Reserve Accounts under the UI Code

California’s Unemployment Insurance Code, in Division 1, Part 1, Chapter 4, Article 4, deals with reserve accounts. Section 1025 requires the director to keep separate records of the amounts paid into the fund by each employer in his or her own behalf, or chargeable to him or her as benefits.

In addition, the amount of employer contributions, advances, or reimbursements, and all other amounts payable to the fund, are to be pooled and available to pay unemployment compensation benefits to any employee entitled thereto, regardless of the source of contributions or any other amounts.

Section 1026 requires the director to maintain a separate reserve account for each employer, and to credit each reserve account with all the contributions paid on his or her behalf. Unemployment compensation benefits paid to an unemployed individual during any benefit year must be charged against the reserve account of his or her employer during his or her base period. 

If the individual performed services in employment for more than one employer during his or her base period, unemployment compensation benefits paid to him or her are to be charged against the respective reserve accounts of the employers in the proportion that the total wages paid to the individual in employment for each employer bears to the total wages paid to the individual in employment for all employers during the base period.

Section 1026.1 prohibits an employer’s reserve account from relief of charges relating to a benefit overpayment if the department determines that the payment was made because the employer, or an agent of the employer, was at fault for failing to respond timely or adequately to requests of the department for information relating to the individual claim for unemployment compensation benefits.

In addition, the department must make this determination when the employer or agent fails to respond timely or adequately in two instances relating to the individual claim for unemployment compensation benefits.

Section 1027.5 states, on the computation date each year, the amount each employer’s net balance of reserve is more negative than 21 percent of the employer’s average base payroll must be canceled from his or her reserve balance.

Section 1028 provides that the charge of unemployment compensation benefits to an employer’s account must be made in such manner as to include as of each computation date all unemployment compensation benefit payments made on or before the computation date.

Section 1029 specifies that, whenever an employer ceases to pay wages in employment, the reserve account of the employer, unless it has been transferred, are to be canceled on the records of the department after a period of three consecutive years has elapsed following the latest calendar quarter in which the employer paid wages in employment.

Section 1030 states that an employer that is entitled to receive notice of the filing of a new or additional claim may, within 10 days after mailing of the notice, submit to the department any facts within its possession disclosing whether the claimant left the employer’s employ voluntarily and without good cause or left under one of the following circumstances: The department is required to consider specified factors together with any information in its possession.

Section 1030.1 states that, if the employment of an individual is terminated due to his absence from work for a period in excess of 24 hours because of his incarceration and he is convicted of the offense for which he was incarcerated or of any lesser included offense, the individual is to be deemed to have left his or her work voluntarily without good cause.

In addition, a plea or verdict of guilty irrespective of whether an order granting probation or other order is made suspending the imposition of the sentence or whether sentence is imposed but execution thereof is suspended, or a conviction following a plea of nolo contendere, is deemed to be a conviction within the meaning of this section.

Section 1031 provides that no ruling may constitute a basis for the disqualification of any claimant but a determination by the department made under state law may constitute a ruling.

Section 1033 specifies that, if it is a ruling that the claimant left the employer’s employ voluntarily and without good cause, or left under one of the following circumstances, benefits paid to the claimant subsequent to the termination of employment that are based upon wages earned from the employer prior to the date of the termination of employment cannot be charged to the account of the employer.

Section 1032.5 provides that any base period employer may, within 15 days after mailing of a notice of computation, submit to the department facts within its possession disclosing that the individual claiming benefits is rendering services for that employer in less than full-time work, and that the individual has continuously, commencing in or prior to the beginning of the base period, rendered services for that employer in such less than full-time work.

Section 1033 requires the director to annually furnish each employer with an itemized statement of the charges to the reserve account, and a statement of the reserve account showing the credits and charges, the net balance of the reserve account and the contribution rate for the applicable rating period.

Section 1034 provides that the employer, within 60 days after the date of mailing of any statement of charges or credits and charges to the reserve account, or within an additional period not exceeding 60 days which may for good cause be granted by the director, may file with the director a written protest on any item shown thereon. The protest is required to set forth the specific grounds on which it is made.

There are specified procedures to follow, such as no protest may be made on the ground that a claimant was ineligible for a benefit payment where the employer was notified as required by this division and any authorized regulation of the filing of a claim for the benefits or of a determination of the claimant’s eligibility.

Section 1035 requires the director to give notice to the employer of his or her action on a protest filed.

Section 1036 requires the director to give notice to the employer of the correction of any error which the director finds in any statement of account or statement of charges. In addition, any additional amount of contributions resulting from an increased contribution rate caused by the correction of any error that the director finds in any statement of reserve account or statement of charges shall be assessed within 180 days from the postmarked date of the notice of correction. Also, any overpaid amount of contributions resulting from a reduced rate caused by the correction of an error that the director finds on any statement of reserve account or statement of charges shall be refunded within 180 days of the postmarked date of the notice of correction.

Section 1037 states that, if a protest involving the contribution rate is pending when any contribution to which the rate relates is due, the employer shall pay the contribution at the rate shown in the statement furnished by the director. Such a protest, however, does not constitute a claim for refund under Article 9 of this chapter, and if a final determination on the protest reduces the contribution rate the amount of overpayment shall be promptly credited or refunded as provided in that article.

Article 5 deals with the transfer of reserve accounts. Section 1051 provides that, whenever any employing unit acquires the organization, trade, or business, or substantially all of the assets thereof, an application may be made within 90 days of such acquisition for transfer of reserve account. The application is required to contained specified information.

Section 1052 provides that, upon receipt of the application the separate account, actual contribution and benefit experience and payrolls of the predecessor or that part thereof, as determined by authorized regulations, which pertains to the organization, trade, or business, or portion thereof acquired, must be transferred to the successor employer for the purpose of determining its rate of contribution after the acquisition with the same effect for that purpose as if the operations of the predecessor had at all times been carried on by the successor.

Section 1054 states that the provisions of this article requiring a specific application for transfer of reserve account cannot apply to any successor who through error or inadvertence continued to file contribution reports and pay contributions for the account and at the rate determined by the department to apply to the predecessor employer.

Section 1055 requires the director, in the event of a denial or granting of an application for transfer of reserve account, to give notice to the employing unit making an application, and to the predecessor employing unit to whose reserve account the application relates, if such predecessor employing unit has continued in business as an employer.

Section 1056 authorizes the director to prescribe regulations for the establishment, maintenance, and dissolution of joint accounts by two or more employers and must, in accordance with the regulations, upon application by two or more employers to establish such account or to merge their several individual accounts in a joint account, maintain such joint account, as if it constituted a single employer’s account.

Section 1057 states that, upon dissolution of a joint venture, each participating employer may within 90 days apply for the transfer of his proportionate share of the reserve account. Upon receipt of the application the separate account, actual contribution and benefit experience and pay rolls of the joint venture are be apportioned among the employers making the application in the same proportion that assets are distributed among the participating employers.

Section 1058 the term “joint venture” means a separate employing unit which has been organized by two or more employers to accomplish a contract or project or series of contracts or projects and which is wholly owned by such employers. Also, the term  “employer” is defined.

Section 1060 provides that a change in contribution rate caused by a transfer under this article of all or a portion of the separate account, actual contribution and benefit experience and pay rolls cannot become effective earlier than the beginning of the calendar quarter next succeeding the effective date of the transfer.

Section 1061 requires the reserve account attributable to a transferred business to also be transferred to, and combined with, the reserve account attributable to the employer to whom that business is transferred, if both of the specified requirements are satisfied.