Tag: unemployment

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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Pregnant Employee

Calling Your Employment Lawyer — Pregnant Employee

I’ve been counseling employers for almost 14 years. One thing that’s become clear over that time is that no one wants to have to call their employment lawyer! But the truth is many companies would be better off if they called more often. It’s usually much cheaper to find out the law and best approach to an employment situation before it leads to litigation or other disputes. This is definitely true when you’re dealing with a complex scenario involving a pregnant employee, for example.

So, what does a call with an employment lawyer sound like?

My actual conversations with clients are confidential, of course. But I can summarize the tone from 1000s I’ve had over the years by way of example. The facts and circumstances of this scenario involving a pregnant employee are purely hypothetical and should not be followed as guidance for any actual situation. Most likely, I would have more background information about the employer before taking this call. Local and state laws also vary and could alter any legal considerations.

“We Have This Employee. . . .”

Client: “Hi, Scott.”

Lawyer: “Hi. How are you? Oh, I know, you’d be better off if you weren’t calling me.”

Client: “Well, nothing personal.”

Lawyer: “No, I get it. None of my clients ever want to be speaking to me about work. It’s the nature of my business. Anyway, how can I help?

Client: “We have this employee. She’s not really working out. She’d had performance issues for a while, and we’d like to move on . . . . But . . . .”

Lawyer: “Yeah, there’s always a ‘But’!”

“She’s Pregnant”

Client: “Afraid so, or I wouldn’t be calling. Before we had a chance to do anything about her performance issues, she told us last week she’s pregnant.”

Lawyer: “I see, well congratulations to her, but you’re worried about trying to let a pregnant employee go?”

Client: “Yes, but, that’s not everything. She had also filed a harassment claim against a co-worker a few months back. And she’s still angry that we didn’t fire the guy she filed it against.”

Lawyer: “Alright. Let’s try to work through this. First, how long has she been working there?”

Client: “Only nine months. She’s our receptionist and also does some of our social media.”

Lawyer: “So, she’s not FMLA eligible yet, but might be eligible for New York Paid Family Leave. Is she full-time?

Client: “Yeah, she works 40 hours. At least, she’s supposed to be working. She spends most of her time on Facebook.”

Lawyer: “You mean doing personal things, not managing the company’s social media.”

Client: “Right. But that’s not the real problem. We should do a better job of policing that and re-directing her. But the bigger problem is that she also answers phones and greets people who come into the office. But her personality is hit or miss. She’s not rude, exactly, but not always friendly either. Plus, she gets messages wrong, forgets to pass them along, etc. We’ve had a few complaints since she started.”

Lawyer: “Has she said when the baby is due?”

Client: “About 3 months from now.”

Lawyer: “So, at that point, she might be eligible for FMLA leave too. Did she get the paperwork on that?”

Client: “Not yet, but that’s one thing we needed direction on. As you know, we have over 50 employees, so we do have people eligible for FMLA. But since she hasn’t been here a year yet, we didn’t know how to handle it.”

Lawyer: “If the leave will begin after she has been there for a year and she meets the other requirements–so if she will have worked 1,250 hours over the past year when her leave starts–then she would qualify for FMLA leave. So you should probably at least give her the FMLA paperwork at this point to avoid a technical violation there.”

Client: “Does that mean we have to keep her on until after her 12 weeks expires?”

Lawyer: “Not necessarily. Even if she becomes eligible for FMLA leave, you don’t have to retain her if you have other legitimate grounds to end her employment. But, of course, it can’t be because of her pregnancy or leave. And even if it isn’t, she could claim it is discriminatory to let her go.”

Client: “So, are we better of waiting until she has the baby and then fire her after she comes back?”

Lawyer: “Not necessarily. That could still be discriminatory or retaliatory.”

“What Should We Do?”

Client: “Okay, you’re the expert. What should we do with her?”

Lawyer: “I know you don’t want to hear it, but like so many of these situations, it depends on various factors and considerations. But it comes down to why you’ve kept her on this long and now want to let her go. If it’s at all related to the pregnancy, then you probably shouldn’t do it. Maybe she’ll take the leave and then not come back, but if she wants to come back, you’d need to let her.”

Client: “We don’t have a problem with her being pregnant. If she were doing her job, we’d be happy to let her take the leave.”

Lawyer: “Then you have to be able to explain why you’re considering letting her go now. Did anything happen recently that’s of particular concern?”

Client: “Remember I mentioned she filed a harassment complaint against a co-worker?”

Lawyer: “Yes. We needed to get back around to that too.”

Client: “Yeah. She claimed a guy who has worked here for 20 years was hitting on her whenever he walked in the building. Now, he’s a salesman who works remotely, so he’s only in a few times a month. She didn’t make any extreme allegations, just that he was too flirty. We investigated it and directed him to stop, and he has.”

Lawyer: “Okay. But has become relevant again?”

Client: “Yes. We need to promote this guy to a director of sales position where he will be in the office full-time. So he’d walk past her every day. Probably multiple times every day. But he refuses to work in the building as long as she’s the receptionist.”

Lawyer: “Is that why you want to let her go now?”

Client: “That’s not the only reason. We know we can’t fire her because the guy she complained about doesn’t want to work in the same building with her. It’s just that we have had these performance issues and they’re not getting better. Eventually, we’d have to let her go. But between the pregnancy and trying to promote the sales guy, we don’t know what the best approach is.”

Lawyer: “Right. I see you’re trying to do the right thing, but there seems like landmines in every direction.”

Client: “Pretty much. So that’s why we called you.”

“Any Alternatives?”

Lawyer: “I understand. Glad you did. Now, let’s see. . . . Just by chance, are there any other open jobs that she might be able to do without the same performance issues?”

Client: “We could try to make her an administrative assistant.”

