Tag: layoff

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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New York Shared Work Program

New York’s Shared Work Program Provides a Layoff Alternative

Many businesses experience ups and downs. Sometimes this results from seasonal fluctuations. Other times from unexpected conditions. Either way, a downturn in customer demand can leave employers without enough work for their existing workforce. One option employers have is to layoff employees altogether until times improve. Another option is to reduce work hours during slow periods. New York’s Shared Work Program promotes the latter approach, potentially benefiting both employers and employees.

What is the Shared Work Program?

The New York Department of Labor administers the Shared Work Program though its Unemployment Insurance Division. Through the program, employees work a reduced schedule and receive partial unemployment benefits for the same week.

Employers must apply with the Unemployment Insurance Division to participate.

Employer Eligibility

To be eligible to apply to participate in the Shared Work Program employers must have:

  • At least 2 employees working in New York State; and
  • Paid Unemployment Insurance contributions, or elected reimbursement of benefits paid to former employee, for 4 consecutive calendar quarters.

Components of Shared Work Plans

An employer may design a Shared Work Plan to cover its total work force, particular shift(s), or work unit(s).

A proposed 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 work force)
  • Cover a period of up to 53 weeks
  • Replace a layoff of an equal percentage of employees

If the plan affects workers subject to a collective bargaining agreement, the employees’ union(s) must also agree to participate in the Shared Work plan.

Despite the 53-week limit on a Shared Work Plan, employers can request a new plan to begin when the current one ends.

An employer cannot hire additional employees for the work group covered by the Shared Work plan. But they can replace separated employees within the covered group.

An employer with an approved plan does not have to use it each week. For weeks when employees work a full schedule, no Shared Work benefits will be paid. Employers can also change the percentage of reduction in work hours from week to week within the 20-60% range.

Employee Shared Work Program Benefits

Usually, employees can only obtain unemployment insurance benefits for weeks where they are totally or “partially” unemployed. Employees must work less than 4 days and earn less than $504 in a week to qualify for partial unemployment. Under an approved Shared Work Plan, however, employees may apply for and receive unemployment insurance benefits even though they work part of the week and exceed the partial unemployment eligibility criteria.

Although employees must be available for work for the Shared Work employer during periods of partial unemployment, they do not have to look for other work.

Employees are eligible for Shared Work benefits if they otherwise qualify for New York unemployment benefits. They may receive up to 26 weeks of regular Shared Work benefits during a benefit year.

Shared Work vs. Layoff

The Shared Work Program will not be right for all employers. However, it does offer certain advantages over layoffs in some situations, including:

  • Retains valuable employees for when business picks up.
  • Keeps employees engaged with the company and reduces skill deterioration.
  • Lessens impact on unemployment experience rating compared to total unemployment.
  • Avoids severance pay obligations, where applicable.

Employers who participate in the Shared Work Program still must consider related practical and legal ramifications. In some ways, reducing employee work hours can still have layoff-like consequences. It could affect rights under insurance policies, severance policies, other employee benefit plans, employment contracts, and collective bargaining agreements. In addition, it could still trigger a notice obligation under the WARN Acts.

This is not a comprehensive guide to the New York Shared Work Program. Interested employers can find out more information and apply on the DOL’s website. Especially if the issues in the previous paragraph are present, employers should discuss their potential participation with an attorney.

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