Category: Compensation

Enhanced Unemployment

Enhanced Unemployment Offers Employers A New Option During Coronavirus Pandemic

Here’s a little secret. Most employment lawyers historically didn’t have to pay much attention to unemployment laws before COVID-19 came along. Employees would leave jobs and either get unemployment benefits or not, for various reasons. But new enhanced unemployment benefits under the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act have suddenly created many new legal complexities surrounding the unemployment system. Solely in the vein of making a horrible situation slightly better, the CARES Act has produced some new approaches to layoffs and work reduction that might pose unique benefits to both workers and their employees.

Another secret. Here are the main takehomes from all the words below:

  • People on unemployment get an extra $600/week until the end of July 2020.
  • The extra money doesn’t come at the expense of employers.
  • New York’s Shared Work Program is a much more attractive option than it ever has been before.

If any of these points seem interesting, please keep reading.

New York State Unemployment

Even before the CARES Act came along, unemployment has long been a fairly complicated system. But most of that complication came in the back end. It involved the details of calculating who has worked enough to receive unemployment benefits, how much they earn, and how much each employer has to pay to enable workers to receive these benefits. Luckily, the government usually handles most of that complexity–in essence, they send workers checks and send employers the bill to cover the benefits.

Although the federal government plays a role in unemployment, it’s usually in the background. Processing unemployment claims and providing compensation to workers out of a job usually falls to the states. Thus, most employers in New York, for example, make regular contributions to the state unemployment insurance system. These contributions vary depending on how many workers receive benefits credited to a particular company’s account. In other words, companies with more employees (usually former employees) who receive benefits typically contribute more to the system. (Many non-profit organizations have the option of essentially being self-insured for unemployment. If they choose to do so, these organizations can refrain from paying unemployment “taxes” and instead reimburse the State directly for the amount of any benefits received by their employees.)

New York workers who become eligible for unemployment must first file a claim with the State. Then they have to re-certify on a weekly basis. The re-certification process serves to confirm that an individual is still out of work, but is available to work and actively looking for a new job. As long as that remains true, a claimant can normally continue to receive unemployment benefits for up to 26 weeks out of a year. To keep things simple, the amount of benefits is usually equal to half of what the person made while working, up to a max of $504 per week.

CARES Act Enhanced Unemployment

Among its numerous stimulus measures, the CARES Act includes many provisions that create temporary enhanced unemployment benefits. This article isn’t going to address all of them in detail. For example, the CARES Act enables self-employed individuals to receive unemployment benefits more easily than they normally could. It also allows workers to receive unemployment beyond the standard 26 weeks in some situations. These and other enhanced unemployment benefits may be relevant to your business or its employees. But, for now, we’re going to primarily focus on other aspects of the CARES Act unemployment enhancements that will likely have a broader and more immediate impact on how companies choose to manage their workforce during the coronavirus crises.

$600 “Federal Pandemic Unemployment Compensation”

Perhaps the most publicized aspect of the CARES Act unemployment measures gives virtually anyone receiving unemployment benefits an additional $600 per week. This extra benefit only lasts until July 31, 2020 (technically, the week of unemployment ending before that date). But it’s still a huge expansion of standard unemployment benefits.

Remember, the NYS max unemployment benefit is normally $504 per week. That’s what someone who normally makes $1,008 or more per week would get. Now they’ll receive $1,104. Yes, even if they made less than before!

The U.S. Department of Labor has issued guidance clarifying that people receiving unemployment will get the $600 extra per week as long as they normally qualify for at least $1 of state unemployment benefits. So, for example, someone who only made $400 per week when working could now get $800 on unemployment ($200 state unemployment benefits plus the $600 federal addition).

Employees will even receive the $600 bump if they’re only receiving partial unemployment benefits. In New York, workers whose pay is cut resulting in them working less than four days in a week and earning under $504 may qualify for partial unemployment. Though usually only a small benefit of a couple hundred dollars, the extra $600, plus whatever they’re still earning from working on a reduced schedule, will often result in such employees earning way more than they regularly would.

Though they might rather be working as normal, this enhancement is at least a meaningful upgrade for individuals on unemployment.

