Biden’s Labor Nominee ‘Embodies the Spirit of California,’ and That’s the Problem

C alifornia spreads its bad policies in a variety of ways, sometimes by launching its politicians directly into top federal posts. But for pure incompetence, few of those California politicians match Julie Su, President Biden’s nominee to run the Department of Labor.

While she was Governor Gavin Newsom’s secretary of labor, Su oversaw the implementation of bad policy and the mismanagement of simple procedures. Any one of her major catastrophes would have been career-enders elsewhere; in California, where the failure of progressive policy is invariably a prompt for more progressive policy, she was instead excused — and then promoted into the Biden White House as deputy to now-former labor secretary Marty Walsh.

In California, Su oversaw the disbursement to organized crime of billions of dollars in unemployment benefits through the state Employment Development Division (EDD). For more than a decade, the state’s independent auditor had issued warnings about EDD’s vulnerabilities. No one, certainly not Su, acted on that intelligence.

“Despite knowing for years that it had problems with call center performance, EDD has not yet adopted best practices for managing the call center, leaving it ill prepared to assist Californians effectively,” the auditor declared in January 2021.

By that time, Su’s EDD had issued an estimated $11 billion in benefits payments to fraudsters. “There is no sugarcoating the reality,” Su told a news conference. “California did not have enough security measures in place.”

But that is sugarcoating reality, because it was Su, not the enormous entity she called “California,” who ignored warnings that a catastrophic breach was inevitable. And further investigation has revealed that fraudsters — including international crime gangs and prison inmates — tapped EDD for what has now reached closer to $33 billion.

The proximate cause of the EDD’s sudden breakdown was Su’s determination that checking a beneficiary’s eligibility for unemployment payments would likely exacerbate social inequality. When federal Covid-relief cash poured into Sacramento, Su heedlessly barreled ahead. While enriching bad guys, Su’s agency stiff-armed legitimate benefits claimants.

“EDD’s lack of preparation left it unable to manage two important fraud-related situations that arose during its 2020 pandemic response,” the auditor wrote in her postmortem. “In September 2020, because of fraud concerns, EDD directed Bank of America to freeze 344,000 debit cards (accounts) that it used to provide benefit payments to claimants. However, EDD did not have a plan in place to ensure that it could unfreeze those accounts found to belong to legitimate claimants, and it has been slow to acknowledge its role in freezing these accounts. EDD was also unprepared to prevent payment of fraudulent claims filed under the names of incarcerated individuals, the total of which is an estimated $810 million. Because it had not developed the capacity to regularly match data from its claims system with data from state and local correctional facilities, EDD did not detect fraudulent claims until after it had paid them.”

Nor did Su question the procedural challenges of implementing California’s Assembly Bill 5. That 2019 law, authored by organized labor, targeted the independent-contractor status of drivers for such gig businesses as Uber, Lyft, and DoorDash. The woman whom Newsom heralds for “her commitment to empowering working people” did not nothing to question the wisdom of a law that killed hundreds of thousands of small businesses. A.B. 5 exempted some favored businesses (like the news organizations that rely on freelancers and might otherwise editorialize against the bill), while destroying others (like the state’s 70,000 independent truckers). The powerful Silicon Valley companies that were the only named targets of A.B. 5 escaped altogether: This week, a state appeals court gave the green light to Uber and Lyft’s successful statewide ballot proposition exempting their drivers.

Su claimed she had no authority to question a legislative act. She was just an operations manager. But it was as an operations manager that she might have opposed the proposed bill. Instead, as the bill’s author, now head of the California Federation of Labor, says, Su “brought a perspective that labor law enforcement isn’t just good for workers, it’s also good for high-road businesses that are doing things right.”

Tell that to the businesses fleeing the Golden State.

As California’s labor secretary, Su also oversaw the deeply troubled Department of Fair Employment and Housing (DFEH). Created in 1959 to mediate sometimes fraught relations between employers and employees, the agency has metastasized into a plaintiffs’ firm for aggrieved employees. Gone are the days of mediation. Under Su, the agency targeted companies where employees had already settled with employers over workplace problems. Su’s department wanted a piece of every settlement, and the bigger the better.

In a 2020 case involving video-game maker Riot Games, plaintiffs’ attorneys representing a group of female employees was finalizing a substantial $10 million settlement with the company on charges of sexual harassment and gender discrimination, when DFEH and the state’s Division of Labor Standards Enforcement (DLSE) stepped in to block the settlement. The department alleged the plaintiffs’ attorneys made procedural mistakes and failed to determine a proper dollar value for their clients, and DFEH made a headline-grabbing demand of $400 million — a number that a Riot Games spokesperson described as “not grounded in any fact or reasonable analysis” and that did not consider “key factors such as job title, duties, skills, experience, or education.” For a sense of scale, that amount was nearly 30 times larger than the total for all DFEH settlements in 2019 and exceeded the largest individual settlement reported in the department’s 2020 annual report by a factor of 200.

Naturally, attorneys for both plaintiffs and defendants rejected the allegations and filed rebuttals. But by late 2021, Riot Games had agreed to a master settlement of $100 million, of which DFEH has requested $7.1 million, while DLSE was awarded $3 million for a related Private Attorney General Act claim.

Cases against computer-game maker Activision and carmaker Tesla followed. Each state intervention followed the pattern established in Riot Games.

If approved, Su won’t be the only half-baked Californian in the Biden White House. Vice President Kamala Harris is (per National Review’s Charlie Cooke) “talented enough to make the inanities uttered by her rival Pete Buttigieg sound substantive, concise, and apprehensible.” Economist David Bahnsen calls California’s Janet Yellen “a career bureaucrat, albeit a hyper-intelligent one, who has spent an adult life devoid of accountability for poor decisions and even poorer ideas.” California’s Xavier Becerra knew nothing about health or human services until Biden made him head of Health and Human Services; during Covid, he did nothing, which, given his résumé, might have been for the best.

Becerra’s fathomless ignorance is almost a prerequisite for this administration, where experience might mean owning your failures. The first White House gig of Californian Alejandro Mayorkas, now secretary of homeland security, as Obama’s director of U.S. Citizenship and Immigration Services involved running interference for a scandal-plagued electric-car company run by Secretary of State Hillary Clinton’s brother Tony Rodham and Terry McAuliffe, cochairman of President Bill Clinton’s 1996 reelection campaign, chairman of the Democratic National Committee from 2001 to 2005, and chairman of Hillary Clinton’s 2008 presidential campaign.

I needn’t go on — or should I mention that Biden’s deputy secretary of education is a former San Diego teachers’-union official whose concern for union power exceeds any attachment to student performance?

Perhaps glad to see Su go — and take her failures with her to the White House — Gavin Newsom issued a note of congratulations when Su stepped up for the deputy secretary’s job in early 2021. But even in that perfunctory press release, there were warning signs.

“Julie has been with me from the very start,” the governor noted. And in what every American ought to have seen as a terrifying portent, he said, “Julie Su embodies the spirit of California.”

Indeed, she does.

California Policy Center policy analyst Steve McCarthy contributed to this research.