The Unemployment Insurance Appeals Board (CUIAB) oversees a quasi-judicial system that hears challenges to decisions about unemployment and disability benefits, as well as tax-liability assessments made by the state Employment Development Department (EDD). When employees or employers disagree with department decisions, they can appeal to an administrative law judge and, if still unhappy, the seven-member board itself. Governor Jerry Brown proposed in 2011 that the board, criticized as a dumping ground for termed-out or defeated politicians, be eliminated for budgetary reasons. The CUIAB is in the Labor and Workforce Development Agency.

Who is CUIAB?

The Unemployment Insurance Appeals Board has been around almost as long as unemployment insurance itself.  Unemployment insurance is a provision of the federal Social Security Act of 1935, and was designed to help workers who had lost jobs through no fault of their own. 1935 was the middle of the Great Depression, a period of high unemployment and economic hardships much worse than anything seen since, including the current recession.

California began its unemployment insurance program in 1936, with employers and employees paying into the state Unemployment Fund. Two years later, the state began paying unemployment benefits. At the time, workers had paycheck deductions subsidizing one-third of the Unemployment Fund. Today, it is paid entirely by employers.

In 1943, California created the Employment Stabilization Commission, whose five members were appointed by the governor. Three of the five commissioners also served as the first Unemployment Insurance Appeals Board, to review any disputes arising from the Employment Development Department’s initial decisions regarding unemployment or disability benefits. The Legislature increased the board’s membership to five in 1967, and seven in 1982.

The board’s staff was designated a separate division of the Employment Development Department in 1949. During its early years, employees who worked alongside those who made benefit determinations reviewed appeals before submitting them to the board. Starting in 1946, the board designated referees to review the appeals, and a “principal referee” to oversee the department’s decisions.

Three years later, when the Board of Appeals Division came into being, it opened field offices in Los Angeles, Sacramento and San Francisco. There are now 12 field offices. Each office was staffed with referees who could hear appeals from that region of the state. These referees later became known as administrative law judges, as they now must be licensed to practice law in California.

California Unemployment Insurance Appeals Board History (pdf)

The seven-member Unemployment Insurance Appeals Board is the largest administrative law agency in the state, overseeing hundreds of thousands of appeals annually of decisions by the Employment Development Department (EDD). It oversees the work of more than 900 department employees, most of whom work in 12 field offices and 43 satellite offices throughout California. In 2011, the board’s administrative law judges rendered about 467,000 decisions.

The board’s work has increased dramatically since the economic downturn of 2008 and ensuing high unemployment. Unemployment insurance appeals claims, by far its largest case load, increased from 243,582 closed cases in 2007 to 441,043 in 2011. The board closed 17,684 disability insurance appeals claims and 2,844 tax petitions in 2011.

Of these appeals, 34,345 unemployment insurance claims made it to the board from the administrative law judges, nearly triple the 13,418 in 2007. The board itself handled 1,349 disability insurance appeals from the judiciary and 281 tax petitions. 

In 2010, the board reversed the decision of administrative law judges 8.6% of the time. Three-quarters of the reversed decisions were in cases filed by unemployed or injured workers. The rest of the reversals were filed by employers or the EDD. All of the appeals that reached the board were settled within 150 days of filing. Almost 96% were settled within 75 days and 48.1% were closed within 45 days.

There is no charge to go through the appeal process within this court system. An attorney is not required, but any involved party may bring legal representation at either of two levels of hearings.

If an appeal is filed with the board, the first level is a hearing with an impartial administrative law judge. Employment Development Department representatives and the other affected parties have an opportunity to state their position. The judge can overturn, agree with, or modify the department’s decision.

Any party not happy with the administrative law judge’s decision can appeal it to the board. The decision made at the second level of review is final, unless overturned by the California Superior Court through a civil lawsuit.

The board also adopts regulations establishing procedures and time limits for appeals, and sets its own annual budget, although that budget is reported as a line item of the Employment Development Department.

As of 2012, there were two chief administrative law judges, one in charge of the field offices, and one in charge of the Appellate Operations Division. This division oversees the cases that are appealed to the entire board.