There’s also good news for employers (beyond the peace of mind in knowing their out-of-work employees are getting more money). The federal government is paying for this extra $600/week. Under existing New York law, this means it won’t count against employers’ unemployment experience rating. But that’s only the extra $600. The standard NYS portion will still be charged to the employer as normal.

Federal Funding of Shared Work Program

New York has had a “Shared Work Program” for decades. This program allows employers to establish a plan for reducing employee hours and compensation that will also enable workers to receive some unemployment to supplement the lower wages.

Employers must apply to the State for approval under this program. To qualify, a Shared Work Plan must:

  • Reduce work hours and corresponding wages 20–60%
  • Apply only to employees who normally work no more than 40 hours per week
  • Not reduce or eliminate fringe benefits (unless also doing so for the entire workforce)
  • Cover a period of up to 53 weeks
  • Replace a layoff of an equal percentage of employees

For more, read New York’s Shared Work Program Provides a Layoff Alternative

Some companies with seasonal fluctuations in their business routinely use this program. The primary benefit for employers is that they keep their workforce intact and in touch with the company. Another feature of the program is that employees don’t have to look for alternative work despite receiving partial unemployment benefits. The idea is for them to continue working for their current employer.

Usually, the State charges the employer’s account for the unemployment benefits employees receive under the Shared Work Program. However, the CARES Act creates full federal funding for the program through the end of 2020. This funding makes the program very attractive for employers who have less work to be done, need to save money, and don’t want to lose their employees during the COVID-19 crisis.

Note: The CARES Act does not provide federal reimbursement for Shared Work benefits paid to temporary, seasonal, or intermittent employees even though such workers can participate in a Shared Work plan under New York law.

Putting It All Together

To show the value of these enhanced unemployment provisions, let’s look at an example.

Company X

Suppose a company with 50 employees has 10 management employees who still need to and are able to work full-time right now. The other 40 are hourly employees who all make $20 per hour (not realistic, but it keeps the math simple). These employees all normally work a 40-hour week. The company qualifies as an essential business, so it can continue to operate. But customer demand is down, and management wants to keep employees safe through social distancing and remote work as much as possible. Consequently, there is much less work for these 40 employees to perform.

Let’s say the company decides it only has about 800 hours of work per week for the hourly employees. That’s half of the standard 1600 hours (40 employees x 40 hours/week). It could lay off 20 of the employees and let the other 20 work full-time, or it could let everyone work 20 hours instead of 40. Assume the company expects business to pick up later this year and will again need 40 hourly employees.

If the company either lays off half of the employees or reduces everyone’s hours, the affected employees can apply for unemployment. They will all get the $600/week enhanced unemployment benefit. The employer won’t have to pay for that. But it will have to pay for the standard NYS benefits the employee will also receive. That is, those benefits will affect the company’s unemployment insurance experience rating and the UI taxes it pays.

Shared Work Program Option

But, under the Shared Work Program, the federal government will pay all of the unemployment with no charge to the employer. Here’s what that would look like:

  • Each of the 40 employees will work 20 hours
  • Employee benefits remain intact
  • The company pays each worker $400/week (20 hours x $20/hour)
  • Each employee receives $200 in standard NYS unemployment for up to 26 weeks (subject to some individual circumstances)
  • Each employee also receives $600/week in enhanced unemployment until the end of July 2020

Through July, each employee will “earn” a total of $1,200 per week for working only 20 hours! That’s $60/hour, or triple their regular hourly rate!

At the same time, the company is still only paying $20/hour and saving $200/week per employee, or $8,000 for the 40 employees.

Can Your Company Take Advantage of This Situation?

The scenario above is just one hypothetical example. The math will vary for each company looking at options to reduce labor costs during the COVID-19 pandemic. But the Shared Work Program does offer flexibility. An employer can divide up its workforce in various ways to include/exclude different employees. You can modify the hour/compensation reduction between 20 and 60% to suit your business needs.

There may also be some logistical hassles. You do have to apply for and receive approval to participate in a Shared Work Program. But it seems New York is encouraging employers to take advantage of this option and may be able to process applications reasonably quickly.

