Mainstay Staffing, a temporary staffing company operated by the Blue Lake Rancheria Tribal Government, an Indian tribe in Northern California, has not appealed a decision made by the California Employment Development Department.
Although it’s unclear if Mainstay intends to appeal the EDD’s decision to place a $16.4 million lien on the business in the coming days, it appears the company could be gearing up to do so.
“Mainstay is exploring many options for redress, which because of the legal aspects is all I can say at this time,” said Jana Ganion, communications director for Mainstay and Blue Lake Rancheria.
“We will have limited response at this time, as this is likely to become a legal issue and we must deploy all resources to transition our clients and our employees,” the company issued in a statement following its closure late last week.
Once news of the lien was known to Mainstay’s financial partners, they pulled funding – forcing the business to close.
Ganion believes the problem is an accounting error at the EDD level, citing a similar situation in 2006 which ended in court. In that instance, the EDD was told to erase more than $9 million in assessments they had made.
“I’ve often wondered why unemployment claims administration (and) accuracy by the EDD has not been investigated. Obviously the California unemployment fund is billions in the red; I wonder how much of that has been spent in complete error?” Ganion asked.
“From our internal audits we observed the EDD error rate to be at about 40 percent of all claims, which is consistent with the percentage of EDD decisions that are overturned on appeal statewide,” Eric Ramos, Mainstay’s chief executive officer, alleges.
The assessment, as computed by the EDD, is more than $16.4 million, which includes a principal of approximately $11 to $12 million, along with interest and penalties.
Mainstay announced that levy actions by the EDD forced the company to close, leaving thousands of California workers wondering if their jobs were in peril.
“Our question is why did the EDD take action they knew would cause layoffs and threaten the survival of hundreds of small businesses? They had the authority to avoid this and keep working with us,” asked Ramos.
“We collect payroll taxes, but we also provide unemployment insurance and disability insurance benefits. In all those areas, we’ve had complaints with the slowness of unemployment insurance,” admitted Pat Joyce, a spokesmen for the EDD.
In a bit of good news, Mainstay helped its employees continue working by partnering with other staffing companies, including Select Staffing, enabling thousands to continue employment elsewhere.
Yet even if the EDD did mistakenly overcharge Mainstay 40 percent, that means the staffing company would still be responsible for paying approximately $7.2 million, begging the question of how they fell behind.
“Liens do not usually occur quickly,” said Dan Stephens, spokesman for the EDD communications office.
Mainstay had been in negotiations with the EDD for more than two years regarding the outstanding unemployment assessment. While Mainstay claims that notice of the lien was sudden and without warning, two years is still 730 days.
“To date we have not been served with any judicial action by Mainstay,” Stephens added, declining to comment about any futher details.