California Proposes Law Forcing Employers to Pay Workers on Strike

To collect unemployment benefits, federal law requires claimants to be jobless through no fault of their own, able and available to work, and actively seeking work. Under a law proposed in California, employed workers would get paid to strike, and California businesses would foot the bill. Here is what employers need to know. 

State Senator Anthony Portantino introduced S.B.799, a bill that would extend unemployment insurance (UI) eligibility to employees who are participating in strikes. Under existing California law, employees who leave work due to a strike are generally ineligible for unemployment benefits, although exceptions exist in cases of lockouts.  

The exclusion of benefits for workers on strike is the standard across much of the nation and based on UI’s basic function to provide a temporary safety net for Americans who are suddenly without work. The program is outfitted with guardrails that limit disincentives to return to work. In most cases, claimants who refuse suitable work are deemed ineligible for benefits. This requirement has been the precedent for decades and is a commonsense approach, especially amid a prolonged worker shortage.

The motives behind California’s attempted departure from the basic principles of UI eligibility are obvious: Capitalize on the ongoing strikes and appeal to the unions. In most cases, workers who go on strike forgo their wages, a financial sacrifice in exchange for bargaining leverage. Unions typically supplement the lost wages to strikers via payments financed from a member-funded strike fund. If workers collect UI while striking, contributions to the strike fund could be redirected for other purposes. Meanwhile, businesses will experience higher taxes to make up for payments from the UI fund. In essence, employers will be forced to pay for workers to strike, which rather tilts the balance in labor law in one direction.  

UI is funded through payroll taxes. Businesses with high employee turnover have a higher UI tax rate than businesses with a lower turnover. This way, businesses whose former employees tap into UI more often are contributing a commensurate share to the UI trust fund. Unfortunately for employers in California, the current UI circumstances are far from normal.  

Over the course of the pandemic, millions of workers drew from a barely solvent UI trust account, and millions of dollars were lost to fraudulently paid claims. The Golden State borrowed billions from the federal trust fund to pay UI claims, resulting in the state owing $18 billion today. To repay this debt, California employers are saddled with higher taxes and can expect additional increases until the trust fund is replenished. The expansion of eligible individuals to include striking employees will only exacerbate the trust fund's insolvency, furthering the burden on employers to sustain the extended coverage for workers who have job offers on the table.   

Similar changes to California’s UI law have been proposed in the past and failed, although the current climate could influence how lawmakers contemplate this bill. Should Senator Portantino’s bill succeed, it is likely the legality of the change would be challenged. Nevertheless, California stakeholders must understand that expanding UI coverage undermines the foundation of the program and prioritizes unions over long-term program stability and employer financial health. 

About the authors

Stephanie Ferguson Melhorn

Stephanie Ferguson Melhorn is the Senior Director of Workforce & International Labor Policy. Her work on the labor shortage has been cited in the Wall Street Journal, Washington Post, and Associated Press.

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