before becoming eligible for overtime pay (unless other factors indicate a different standard). For example, various Orders of the Industrial Welfare Commission (published in Title 8 of the California Administrative Code) provide that for some industries and occupations no employee shall be employed more than 40 hours in any workweek unless the employee is paid one and one half times his/her regular rate of pay for hours worked in excess of 40 in a workweek. For occupations covered by such provisions, full-time work would be 40 hours per week, in the absence of other indicators.
(3) A third factor which would be considered for unionized occupations would be the provisions of any applicable collective bargaining agreements. Such agreements might specify what is considered to be the regular or standard workweek for various classes of workers.
In the event that consideration of the above factors results in a finding of different standards for the same occupation in a labor market area, the higher number of hours will be considered the full-time workweek. On the other hand, if no standard can be identified after examining all pertinent factors, 40 hours will be presumed to constitute a week of full-time work.
In occupation D, the majority of workers are employed year-round for 20 hours per week. Industrial Welfare Commission Orders pertaining to this occupation require overtime pay for hours worked in excess of 40 hours per week. There is no collective bargaining agreement pertaining to this occupation in the labor market area. Full-time work would be 40 hours per week since that is the higher of the two different standards.
In occupation E, the hours worked by each individual varies considerably throughout the year, ranging from 8 to 60 hours per week, depending on conditions affecting the industry. There are no laws or regulations requiring overtime pay for individuals in this occupation, and they are not covered by a collective bargaining agreement. Since no standard workweek can be identified, 40 hours will be considered to be full-time work.
b. Commission Salespersons
The above general principles do not apply to some individuals employed as commission salespersons. If a claimant's normal pattern of earning a living is to perform services (i.e., employer-employee relationship) as a commission salesperson, he/she would be considered to be working full time in any week in which he/she performs services in this occupation, regardless of the actual number of hours worked each week. This policy is based on the Appeals Board's findings in P-B-201.
In P-B-201, the Board considered the case of a claimant who normally worked full time as a garment cutter and who also was employed in his spare time as a real estate salesman working for commissions. During a seasonal layoff from his work in the garment industry, he worked up to five hours per day as a real estate salesperson but his hours and days of work, as well as his earnings, were irregular. When he filed his claim for benefits during the seasonal layoff from his regular occupation, he was denied benefits under Section 1252 on the grounds that he was fully employed because he could work as many or as few hours as he wished. In holding that the claimant was "unemployed" within the meaning of Section 1252, the Board said:
"If an individual normally makes his living in one occupational field such as the garment industry and merely supplements his income by spare time efforts as a commission salesman . . . it is our opinion that he is 'unemployed' when he is temporarily laid off from his work in his usual full-time occupation even though he continues to devote some of his time to his usual spare-time work. His primary occupation is his normal full-time work, and it is the loss of this work and the desire to obtain more of such or similar work which causes him to claim unemployment benefits;
On the other hand, if the individual's normal pattern of earning a living is to devote his entire working time each week to work as an employee commission salesman, he is fully employed without regard to his 'wages' whether during a particular week he works 80 hours or 20 hours . . .
"If an individual, during a period of unemployment becomes an employee commission salesman, in an attempt to secure some funds until he is able to obtain work in his usual occupational field which is other than commission sales, it is our opinion that whether he is or is not 'unemployed' depends not so much on whether he devotes 20 hours or 80 hours in this field of fluctuating hours and income but on whether he may realistically be considered as still 'unemployed' insofar as his usual occupational field is concerned or be considered as having changed his normal work pattern to the new occupational field of commission sales. Because of the myriad variations in patterns of employment, each situation must be considered separately to determine as a practical matter what is the claimant's primary occupation; has he remained unemployed so far as that or similar occupations are concerned, or has he obtained temporary or permanent substitute work with which he fills all of his normal working hours considering the nature of the work."
Another area to be examined in determining a claimant's eligibility for benefits under Sections 1252 and 1279 is whether he/she has "wages" payable with respect to a week of benefits claimed.
- Wages Defined
Both Sections 1252 and 1279 contain the following definition:
"For the purpose of this section only 'wages' includes any and all compensation for personal services whether performed as an employee or as an independent contractor or as a juror or as a witness . . ."
It should be noted that this definition of wages includes earnings from work as an independent contractor (self-employment) and from services as a juror or witness even though the amount of time devoted to such work or services does not affect the claimant's eligibility under Section 1252.