 

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COVID-19 Leave Guidance

U.S. DOL Issues Preliminary COVID-19 Leave Guidance

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act into law. Among other provisions, the law mandated two new forms of leave for employees of private employers with less than 500 employees and all government entities. The U.S. Department of Labor has the authority to issue regulations interpreting these leave requirements. Before releasing formal rules, the DOL has posted initial COVID-19 leave guidance on its website.

Fact Sheets

The DOL has created “Fact Sheets” targeting both employees and employers. These documents are available in English and Spanish and are available through these links:

Employee Paid Leave Rights

Employer Paid Leave Requirements

The fact sheets primarily outline the parameters of the law. For our full summary of the legislation, click here.

Questions and Answers

The Wage and Hour Division of the DOL has also created a “Questions and Answers” page as part of its COVID-19 leave guidance.

For simplification, the DOL is referring to the two new forms of leave as “paid sick leave” and “expanded family and medical leave.”

“Paid sick leave” refers to paid leave under the Emergency Paid Sick Leave Act. Eligible employees can receive up to two weeks of paid leave for absences related to COVID-19 (the novel coronavirus).

“Expanded family and medical leave” refers to paid leave under the Emergency Family and Medical Leave Expansion Act. It is a new form of leave under the Family and Medical Leave Act (FMLA) that allows employees to take up to 12 weeks of leave to care for a child whose school has closed or whose childcare is unavailable due to COVID-19. The last 10 of these 12 weeks would be paid leave for eligible employees.

The DOL seems to be updating this Q&A page periodically. It has already grown from 14 questions at launch on March 24th, to 37 questions on March 26th, as of the writing of this article.

The first question addresses when the leaves become available. Although most observers initially read the law to take effect on April 2nd, the DOL states that these new leave requirements take effect on April 1, 2020. Unless extended, these leave provisions will expire as of December 31, 2020.

Click to read: DOL Families First Coronavirus Response Act Questions and Answers

Here are a few notable clarifications in the COVID-19 leave guidance Q&As:

What records do employers need to keep to document these leaves?

Because employers can receive tax credits to offset the wages they pay to employees during these leaves, they must be able to demonstrate that the employee qualified for the leave under the law.

For paid family leave, the DOL says “you must require your employee to provide you with appropriate documentation in support of the reason for the leave, including: the employee’s name, qualifying reason for requesting leave, statement that the employee is unable to work, including telework, for that reason, and the date(s) for which leave is requested.” Documentation of the reason for the leave will also be necessary.

For expanded family and medical leave, “you must require your employee to provide you with appropriate documentation in support of such leave, just as you would for conventional FMLA leave requests.”

The IRS’s initial statement regarding the tax credits accompanying these paid leaves is available here.

What documentation does the employee need to provide to take these leaves?

For paid sick leave, supporting documentation “may include a copy of the Federal, State or local quarantine or isolation order related to COVID-19 or written documentation by a health care provider advising you to self-quarantine due to concerns related to COVID-19.”

For expanded family and medical leave, an employee could provide “a notice of closure or unavailability from your child’s school, place of care, or child care provider, including a notice that may have been posted on a government, school, or day care website, published in a newspaper, or emailed to you from an employee or official of the school, place of care, or child care provider.”

Can employees take intermittent leave?

Yes, if their employer allows it. The guidance says employees can take the leave in any time increment that the employer permits. But, then it limits that position.

Unless the employee is teleworking, paid sick leave is only available in full-day increments, except where the leave is to care for a child who is out of school/child care due to COVID-19.

Do employees have a right to these leaves if their worksite closed before April 1, 2020?

No, but they might be eligible for unemployment benefits.

What if the employer closes down while an employee is taking paid sick leave or expanded family and medical leave”?

The employer must pay for any leave before the closing. The employee is not eligible for paid leave after that, but they may become eligible for unemployment benefits.

Employee Rights Poster

By April 1, 2020, covered employers must post an employee rights notice regarding these new forms of leave in the workplace.

The DOL has prepared the poster, which is available here.

Future Developments & Compliance

The COVID-19 leave guidance now available on the DOL’s website references “forthcoming regulations.” These will likely go into even more detail on some aspects of the new laws. The regulations will also carry more legal authority than this preliminary website guidance. The DOL has suggested the regulations would come out sometime in April, despite the April 1st effective date.

