Info Sheet: Waiver Of Penalty Policy (De 231J)
DE 231J Rev. 9 (10-13) (INTERNET) Page 1 of 2 CU
WAIVER OF PENALTY POLICY
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
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 specically
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 on 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.
Existence of Good Cause
Good cause exists where the circumstances causing the delay
are clearly beyond the control of the employer or where the
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
responsibilities and, therefore, must establish all of the
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
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
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 ling 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
does not meet the time limits for ling the proper forms or
making the proper payments to the EDD, it will be at fault
and will not have good cause for the delay.
NOTE: Unforeseen nancial 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.”
DE 231J Rev. 9 (10-13) (INTERNET) Page 2 of 2 CU
Examples Where Good Cause Does Exist
• The employer’s return and remittance for California
was inadvertently placed in the wrong envelope and
mailed timely to the Commonwealth of Virginia. The
CUIAB determined the employer’s late ling was due
to an isolated instance of inadvertence not reasonably
foreseeable by the petitioner and not attributable to any
fault of the petitioner (P-T-449).
• An employer failed to afx proper postage to an
envelope with a timely remittance enclosed. The CUIAB
determined the employer made a good faith effort to le
on time and believed it had done so. All other payments
and lings were made timely to the EDD and this was
an exception to that practice. In this case, good cause
• Good cause existed where the employer, under the
distress of the sudden illness of the employer’s father,
was unable to le and pay the contributions due timely.
• Catastrophic occurrences, such as re or earthquake,
or delays attributable to the postal service, would
clearly give the employer good cause (P-T-449). The
catastrophic occurrences would be subject to when the
calamity actually took place in relation to the time when
the taxes were due.
Examples Where Good Cause Does Not Exist
• The CUIAB held that an employer’s reliance upon
another to perform acts does not constitute good
cause since he or she may not complain of his or her
voluntary delegation of authority and, as principal, is
bound by the action or inaction of his or her agent.
• The employer contracted with an accountant to
handle its tax obligations. The accountant failed to le
reports while assuring the employer that all deadlines
were being met. The employer had a duty to select a
responsible accountant but did not do so. The employer
also failed to specify what assurances were given by the
accountant. Therefore, the employer failed to establish
it acted with the degree of diligence a person of ordinary
prudence would have used under the same or similar
circumstance. In this case, good cause did not exist.
• An employer’s public accountant prepared the return,
but no one was available to draw the check. The
accountant mailed the employer’s return unaccompanied
by payment. The CUIAB found the cause for failure to be
the accountant’s lack of knowledge of the law coupled
with the employer’s failure to have a responsible agent
with the authority to draw checks on its behalf to properly
discharge its responsibility to make contributions. Good
cause did not exist because there was no element
beyond the control of the employer.
• The mere fact that one partner may have been
defrauded does not constitute good cause for the
partnership not ling and paying returns in a timely
manner. The partner had knowledge of the “credentials”
or lack thereof possessed by the other partners. The
partner’s conduct in entrusting the total business to them
did not demonstrate the use of prudence or diligence.
The above-mentioned cases may not encompass the
entire set of factors used by the CUIAB in establishing the
existence or lack of good cause, and are presented here as
examples only. The EDD and the CUIAB will determine good
cause on a case-by-case basis.
For further information, please contact the Taxpayer
Assistance Center at 888-745-3886, or visit the nearest
Employment Tax Ofce listed in the California Employer’s
Guide (DE 44) and on the EDD website at
The EDD is an equal opportunity employer/program.
Auxiliary aids and services are available upon request
to individuals with disabilities. Requests for services,
aids, and/or alternate formats need to be made by calling
888-745-3886 (voice) or TTY 800-547-9565.
This information sheet is provided as a public service and is intended to provide nontechnical assistance. Every attempt has been made
to provide information that is consistent with the appropriate statutes, rules, and administrative and court decisions. Any information that
is inconsistent with the law, regulations, and administrative and court decisions is not binding on either the Employment Development
Department or the taxpayer. Any information provided is not intended to be legal, accounting, tax, investment, or other professional advice.