 The chief administrative law judge in charge of field operations doubles as the executive director of the entire program. As the chief administrative law judge in charge of field operations, he oversees each of the field offices. These are located in Fresno, Inglewood, Rancho Cucamonga, Los Angeles, Oakland, La Palma, Oxnard, Pasadena, Sacramento, San Diego and San Francisco. Each field office also works with a number of satellite offices in other cities, so that those who are participating in an appeal travel the least distance possible.

The number of satellite offices for any given field office is determined by how geographically large a territory it serves. Since the board only uses the satellite offices as a place to conduct hearings, these offices typically serve other purposes as well. They could be located within an Employment Development Department office, but also could be at a City Hall or even a privately owned business.

Within these 12 field offices are the offices of many of the state’s 600 administrative law judges, each of them lawyers with at least five years’ experience practicing law in California. These judges typically preside over seven or eight cases a day.  The field offices also have support workers, although only the administrative law judges attend hearings. Other California agencies, such as the Public Utilities Commission and the Office of Administrative Hearings, also hire administrative law judges.

Besides the Appellate Operations Division, two other divisions serve the board but are not overseen directly by the chief executive officer. These are the Special Assistant to the Board project team, and the Office of the Chief Counsel. The Special Assistant to the Board project team assists the board with matters not directly related to unemployment appeals. For instance, since 2008, it has developed procedures to reduce the backlog of appeals under consideration by the board.

Five of the seven board members, including the chairman, are appointed by the governor; one is picked by the Senate Pro Tem and one is chosen by the Speaker of the Assembly.

Organizational Chart (CUIAB website) (pdf)

Fact Sheet (CUIAB website) (pdf)

Board Members (CUIAB website) (pdf)

The Challenges and Rewards of an Administrative Law Judge (by Nina Schuyler, Bar Association of San Francisco) (pdf)

The Unemployment Insurance Appeals Board gets a bit more than 90% of its revenue from the federal government via grants. About 7.5% comes from state special funds and only .5% comes from the state General Fund.

There are more than 900 employees of the board. Many of these are the administrative law judges who work in field offices, whose starting salary is between $7,500 and $9,000 a month.

Governor Jerry Brown attempted to eliminate the board in the 2011-12 budget, and tried again with his proposed 2012-13 budget. In 2011, the Legislature said “keep it.”  The 2011 proposal didn’t provide a way for the Employment Development department to offer opportunities to appeal cases beyond the administrative law judges’ decision.

While the board still exists, Governor Brown instead decided to shrink it. He has had the opportunity to appoint two new board members in the 2011-12 fiscal year, and hasn’t filled either of those vacancies.

For 2012, Brown proposed replacing the independent board with a bureau run by the Employment Development Department. Eliminating the board is expected to trim $2.6 million from this program’s $102 million budget. The board chairman receives a salary of $132,179, and the other four board members receive $128,109 apiece. This would save almost $600,000.  Consolidation of the board’s administrative service functions into the department’s Administrative Services Division, and elimination of 20 other positions was expected to save another $2 million.

3-Year Budget (pdf)

Major Program Changes (Governor’s Proposed 2012-13 Budget)

Governor Proposes Eliminating Unemployment Insurance Appeals Board (by Kenneth Ofgang, Metropolitan News-Enterprise)

The Challenges and Rewards of an Administrative Law Judge (by Nina Schuyler, Bar Association of San Francisco) (pdf)

Executive Director Fired

In 2008, a state auditor’s report strongly criticized the board for “weak policies and practices,” saying they could “undermine employment opportunity and lead to mismanagement of state resources.” By the time the auditor’s report came out, the board had fired Executive Director Jay Arcellana for delaying cases, failing to reign in nepotism and wasting money.

The auditor’s report looked at the board’s hiring practices by analyzing 27 recently filled positions. It found managers didn’t consistently document the reasons for their hiring decisions, which left the board open to allegations its hiring practices are unfair and exclusive. Specifically, in 21 of the 27 cases, it had no explanation as to why it hired a particular job candidate, and in 19 cases it didn’t do reference checks. In eight cases, there was no evidence the hiring managers had even conducted job interviews.

Half of the board’s employees who responded to a survey conducted by the state auditor said they believed family relationships and employee favoritism affected hiring and promotion practices. Arcellana reportedly had his children working as interns for the agency and 35 employees were identified as having relatives there. Board Chairman Rick Rice complained that, “Every member of the senior staff but one has had a family member on the payroll at one time or another.”