Perhaps due to the need to issue the formal regulatory guidance, the DOL has indicated that it will not enforce these new leave requirements until April 18, 2020. However, employers who violate the law before then may still face some consequences. Employers who committed violations in early April despite “reasonable” actions “in good faith” will still have to repay employees who should have received paid leave as soon as practicable. The DOL may later seek additional penalties, however, for employers who willfully violated the leave requirements even before the DOL begins enforcement.

Consequently, employers who might be subject to these new requirements must get familiar with them and plan to comply as well as possible by April 1st.

 

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Quarantine Leave

New York State Creates COVID-19 Quarantine Leave for Employees

On March 18, 2020, New York enacted a new law providing job-protected leave and compensation to any employee in New York State who is under a precautionary or mandatory order of quarantine or isolation due to COVID-19. The law provides varying benefits based on several characteristics of the employer.

In addition to the statutory terms discussed below, the law requires various State agencies to issue interpretative regulations by June 1, 2020. The law, however, took effect immediately.

Private (Non-Government) Employers

“Small” Employers

Private employers with less than 10 employees as of January 1, 2020, and income less than $1 million in the previous tax year must provide unpaid sick leave to any employee who is placed under a precautionary or mandatory order of quarantine or isolation due to COVID-19 through the duration of the order. Employers must continue to provide such employees and any other benefit that the employee has a right to under any law.

These employees are entitled to receive compensation for the duration of the leave through the New York paid family leave and disability benefits programs.

“Medium” Employers

A middle category of benefits applies to employees of employers with:

  • less than 10 employees who had a net income greater than $1 million in the previous tax year; and
  • between 11 and 99 employees.

These employers must provide at least 5 days of paid leave to employees under COVID-19 quarantine or isolation. They must also allow unpaid leave for the remainder of the quarantine or isolation period.

After the 5 days of paid leave, such employees will be eligible for paid family leave and disability benefits.

“Large” Employers

Employers with one hundred or more employees must provide at least 14 days of paid sick leave to any employee under COVID-19 quarantine or isolation.

The statute does not state that these employees can receive additional unpaid leave or paid family leave and disability benefits. That might be based on the assumption that quarantine usually wouldn’t last beyond 14 days. Or perhaps, the omission could be inadvertent and may be corrected through an amendment upon discovery by the State.

Public Employers

Public employers (i.e., all state and local government entities) must provide any employee or officer under a mandatory or precautionary order of quarantine or isolation with 14 days of paid sick leave.

The statute clarifies that such public employees must receive compensation at their “regular rate of pay” for “regular work hours” they miss due to the quarantine or isolation order. There is no specific clarification of the compensation rate for private-sector employees.

Additional Conditions for Quarantine Leave

Qualifying Quarantine/Isolation Order

To qualify for leave the employee’s order of precautionary or mandatory quarantine or isolation for COVID-19 must be issued by the State of New York, the NYS Department of Health, a local board of health, or any government entity duly authorized to issue such an order.

However, the law clarifies that this law does not apply to an employee who meets both of the following conditions:

  • has been deemed asymptomatic or has not yet been diagnosed with any medical condition; and
  • is physically able to work while under a mandatory or precautionary order of quarantine or isolation, whether through remote access or other similar means.

Job Restoration

Employers must restore any employee who returns to work from COVID-19 quarantine leave to the position the employee held before taking the leave. The employee must receive the same pay and other terms and conditions of employment.

The law prohibits discrimination and retaliation against employees for taking this leave.

Conversely, the law does not bar employers from taking personnel actions unrelated to “any request to use, or utilization of, any leave provided by this act.” Presumably, this acknowledges that employers may discipline or even layoff or discharge employees due to performance, misconduct, or economic factors.

Impact on Other Sick Leave

Any employee who qualifies for leave under this law may take it without losing any other accrued sick leave.

Disqualifying Travel

Any employee who (other than for work or at the direction of their employer) traveled to a country subject to a Level 2 or Level 3 travel health notice from the Center for Disease Control and Prevention, despite receiving such notice, is not eligible to receive paid sick leave during the period of quarantine or isolation. Such employees still may use any other accrued paid sick leave and remain entitled to unpaid leave for the duration of the quarantine or isolation.

