Here is the EDD's explanation:
"The "Lag Period"
Section 1277 of the UI Code prevents an individual from establishing valid claims in two successive benefit years without having reestablished an attachment to the labor market subsequent to the effective date of the first claim.
The "lag period" is the space of time between the end of the base period of the claim and the effective date of the claim itself. Earnings during the lag period are not used in computing the award of the claim. Whenever these "lag period" wages appear in the base period of a subsequent claim, the 1277 test applies.
In enacting Section 1277, the Legislature placed a "test" upon the claimant's attachment to the labor market before a second claim could be established on "lag period" wages. The test consists of both an earnings and work requirement.
1. The Earnings Requirement
Section 1277(b) requires that the claimant have had, during the old benefit year, sufficient wages of the type required to establish a claim. This requirement means that, for claims established after January 1, 1992, the claimant must have been:
- Paid wages for employment of not less that $1300 during the "high quarter" of the base period of the new claim, or
- Paid wages for employment of not less than $900 in the "high quarter" of the new claim, and have earnings of 1.25 times those "high quarter" earnings in the base period of the new claim. (Example: If "high quarter" earnings are $900, the claimant must have total base period earnings of at least $1125. If "high quarter" earnings are $1200, the total base period earnings required are at least $1500., etc.)
While only earnings in covered employment may be used to establish an award, any and all compensation as an employee may be used to satisfy the earnings requirement for clearing the lag period test of Section 1277. This includes compensation from nonsubject employment, out-of-state employment, and where there is elective coverage, earnings in self-employment. It also includes fees for performance as a juror or court summoned witness, in lieu of notice pay, as well as any vacation pay, backpay, sick leave pay or holiday pay which is not excluded from the definition of Wages in Section 1265.5.
Compensation for any military service, whether on an active duty basis or a member of the reserves, constitutes employment. Therefore, it can be used to satisfy both the earnings test and the "some work" test as described below."