The auditor’s report also faulted the board’s travel policies. It reviewed 20 travel expense reimbursements and found in seven cases the business purpose of the trip was not sufficiently documented to determine if it was in the state’s best interest. They also found evidence that Arcellana had inappropriately claimed and received $2,200 in reimbursements for travel between his home and the board’s headquarters office.

Its Weak Policies and Procedures Could Undermine Employment Opportunity and Lead to Misuse of State Resources (State Auditor) (pdf)

Turmoil Rocks Jobless Benefits Agency (by Patrick McGreevy, Los Angeles Times)

Unemployment Insurance Board Fires Top Administrative Officer (by John Howard, Capitol Weekly)

Board Meeting on Termination of Jay Arcellana (pdf)

Board Chairwoman Accused of Sexual Harassment in Surrogate Pregnancy

The Unemployment Insurance Appeals Board is used to controversy, often involving its revolving membership of ex-politicos. But a charge of sex harassment against Chairwoman Ann Richardson in 2007 was unique.

Richardson had been a board member since 2003 and chairwoman since July 2006 when she was elevated to the post by Governor Arnold Schwarzenegger. Her secretary, Claire Connelly, alleged that in September 2006 Richardson, who was in her 50s, asked the 31-year-old single mother if she would consider having a surrogate child for $10,000. Connelly said that when she refused, she was harassed in multiple ways, including having to walk Richardson’s dog and clean up after it.

Ultimately, Connelly, whose father is the agency’s presiding administrative law judge Tim McArdle, transferred to a job in another office. 

Connelly said she filed a harassment complaint with the U.S. Equal Employment Opportunity Commission in 2007 after being told she was no longer welcome at meetings of the board. A 52-page report to the board by labor attorney Tim Yeung failed to substantiate the claims, but by mid-2007 Richardson was prematurely replaced as chair by Rick Rice.

Mother of a Sex Harassment Charge (by Phillip Matier and Andrew Ross, San Francisco Chronicle)

The Bay Area Could Be the Clinton-Obama Decider (by Phillip Matier and Andrew Ross, San Francisco Chronicle)

“Highly Paid Sinecures”

The board has long been a favorite roost for termed-out and defeated politicians. As of May 2011, six of its seven board members were former politicians, each with an annual salary of $128,109.

Twelve other ex-legislators have served on the board since 1986, and many other appointees were personal friends or major fundraisers of the governors, Assembly speakers and Senate presidents pro tem who appointed them.

Capitol Weekly, in an August 2011 story about the board, called them “highly paid sinecures,” “an ex-legislator’s private membership club” and “first thing on the chopping block.” In fact, Governor Jerry Brown had called for eliminating it in the 2011-12 budget.

 “They’re perfectly fine people but this kind of board and many of the other boards where ex-legislators wind up are, generally speaking, highly paid, cushy operations,” Lew Uhler, president of the National Tax Limitation Committee, told Capitol Weekly. “And especially during this time of very desperate budget situations, these bodies should be reviewed and changed to the benefit of the taxpayer.”

Several daily newspapers, including the McClatchy chain serving most of the area between Sacramento and Fresno have called for the board’s elimination.

“Given the state's chronic budget problems and the rising levels of public disgust about self-serving politicians, it's high time the power-wielding boards are re-evaluated,” said McClatchy columnist Dan Walters. “Do we really need panels drawing six-figure incomes to decide on disputes over who's owed unemployment insurance or workers' compensation benefits?”

 “Sacramento may have more blatant dens of cronyism and back-scratching, but they’re hard to imagine,” an unsigned editorial in the Redding Record Searchlight said.

“It’s one of the choicest plums at the fruit stand,” Steve Maviglio told Capitol Weekly. Maviglio served as former Governor Gray Davis’ press secretary, and as Davis’ appointee to the board for one year.