Employee Eligibility for Insurance Benefits

New York State Disability Benefits

The new law amends, for limited purposes, the definition of “disability” under the New York State Disability Benefits Law to mean:

any inability of an employee to perform the regular duties of his or her employment or the duties of any other employment which his or her employer may offer him or her as a result of a mandatory or precautionary order of quarantine or isolation issued by the state, the department of health, a local board of health, or any government entity duly authorized to issue such order due to COVID-19 and when the employee has exhausted all paid sick leave provided by the employee’s employer” under the COVID-19 quarantine leave law.

For employees with such a disability, the law waives the standard 5-day waiting period before receiving disability benefits. This waiver allows qualifying employees to begin receiving disability benefits starting the first full workday that they miss due to COVID-19 quarantine or isolation.

The law seems to increase substantially the dollar amount of disability benefits potentially available for employees missing work for this purpose. Usually capped at $170 per week, disability benefits for qualifying employees on COVID-19 quarantine leave will be equal to the difference between the maximum family leave benefit and the employee’s average weekly wage, up to a maximum of $2,043.92.

New York State Paid Family Leave

The COVID-19 quarantine leave law also amends, for limited purposes, the definition of “family leave” under the New York State Paid Family Leave Benefits Law to mean:

(a) any leave taken by an employee from work when an employee is subject to a mandatory or precautionary order of quarantine or isolation issued by the state, the department of health, a local board of health, or any government entity duly authorized to issue such order due to COVID-19; or

(b) to provide care for a minor dependent child of the employee who is subject to a mandatory or precautionary order of quarantine or isolation issued by the state, the department of health, a local board of health, or any government entity duly authorized to issue such order due to COVID-19.

Notably, part (a) of this revised definition provides for “family leave” in the case of the employee’s own quarantine or isolation due to COVID-19. This addition is a significant departure from the existing NYS paid family leave provisions, which only apply to particular circumstances unrelated to the employee’s own medical condition.

Simultaneous Benefits

The above all now means that an employee under quarantine or isolation for COVID-19 can receive both disability benefits and paid family leave benefits at the same time.

However, the law caps these benefits for employees under quarantine or isolation at no more than $840.70 in paid family leave benefits and $2,043.92 in disability benefits. An employee’s average weekly wage would have to be at least $2,884.62, or $150,000 annually, to reach the cap.

Ironically, it seems that perhaps employees making less than about $1,400 per week would end up with less than full wage replacement. That is because the law determines the amount of disability benefits based on the “maximum weekly family leave benefit,” which arguably is the maximum for any employee (currently $840.70), rather than the lower amount that the employee in question would receive in paid family leave benefits. It’s uncertain whether the State intended this discrepancy. It is possible that they might seek to “clarify” the calculation by an amendment or further regulatory action.

Interaction with Other Laws

This New York State measure addresses possible overlap with federal law. Indeed, within hours of Governor Cuomo signing this act, President Trump signed a bill from Congress that also provides for up to two weeks of paid sick leave related to COVID-19. The federal law would apply to some of the same employees and employers as the State law, does but there are differences in coverage.

The New York law indicates that its benefits (whether through paid sick leave, paid family leave, or disability benefits) are not available to the extent the employee otherwise receives compensation under the federal law. However, where the State law provides more generous benefits than the federal law, the employee is eligible to receive the difference in benefits to supplement what the federal law requires.

Our full summary of paid sick leave and paid FMLA requirements under the Families First Coronavirus Response Act is available here.

Penalties

The New York law does not contain any express penalties for non-compliance. However, existing penalty provisions under the New York Disability Benefits Law and New York Paid Family Leave Benefits Law would likely apply to relevant portions. Moreover, failure to pay the new sick leave benefits might constitute a failure to pay wages subject to stiff penalties under the New York Labor Law.

What Employers Must Do

Asking employers to comply with this new law, especially when coupled with new federal requirements and during an unprecedented national health crisis, is no small request by the State. The provisions are quite complex, including peculiar implications under existing insurance policies. But the law is now in effect and should be taken seriously. Ideally, this would include updating applicable policies, such as your paid family leave policy, which all New York employers must have in writing. We strongly encourage you to consult with experienced employment attorneys in attempting to apply this new array of leave benefits to your workplace.

 

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