Employers May be Forced to Pay Unemployment Benefits to the Employed (On Strike).

Employers in California may be surprised to hear that a new bill is making its way through the California legislature, and (if it becomes law) would require employers to pay employees who refuse to work. Yes, you read that right. California Senate Bill 799 intends to give unemployment benefits to those who are currently employed but are on strike. Traditionally, unemployment benefits have been for those employees who have been laid off. In fact, the very name “unemployment benefits” would lead one to assume that those receiving unemployment benefits do not have a job. Well, a new bill would extend unemployment benefits to employees who are not laid off, still have a job, and simply refuse to work because the demands they made to their employer are not being met.

In California, the Unemployment Fund is entirely funded by employers through the employers’ tax contributions. This Unemployment Fund is used to pay unemployment benefits to employees when they are laid off by an employee. Currently, California’s Unemployment Fund is in debt to the federal government to the tune of at least $18 billion. It is basically insolvent.

Now, you may be asking: “How is this sustainable? How can we choose to extend benefits to more people by paying unemployment benefits even to those who are NOT unemployed?” Well, the short answer is: it probably isn’t sustainable. Clearly, California will need to raise the unemployment taxes on employers or cut benefits to employees. With an Unemployment Fund that is basically insolvent, extending unemployment benefits to people who are still employed will not end well for either the employers or the employees.

The new bill states in part that “[t]his bill would restore eligibility after the first 2 weeks for an employee who left work because of a trade dispute. The bill would codify specified case law that holds that employees who left work due to a lockout by the employer, even if it was in anticipation of a trade dispute, are eligible for benefits.” The current unemployment benefits in California are $450 per week for a maximum of 26 weeks. Yes, those who are refusing to work could be paid a total of $11,700!

Clearly, if Senate Bill 799 becomes law, there will be many negative repercussions. First, it will give organized labor, an already powerful force in politics today, even more leverage and power. Second, it may cause more jobs to be left unfilled as many employees will be incentivized to strike. After all, they get paid during a strike, and they will (presumably) get paid MORE after a strike. Worst of all, the employers and employees who are not participating in the strikes are ultimately being forced to participate by paying increased taxes or receiving less in benefits.