Jerry Brown Proposes Nixing Controversial Appeals Board (by David Siders, Sacramento Bee)

Brown: Eliminate Unemployment Board for Budget (by Judy Linn, Associated Press)

Unemployment Insurance Appeals Board: Just the Name Evokes Controversy (by Greg Lucas, Capitol Weekly)

It’s Time to End the Six-Figure Soft Landings (Redding Record Searchlight editorial)

Cases Pile Up

An investigation by the Los Angeles Times in 2009 found that although the board is legally required to decide appeals within 30 days, it did so only 4% of the time. At the beginning of 2009, it had a backlog of 68,135 appeals, and was taking longer than every state except Virginia to process them. It also had a higher volume of appeals than most states, accounting for 20% of all unemployment benefit appeals nationwide.

The board blamed its problems on a rise in the number of unemployed amid a failing economy and the policies of Governor Arnold Schwarzenegger. Although the federal government pays almost all of the department’s bills, it was slow to hire more workers when the economy collapsed in 2008 and had, instead, furloughed them. Board members said the governor had ordered that its 728 employees take three unpaid days off a month.

U.S. Labor Secretary Hilda Solis, who said it was illegal to furlough state workers paid with federal dollars, sent a team of investigators to the state.

Schwarzenegger blamed the board for the backlog, noting that some of its administrative law judges work from home and they all abide by a labor agreement that caps the number of cases they may handle. “It's outrageous that at a time when the people of California are most in need of their services, these judges are hiding behind a provision in a union contract to avoid work,” the governor said in a press release.

The U.S. Department of Labor ordered the board to devise a plan for reducing this backlog, which grew even higher for a time. Things have improved since then, in part because the board nearly doubled its workforce between 2009 and 2011, and in part because unemployment began declining in 2011. Yet the Department of Labor continues to monitor the board’s progress in reducing the backlog, which at the beginning of 2012 was around 55,000 cases.

California Jobless Benefit Appeals Pile Up (by Marc Lifsher, Los Angeles Times)

Schwarzenegger Blasts Unemployment Appeals Board over Backlog (by Marc Lifsher, Los Angeles Times)

U.S. Asks Whether California Furloughs Are Delaying Jobless Benefits (by Marc Lifsher, Los Angeles Times)

Schwarzenegger’s Last-Minute Appointees

Former governor Arnold Schwarzenegger appointed two board members on his last day in office, both of them former state senators. Roy Ashburn of Kern County was confirmed by the state Senate, and remains on the board in 2012, but current governor Jerry Brown put a stop to the Senate confirmation of Dennis Hollingsworth of Riverside County.  Governors’ appointees can serve on a board or commission for one year without Senate confirmation, which is what Hollingsworth did.  He and many other last-minute Schwarzenegger appointees to other boards had to leave office on December 31, 2011.

Jerry Brown Scuttles GOP Politician’s Jobless Board Position (by Dan Walters  Sacramento Bee)

For Arnold Schwarzenegger’s Last Appointees Time Is Running Out (by Patrick McGreevy, Los Angeles Times)

Proposal to Eliminate the Board

Governor Jerry Brown’s proposed 2012-13 budget eliminates the Unemployment Insurance Appeals Board and replaces it with a bureau under the Employment Development Department’s jurisdiction.

Although Governor Brown sees eliminating the board as a way to cut an unnecessary $2.6 million expense, supporters see alternatives as more expensive. In 2011, the governor proposed eliminating the board, but had not formulated a plan to replace it with a bureau. The state Legislature argued that if the board wasn’t the place for a second level of appeals, where was? It kept the board alive in 2011, but said it would revisit the issue in 2012.

Federal law requires states to have some method for appealing unemployment insurance decisions, and about 40 of the 50 states have a board like California’s. Because it is a federal mandate, federal funds pay $94 million of the $102 million cost. California’s general fund pays only $282,000.

About 9% of appeals heard by administrative law judges (slightly more than 36,000 in 2011) reach the second level and are heard by the board. The state is only required to have one layer in its appeal process, but if it didn’t have a second layer many of those cases would likely have gone straight to California Superior Court. This would be a much more timely process than the board provides, but could have its drawbacks.

“If we didn’t have a second level of appeal involving the board, particularly with the volume of appeals in this state, these cases would never be heard if they went to court, especially with the cuts the courts sustained this year. That would certainly be more costly for everyone,” former board member Denise Ducheny told Capitol Weekly.

