WAIVER OF PENALTY POLICY
DE 231J Rev. 10 (1-18) (INTERNET) Page 1 of 2
CU
A request for waiver of a penalty requires an evaluation
of the facts presented in writing by the employer. For the
Employment Development Department (EDD) to waive the
penalty, the employer must establish that good cause or
reasonable cause exists, based on the facts involved in the
actual case. Good cause or reasonable cause are issues when
an employer fails to comply in a timely manner with certain
requirements of the California Unemployment Insurance
Code (CUIC) or title 22, California Code of Regulations.
Provisions for waiver of penalty for good cause are in
sections 803, 991, 1088.5, 1088.8, 1111, 1112, 1112.5,
1114, 1116, 1117, and 13057 of the CUIC. Provisions for
waiver of penalty for reasonable cause are in section 13052
of the CUIC. Good cause and reasonable cause have been
interpreted by the California Unemployment Insurance
Appeals Board (CUIAB) to have virtually the same meaning.
Penalties charged under sections 1126 and 1135 of the CUIC,
or any other CUIC section that does not specifically indicate
provisions for waiver of penalty, cannot be waived.
Waiver of Penalty
A waiver of penalty request will not be considered until the
employer submits a request through e-Services for Business
or in writing that explains why good cause exists and the
reason(s) for the untimeliness. Billing will continue while the
request is reviewed. To avoid the accrual of interest and stop
the collection process, the amount due must be paid. If it is
determined that the penalty should be waived and the penalty
has already been paid, a refund will be issued or applied to
any outstanding liability.
Good cause exists where the circumstances causing the delay
delay is due to a mistake or inadvertence under circumstances
not reasonably foreseeable by the employer. In other words,
the delay is not attributable to the employer’s fault.
Employers are expected to discharge their basic employer
following:
1. They acted in good faith (demonstrated history of timely
payment and reporting).
2. They acted in a diligent, timely, and prudent manner.
3. The circumstances could not have been reasonably
foreseen.
A good cause determination must always take into account
the total time period taken by the employer or his/her
representative to comply with the EDD’s requirements.
Precedent Tax Decisions
The EDD is required to follow the guidelines set forth
in precedent tax decisions issued by the CUIAB when
determining whether good cause exists.
According to Precedent Tax Decision P-T-23, good cause must
be more than a mere excuse. It must be a substantial reason
which affords a legal excuse accompanied by that degree of
diligence which men of ordinary prudence would have used
under similar circumstances. Good cause will depend largely
upon the facts and circumstances of each case.
Precedent Tax Decision P-T-449 addresses good cause
in the case of a delayed remittance. In the decision, the
CUIAB stated that the employer had established a system for
filing returns/reports and remittances that it had reason to
believe was adequate and the belief was grounded in prior
experience and not mere speculation. Therefore, an isolated
instance of inadvertence not reasonably foreseeable by the
employer constitutes a substantial reason which affords a
legal excuse.
In this case, the prior history of the petitioner
was considered, showing strong evidence that the petitioner
had reason to believe its system was adequate.
In addition, the CUIAB stated in P-T-449 that when an
employer is aware that its procedures for reporting and
paying its tax obligations are inadequate and that employer
making the proper payments to the EDD, it will be at fault
and will not have good cause for the delay.
NOTE: Unforeseen financial hardship is not grounds for
good cause. In Precedent Tax Decision P-T-449, the CUIAB
stipulated that “lack of funds to pay the amount owing on a
return does not constitute good cause.”