Gov. Gavin Newsom has vetoed a bill that would have increased the weekly amount of EDD benefits paid by the state, which could have resulted in inflated EDD liens against workers’ compensation cases and complicated EDD lien negotiations.
While perusing the California Legislature website for workers’ compensation bills, your humble blogger stumbled upon a creative proposal that would have increased EDD benefits significantly.
Assembly Bill 123, by Assemblywoman Lorena Gonzalez (D-San Diego), would have tweaked the formula for computing the weekly EDD disability benefit to increase that benefit by 10% to 20% from 2023 to 2025, and then on 1/1/2025 it would have increased it even more. (See below for more details.)
If you read older summaries of the bill, the first few versions only addressed increases to paid family leave benefits. However, lawmakers later revised the bill to include other benefits, such as state disability benefits too.
Fortunately for your paycheck, Gov. Newsom vetoed the bill on Sept. 28 for two pretty good reasons.
“This bill would create significant new costs not included in the 2021 Budget Act and would result in higher disability contributions paid by employees,” the governor wrote in his veto message.
Blowing out the existing budget is never a good idea, but increasing workers’ disability contributions from your paycheck is an even worse one for a governor who is seeking re-election next year. If Newsom had put his signature on that bill, all of us would see smaller take home pay from our paychecks and the blame would lie with him.
It doesn’t take a rocket scientist to determine that less take home pay for everybody would hurt Newsom’s re-election chances in 2022.
THE DEVIL IS IN THE DETAILS
So how does this formula work? Well under existing law, EDD would calculate rates after 1/1/23 by taking the quarter of disability base period where wages were highest, and multiplying that 55%, and dividing the number by 13.
What? I agree, that’s not easy to understand.
Instead, let me give you an example to make this easier.
So let’s say you had an employee, Jack, who makes $1,000/wk during the applicable quarter. Under existing law, Jack would get somewhere around $550/wk from EDD.
The proposed bill, AB 123, increased that percentage from 55% to higher percentages.
Under the proposed bill:
- If Jack got EDD benefits from 1/1/23-1/1/25, Jack would get $650 to $750 a week from EDD instead.
- From 1/1/25 and later, Jack would get somewhere around $700 to $900 a week from EDD.
EDD CAN’T EXCEED TTD
As you know, EDD benefits should not exceed temporary total disability (TTD) rates. And existing law states that, and the proposed bill reiterated that.
So if our employee Jack who made $1,000/wk had a TTD rate of $666.67, this proposal could have made EDD wind up paying him at a higher rate than that at some point in the future.
It’s pretty common for EDD to pay a whole year of benefits, so let’s take this example further. Let’s say EDD paid Jack for a whole year of benefits at a rate of $750/wk while Jack was temporarily totally disabled. That would result in a lien of $39,000.
Could EDD collect on all of that? No. Before applying interest, EDD’s collectable balance would be $34,666.84. So, the state would have to eat the difference, which is $4,333.16.
Now remember, we just said that there’s existing law stating that EDD is not supposed to pay more than the TTD rate. Does that mean that EDD never exceeds the TTD rate?
Unfortunately, EDD does (unintentionally) pay in excess of the TTD rate from time to time. I don’t blame any singular person at EDD for that, it’s an enormous benefits system and hey, this stuff is complicated.
While this bill wasn’t aimed at the workers’ compensation community, it would have complicated negotiations between our friendly EDD representatives, defendants, and applicant’s attorneys by creating inflated liens.
What would that have resulted in? Probably more delays and more litigation.
And of course, more confusion, delays and litigation would not benefit employers, carriers, or applicants.
It’s mind-blowing to see that our state lawmakers voted unanimously in favor of AB 123. Yes, you read that correctly – there were zero “noe” votes against this bill which according to Gov. Newsom would have reduced your amount of take home pay. It’s even more baffling that they thought he would sign off on this with an incoming election.
So when you get your next paycheck, take a look at it and be thankful for this veto, because according to Gov. Newsom he saved you (and the state’s bountiful coffers) some money.
And if the state coffers did have to foot the bill for more EDD benefits, that would probably ultimately found its way back to us, the citizens, in additional taxes one way or another.
Got a question about workers’ compensation defense issues involving the coronavirus? Feel free to contact John P. Kamin. Mr. Kamin is a workers’ compensation defense attorney and partner at Bradford & Barthel’s Woodland Hills location, where he monitors the recent legislative affairs as the firm’s Director of the Editorial Board. Mr. Kamin previously worked as a journalist for WorkCompCentral, where he reported on work-related injuries in all 50 states. Please feel free to contact John at email@example.com or at (818) 654-0411.
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