The 2012-2013 budget proposal to replace the board with a bureau hasn’t had much public debate. It remains to be seen if that will be more acceptable to the Legislature.

Governor Brown’s predecessor, Arnold Schwarzenegger, proposed in 2005 consolidating the Unemployment Insurance Appeals Board, the Occupational Health and Safety Appeals Board and the Workers’ Compensation Appeals Board into one new board called the Employment and Benefits Appeals Board. This would have been a nine-member board whose members would receive salaries of $114,000 to $117,000, which is what the three boards’ members received in 2005.

The task force Schwarzenegger put together favored this approach for all three appeals boards, because it believed the public’s best interests were served by having these appeals decided by an independent body. But, with many other boards and commissions slated for outright elimination in the 2005 report, Schwarzenegger faced stiff opposition from those interested in protecting the status quo.

An Overhaul of California Boards Is Long Overdue (by Dan Walters, Sacramento Bee)

Governor's Reorganization Plan (2005 California Performance Review) (pdf)

In Brown’s Budget: A Mini “Blow up the Boxes” (by Joel Fox, Fox and Hounds)

Extending Unemployment Benefits

The economic collapse of 2008 threw millions of Americans out of their jobs and onto the state unemployment rolls. As a result, the Unemployment Insurance Appeals Board saw an unprecedented increase in its activity as appeals jumped from 243,582 closed cases in 2007 to 441,043 in 2011. One out of every eight of the initial 3.3 million California jobless claimants filed an appeal in 2011. As unemployment rose, the federal government and the states lengthened the time a jobless worker could receive benefits. But as the economy continues to stumble and government budgets become stretched thin, benefits that can extend up to 99 weeks have been called into question.

Unemployment Insurance Appeal Facts & Accomplishments Calendar Year 2011 (pdf)

Parties Dig in for Another Debate over Unemployment Benefits (by Karoun Demirjian, Las Vegas Sun)

On the Right: Cut Back on Benefits

Opponents of extended unemployment benefits argue that they are budget busters that expand the size of a government where waste and fraud are rampant, and at the very least should be paid for with cuts in other programs.

They also claim that giving money to people who aren’t working encourages them not to look for a job, further establishing the U.S. as a nanny state that coddles its citizens. People who don’t think they have to be self-sufficient won’t be self-sufficient and will view the government as a system to be gamed.

Alex Brill of the conservative American Enterprise Institute says, “When you’re providing additional benefits, some of those unemployed people will remain unemployed for a little bit longer. . . . We don’t need to be assuming they’re going to need two years of benefits.”

Many conservatives don’t think its government’s job to promote economic growth, whether it’s good times or bad. Libertarian Cato Institute budget analyst Tad DeHaven says, “The fundamental question is: Do you think that the private sector would do a better job of fostering economic growth and job creation, or do you think politicians and bureaucrats would do that?” John Antos at the American Enterprise Institute concurs: “I think the entire history of trying to buy jobs with government spending has largely been a failure.”

While liberal economists argue that unemployment benefits stimulate the economy, conservatives contend that there are better ways to accomplish that task. First and foremost: tax cuts. James Sherk at the Heritage Foundation acknowledges that unemployment benefits do, indeed, allow the unemployed to spend more. But the money to pay for that assistance comes from taxes on people who would also be spending and investing the money, resulting in an ephemeral stimulus of smoke and mirrors. “Worse, that someone would usually otherwise invest his or her funds in the private sector, creating jobs,” Sherk says. “The overall economy gets no boost. This is why the stimulus failed.” 

Sherk also argues that unemployment benefits encourage out-of-work individuals to look for the wrong kind of jobs. “Most unemployed workers want jobs similar to their old ones—in the same city and in a similar occupation. Extended unemployment insurance benefits lead many workers to spend more time looking for these jobs than for jobs they are likely to find. When benefits start to run out, they cast a wider net.”

More Unemployment Insurance Won't Stimulate Growth (by James Sherk, US News)

No Free Lunch in Subsidy Programs (by Chris Edwards, US News)

The Great Debate: Do Unemployment Benefits Boost the Economy? (by Charles Wallace, Daily Finance)

Does it Matter Whether Unemployment Is Socially Productive? (by Casey B. Mulligan, Supply and Demand)

On the Left: Don’t Cut Back on Benefits

Supporters of extended benefits argue that it is, first and foremost, the humanitarian thing to do. People with families, who through no fault of their own have been deprived of meaningful work, need these benefits to put food on the table and pay the rent while they search for new employment and the economy recovers. 

