Ha! Not in California

Eugene Volokh is writing about a case against an attorney who defrauded his firm.  The details are not important, what caught my eye is what is highlighted below:

Once again, this case does not turn on the bare fact that Attorney Siderits wrote-down his time; this case is about Attorney Siderits abusing his write-down discretion and lying to his law partners in order to collect almost $47,000 in bonuses to which he was not entitled. Attorney Siderits cannot seriously contend that firms must have a written policy forbidding stealing and lying before a misconduct charge for one of these actions can be sustained.

That certainly makes sense, but it does not apply at the California EDD, which administers (among other things) the state unemployment insurance program.  We terminated an employee for accepting money from a customer to provide a service, then pocketing the money and not providing the service.  I call this "theft", and had assumed all would understand that stealing from customers is a firing offense.   When California sent out its unemployment paperwork, we said this employee had been fired "for cause", which in many states means that they are ineligeable for full unemployment payments.

However, after some back and forth, I was eventually informed by the EDD that since I did not have an explicit policy in the employee manual that said "employees may not steal money from customers", then they could not recognize that she was fired for cause.  Even if I had put that in the manual, it probably would not have counted because the next thing EDD asked for is something in writing proving, with the employee's signature, that she had read that passage.   And from past experience with the EDD, my guess is that they likely would not have accepted firing on the first offense, but would have insisted we needed to have her steal from multiple customers, with written warnings each time, before we terminated her.

Basically, what this all means is that while the law technically says people can't be paid unemployment if fired for cause, California has made the standards of proof so absurd that this requirement is meaningless.  Everyone is going to get unemployment.

As it turns out, there is a silver lining from this lack of diligence by the state.  My business is seasonal and I can only offer summer work.   Most of my employees are happy with this, as they like to take the winter off (many are retired).  One is not supposed to collect unemployment if he or she is not actively seeking work, but my employees have discovered that California does zero dilligence to check this.  So some of them lie and say they are looking for work over the winter when they are not, and collect unemployment.  I know of two couples who spend their winter in Mexico but still collect their California unemployment like clockwork.   Not only is California not dilligent about it, but when I tried to report someone I knew who was collecting unemployment but not even in the country, I was threatened by the EDD official that I was risking substantial personal liability by submitting such a claim and opening my self up to civil suits and even prosecution for harassing the worker.  So of course I dropped it.

So what is the silver lining?  California is so eager to hand money in the off-season to support my employees' seasonal vacations that my unemployment insurance premium rate is already the worst possible.  My rates can't go any higher.  So if they insist on giving state money to a thief, it's not coming out of my pocket.


  1. Broccoli:

    It is coming out of your pocket, just second hand in the form of the high California tax rates you and your business pay. I know you know the concept so I am just being a nitpicking ninny.


  2. Concrete Guy:

    "So what is the silver lining? California is so eager to hand money in the off-season to support my employees' seasonal vacations that my unemployment insurance premium rate is already the worst possible. My rates can't go any higher. So if they insist on giving state money to a thief, it's not coming out of my pocket."

    That's hardly a "silver lining". That's being held hostage to an inept government program where you have no ability to reduce your withholding rate to the proper percentage.

    I had a very similar experience here in Illinois with my excavation and concrete construction company. I fired an employee after he physically assaulted a coworker. His unemployment claim was allowed because my employee manual did not expressly state that you can't show up on a job site and punch a coworker.

    I learned a long time ago.......if you want to get rid of a problem employee and successfully dispute their unemployment compensation claim, wait to fire them until they violate a written company policy (e.g. show up late to work).

  3. marque2:

    You should probably let all your employees know they can collect unemployment insurance once the work ends. After all it is not your dime as you say.

  4. Concrete Guy:

    Marque2: I hope you're being sarcastic. There are enough people out there gaming the system. That's why we're in the mess we're in.

  5. randian:

    I find this insane. Since when do employees have to be told that committing a crime in the course of employment is a firing offense? Isn't that understood as part of the common-law employment relationship?

    What's next, allowing an unemployment claim because you didn't specifically state that employees shall not commit rape or murder? Surely that didn't need to be stated?

    Can you get away with general wording rather than getting stuck specifically enumerating every possible offense (and get screwed because you missed one)?

  6. Concrete Guy:

    Radian...you are not alone to think these rules are insane. There is an on-going war against employers in this country. Here in Illinois the absurdities embedded within the unemployment compensation system are minor compared to what we face in the worker compensation system (injured worker compensation). I would wager that in Illinois over 90% of the dollars paid out in medical claims are the direct result of fraud. In the last year alone I saw a $40K settlement for a sprained wrist and a $60K settlement for tendinitis in a knee. In both cases the worker went from doctor to doctor until they found one that would perform an exploratory surgery. In both cases the surgeries were negative, but because a surgery was performed, the worker was entitled under law to a huge monetary settlement. The system is totally gamed by PI attorneys and their "favorite" doctors.

  7. Bill:

    This is not a new problem in California. In the late 90's I fired an employee for theft, that he admitted to. Shortly, we got the notice that he had applied for unemployment, and we opposed. The case was eventually set for a hearing, but the fired employee failed to appear. So it was rescheduled, and then rescheduled again. On the fourth scheduled date he finally showed up. But the administrative law judge opened the proceeding by asking us "Why are you bothering with this. You can't win here." And, sure enough, even with the ex-employee admitting to the ALJ that he had stolen, he was allowed to collect unemployment. So up went our rate, which had been at the low end of the range.

    It's just a machine to transfer money from employers to the lazy and guilty; it probably under-compensates those out of work through no fault of their own, and rewards bad behavior.

  8. Wolfman:

    I had a similar experience with drugs in the work place. Found it in his locker, but was told I couldn't prove it was his.