The UI Code also provides that certain types of payments for personal services are not considered wages within the meaning of Sections 1252 or 1279. Some examples are:
. . . any payment received by a member of the National Guard or reserve component of the armed forces for inactive duty training, annual training, or emergency State active duty. (Sections 1252 and 1279)
. . . payments to an individual under a plan or system, established by an employer which makes provisions for his employees generally or for a class or group of employees, for the purpose of supplementing unemployment insurance benefits (Section 1265)
. . . payments to an individual for vacation pay . . . which was earned but not paid for services performed prior to termination of employment . . . (Section 1265.5)
(Discussions about the various types of payments claimants may receive are included in the other categories of this Division of the BDG.)
- Allocation of Wages
For the purposes of determining eligibility under Sections 1252 and 1279, wages are generally allocated (i.e., considered earned) during the period(s) of time during which the claimant performed the services to which the wages pertain. The date the worker is paid for the services performed is usually immaterial. For example, if a claimant works on Monday, June 18 and receives payment for that work on July 2, the wages would be allocated to the week ending June 23. In applying this general rule it should be kept in mind that services can include or consist of periods of inactive duty. Thus, if an individual earns wages for being on standby status as an employee on Friday, June 22, for which she receives payment on July 2, the wages would be allocated to the week ending June 23.
There are several types of payment which are not allocated in accordance with this general rule. Some examples are residual payments and holiday pay that is not paid until the individual returns to work. (To locate discussions concerning the allocation of specific types of wages, see TPU 460.)
It should be noted that the general method for allocating wage to determine eligibility under Sections 1252 and 1279 is different from the method used to establish claim validity and to determine the WBA and MBA of a valid claim. The reason for this difference is the different terminology used in the pertinent sections of the UI Code. Section 1252 speaks of "wages payable . . . with respect to a week" and 1279 reads "wages payable to him or her for services rendered during the week." In contrast, Section 1275 provides, "Unemployment compensation benefit award computations shall be based on wages paid in the base period."
Therefore, in the examples given above, wherein the wages were allocated to the week ending June 23 for 1252 and 1279 purposes, these same wages would be allocated to the July-September quarter for claim computation purposes (for further inform concerning benefit computation factors, see MS 60).
- Amount of Wages
Although a claimant is required to report to the Department to total gross wages payable, only a portion of those wages affects the claimant's eligibility for benefits under Sections 1252 and 1279.
If the wages allocated to a week claimed are $25.99 or less, such earnings are disregarded and, hence, have no effect on the claimant's eligibility for benefits. If the wages are between. $26 and $99. 99, $25 of the wages are disregarded and the amount remaining is considered to be deductible. If the wages are $100 or more, 25 percent of the wages are disregarded and, therefore, the deductible earnings would be 75 percent of the total wages.
When the deductible earnings equal or exceed the claimant's WBA, he/she is ineligible for benefits under Section 1252 since he/she does not meet the definition of an unemployed individual. When the deductible earnings are less than the claimant's WBA and the claimant has worked less than full-time, he/she would be ineligible for full weekly benefits under Section 1279. If otherwise eligible, the claimant would be paid the difference between his/her WBA and the deductible earnings.
Claimant F worked less than full time and earned gross wages of $85 during the week ending August 4. F's WBA is $55. The amount of deductible earnings is $60 ($85 minus $25) which exceeds the claimant's WBA. Therefore, F is ineligible for benefits under Section 1252.
Claimant G worked less than full time and earned gross wages of $120 during the week ending August 11. G's WBA is $85. The amount of deductible earning is $90 ($120 minus 25% of $120) which exceeds the WBA. Therefore G is ineligible for benefits under Section 1252.
Claimant H worked less than full time and earned gross wages of $93 during the week ending August 18. H's WBA is $95. The amount of deductible earnings is $68 ($93 minus $25) which is less than the WBA. Assuming that H meets all other eligibility requirements, the amount payable would be $27 ($95 minus $68).
Claimant I worked less than full time and earned gross wages of $200 during the week ending August 25. I's WBA is $166. The amount of deductible earnings is $150 ($200 minus 25% of $200) which is less than I's WBA. Assuming that I meets all other eligibility requirements, the amount payable would be $16 ($166 minus $150).