Liberal economists point to the stimulative effect of unemployment benefits on the economy, which can be especially helpful during a downturn. Nearly all of the money is spent on goods and services in the private sector that stimulate growth and employment. Augustine Faucher, director of macroeconomics at Moody's economy.com, says the two most useful forms of stimulus are extended unemployment insurance benefits and aid to state governments. “You get a lot of stimulus dollars spent, and the money also gets into the economy quickly.”

While critics argue that 99 weeks of unemployment benefits (the maximum allowable in any state) is an unnecessarily long period, Gary Burtless of the Brookings Institution points out that it puts the United States “exactly in the middle” of industrialized countries. And according to Carl E. Van Horn, professor of public policy and director of the John J. Heldrich Center for Workforce Development at the Bloustein School of Planning, those who receive benefits tend to work harder at finding a new job. “Our surveys found that--compared to people without UI support—those receiving UI spent more time each week going to job interviews and job fairs, networking with friends and colleagues, and scouring the Internet and newspapers for job openings,” he says.

Van Horn also says that those who receive unemployment benefits are less likely to avail themselves of other more costly government safety-net programs, such as food stamps, disability insurance, Social Security, Medicare and Medicaid.

Conservatives argue that cutting off unemployment benefits would force people back to work and cut the unemployment rate 2%, but the Federal Reserve Bank of San Francisco calculated that “in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.”

Supporters of extended benefits maintain there is a fairness factor involved. After the crash, billions of dollars were poured into bailing out financial institutions, many of whom were part of the cause of the debacle. Tax breaks for the wealthy profligate as the income gap between haves and have-nots increases, and the middle class shrinks. Comparatively little goes to jobs programs, rebuilding infrastructure and benefits for individuals. In the words of U.S. Representative Lloyd Doggett, “The same crowd that continues to promote big tax breaks for the wealthiest few, while preserving multinational corporate tax loopholes, argues that helping the unemployed is just too high a mountain for our country to climb.”

Doggett says that inferences and outright claims by conservatives that the unemployed choose not to work because of government handouts is belied by data that shows there are more than four unemployed workers for every job opening and unemployment checks typically fail to get a family of four above 70% of the poverty level. In general, an unemployment check comes to less than half of the worker’s previous wage.

U.S. House Minority Leader Nancy Pelosi summed up the position of many Democrats and those on the left: “We have to pay for unemployment insurance, we don’t have to pay for tax cuts for the rich. Tax cuts do not create jobs. They haven’t throughout the Bush administration. Unemployment insurance creates jobs and does not add to the deficit.”

Unemployment Insurance Will Promote Economic Recovery (by U.S. Representative Sander Levin, US News)

Don't Blame Unemployment Benefits for High Unemployment (by Derek Thompson, The Atlantic)

Extended Unemployment and UI Benefits (by Rob Valletta and Katherine Kuang, Federal Reserve Bank of San Francisco)

Withdrawing Unemployment Insurance Will Not Solve Job Crisis (by Professor Carl E. Van Horn, US News)

Americans Don't Turn Their Backs on Americans in Need (by U.S. Representative Lloyd Doggett, US News)

Democrats: Unemployment Insurance Extension a Moral Debate (by Josh Lederman, AOL Politics Daily)

Bonnie Garcia, 2009–2011

Fred Aguiar, 2009 (acting)

Richard Rice, 2007–2008

Ann M. Richardson, 2006–2007

Joan Borucki, 2005–2006

Cynthia K. Thornton, 2000–2005

Louis W. Barnett, 1995–2000

Robert L. Harvey, 1984–1994

Don Blewett, 1975–1983

Ewing Hass, 1975

Robert W. Sigg, 1967–1973

Gerald F. Maher, 1963–1967

Robert W. Sigg, 1963

Ernest B. Webb, 1959–1962

Michael B. Kunz, 1949–1957

Toland C. McGettigan, 1946–1948