Our news is free on LAist. To make sure you get our coverage:Sign up for our daily coronavirus newsletter. To support our nonprofit public service journalism:Donate now.
Throughout the COVID-19 pandemic, a loophole in the unemployment system has resulted in very low benefits for jobless Californians who previously earned income from multiple sources.
These so-called "mixed earners" were promised a new form of relief in the latest Congressional COVID bill. But two months after the law's passage, delays in implementation and ongoing eligibility issues have left many Californians falling deeper into financial ruin.
In Los Angeles, many creative workers have been hit by the mixed income problem. Actors, musicians and makeup artists have said the state's unemployment department is treating them unfairly based on the nature of how they're paid.
Some have now been surviving for nearly a year on benefits that cover only a small fraction of their living expenses.
HOW A FORMER STUNTWOMAN FELL THROUGH THE MIXED INCOME LOOPHOLE
The issue stems from a quirk in the way states calculate unemployment benefits. If applicants have W2 employment wages in their work history, those wages alone will be used to determine their weekly benefits.
In practice, that means a single W2 check for a one-off gig can drastically slash benefits for people who earn their living mostly through self-employment income as reported on 1099 forms.
In California, freelancers and small business owners who relied on self-employment income are ending up with weekly unemployment benefits that sometimes amount to a tenth of what they would have received had their full income been taken into account.
Karen Castoldi has worked in acrobatics for decades. She owned a fitness studio in Redlands before the pandemic. But running the gym became impossible in an era of social distancing, because of the physical nature of the activities.
"They're doing both ground and aerial acrobatics," Castoldi said. "You need to be near them, under them, ready to catch them, just in case."
When Castoldi's business closed, her income dried up. She was hopeful about getting unemployment benefits after learning that Congress had expanded eligibility to business owners such as her. But after filing for unemployment, she found out that the state of California would only provide her $45 per week in benefits.
That's because she periodically earns small residual checks from her 1980s work as a Hollywood stuntwoman. Castoldi was a stunt double for stars such as Jane Fonda and Kirstie Alley. In the James Bond movie, A View To A Kill, she performed a fight scene atop the Golden Gate Bridge.
"I did a lot of gnarly stunts," she said. "Jumping out of cars before the car went off a cliff. Stair falls. Car hits. Burns."
Her residuals from that past career show up periodically, but they don't amount to much.
"I've got one [check] sitting in front of me right now for seven cents," she said.
Like other performers, Castoldi is now haunted by the slow trickle of payments for past work as she tries to navigate the unemployment system.
Because those residuals come in the form of W2 income, they have wiped out all her past self-employment income in the eyes of California's unemployment department. If her business earnings had been taken into account, she would have likely received $450 per week.
Lately, Castoldi hasn't even been receiving her weekly $45 benefit because EDD put her payments on hold.
"I don't feel angry," she said. "I feel scared. I just have to be as positive as I can and I can't worry too much, or the energy and the focus will go away, and I'll fail even more."
CONGRESS HOLDS OUT PROMISE OF RELIEF, BUT CALIFORNIA HAS YET TO DELIVER
Recognizing that the unemployment system was shortchanging mixed earners, federal lawmakers crafted a new program in the December COVID relief bill to put more money in their pockets.
The plan was simple: those caught in the loophole would receive an extra $100 per week -- on top of their existing benefits -- as long as they could show at least $5,000 in self-employment income during the most recent tax year. The program would be called Mixed Earner Unemployment Compensation (MEUC), and it would last until mid-March.
While other states and the District of Columbia have begun rolling out their MEUC programs, California lags behind.
The state's Employment Development Department (EDD) -- embroiled in fraud scandals, leadership changes and scrutiny from lawmakers over widespread payment delays to legitimate applicants -- has not provided guidance on when mixed earners can expect to see the extra $100. KPCC's repeated inquiries to EDD officials were not answered in time for this story.
Congressman Adam Schiff (D-Burbank) advocated for the MEUC program in the latest COVID bill. He argues the benefit should be continued and increased in the next round of legislation.
In a recent online event addressing questions from mixed earners, Schiff said Congress ended up passing this small, targeted benefit -- rather than overhauling the way states calculate benefits for mixed earners -- in hopes that state unemployment departments would deliver it quickly.
The delayed implementation in many states, Schiff said, is, "maddening for me. And it's obviously life-threatening for many people ... We went with a simple formula. And even that, apparently, is too much to get done quickly the way it should in some of the states."
LEFT HOMELESS ON $45 PER WEEK
Back in Redlands, Karen Castoldi decided to shut down her business for good last summer after months of financial struggles and little help from the state's unemployment system. With her own personal savings depleted and little money coming in, she had to leave her rental home and move in with a friend. But that living situation became untenable.
Now, she's living in a storage space owned by one of her former students.
"I thought I was going to be in my car. I was lucky to be here," she said. "I'm probably going to have to stay homeless for a while."
When Castoldi closed her business, she put her acrobatics equipment and costumes into storage units, hoping to relaunch her career after the pandemic subsides. But she now fears that future is in jeopardy, because she's not sure how to pay the storage fees.
"That's the threat: if you don't pay for your storage units, they auction them off," she said. "That gets me emotional because that's my career -- my future. I'm 60. I was planning on retiring in five to seven years."