Lawyer: “But it sounds like she’s already had problems with messages and communication. Would that be a factor in those jobs?”

Client: “Yes. It would just move her from the front desk and maybe solve the problem with the sales guy.”

Lawyer: “I don’t really want you to create new problems in trying to solve this one. If we figured out the right approach, would you consider offering her a severance package?”

Client: “We might be able to pay her a month’s pay and continue her health insurance. I guess that would become an issue for her with the baby and all.”

Lawyer: “Good point. So she’s taking the company’s insurance?”

Client: “Yes. She is. She is married, but they have family coverage through us. He might have it available at work too. I don’t know. Maybe ours is a better deal.”

Lawyer: “Sure. That could be an issue. If he has coverage, then losing yours might not be as bad. But she’s looking at some disability and PFL benefits coming up when she has the baby too if she were still employed. And if he doesn’t have insurance available, they might have to go on COBRA coverage. She would probably get unemployment.”

Client: “Yeah. We wouldn’t contest the unemployment.”

Lawyer: “Okay, how bad has her performance been? Has it gotten any worse lately?”

Client: “It’s just ongoing mistakes. No single recent incident.”

“Severance Package?”

Lawyer: “Alright, overall, I’d say there is some risk of some kind of pregnancy or even retaliation–for the harassment complaint–claim if you fire her now. But that doesn’t necessarily diminish as time goes on. Maybe it would get easier if she does something really bad, but you don’t want that either for operational reasons. Some options include putting her on a formal performance improvement plan and seeing how that plays out or just having a conversation with her now pointing out the performance problems and noting that you have to let her go but will offer a severance package. There’s no perfect solution. If she says no to the severance and you fire her, then she might make a claim.”

Client: “But if she agrees to the severance, then we’d get a release and she couldn’t sue us?”

Lawyer: “Yes, we’d make the severance contingent on her signing a release.”

Client: “Okay, I got it for now. I’ll go back and speak to the managers involved. I’ll probably be giving you another call once we decide how to handle this.”

Lawyer: “Sounds good. I’ll be here. Hopefully, there’s a way to make this work out okay for everyone.”

Client: “Hope so. Thanks.”

 

Some of these calls lead to a straightforward solution. Others, like this hypothetical one, involve balancing risky alternatives. But understanding the risks better allows better decisionmaking and helps avoid obvious missteps.

 

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Fire Bad Employees

Should I Fire Bad Employees or Let Them Quit?

Gary Vaynerchuk is a wildly successful and popular investor, serial entrepreneur, CEO, author, and, well, personality. One of his recent business mantras gives experienced employment lawyers like me pause. Vaynerchuk, or “Gary Vee” as he’s widely known, argues that companies should fire bad employees rather than letting them quit on their own. But is that always the prudent course of action?

In Favor of Firing

As I understand it, Gary Vee emphasizes that employers need to send the right message by firing bad employees before they leave on their own. This shows that the company won’t tolerate inappropriate behavior.

Vaynerchuk consistently promotes a positive workplace atmosphere and collegiality as a hallmark of good business. That’s a hard position to attack. But those aren’t the only aspects of good businesses. They also must offer viable products/services and sell them to customers. Sometimes employees who produce in these areas don’t play well in the sandbox. Vaynerchuk advocates extracting workplace cancers even if they’re top rainmakers or otherwise seem to contribute disproportionately to the firm’s financial success. To him, these positives never justify being a jerk.

So, the argument continues, you have to fire the jerk before the jerk fires you. That’s how you maintain credibility, particularly in the mission to promote a positive and healthy work environment. If you let the jerks leave on their own terms, they win and you lose. They leave behind the impression that the company was willing to tolerate their misbehavior for financial gains. This begets more jerks rather than pleasant co-workers striving to achieve the company’s collective goals in a more or less friendly workplace.

Why You Might Let Them Quit

Many business owners find wisdom in Gary Vee’s “fire them before they fire you” advice. Indeed, it makes a lot of sense from a morale perspective. And workplace morale is a valuable asset.

Why do many employers think it’s a better idea to wait out a bad employee until they leave on their own? Some probably just hate confrontation or at least the unpleasant experience of firing someone. Vaynerchuk seems to empathize with that reality, encouraging employers to work to overcome their reluctance and take difficult actions as soon a necessary. “Hire fast, and fire fast” he preaches, while acknowledging the latter doesn’t come naturally to him either.

But there’s an even deeper counterargument to consider. It lies in employment law. Yes, leave it to lawyers to try to ruin a good thing.

Here are several legal risks employers try to avoid by not firing problematic workers:

Discrimination Claims

What could happen when you fire someone? Well, they could accept it and move on. Or they could become contentious and potentially litigious.

Most people don’t want to be sued. This goes for most business owners and managers as well. And there are just so many laws out there protecting employees these days, including extensive anti-discrimination statutes.

This can filter into the equation when you start to consider how to move on from an employee who isn’t working out. Especially if the employee in question differs from others similarly situated in one or more protected characteristics. Even if you know the employee has to go for legitimate reasons, you might pause to fire the oldest person in a department. Or the only female supervisor. Or someone in a racial minority.

Unemployment

Even when there’s no particular concern of a discrimination claim, some employers would rather an employee quit so they can’t obtain unemployment benefits. The unemployment laws vary by state, but there’s usually some additional cost to employers whose former employees receive unemployment. And employees who quit often aren’t eligible.

Employers can sometimes defeat worker unemployment claims by proving that the employee deserved to be fired. But that’s a risk that some companies would prefer to avoid. So they might prefer to let the employee walk away rather than show them the door.

Severance Pay

Some employees have employment contracts or are eligible for company policies that provide severance pay under certain conditions. Employees are usually more likely to be eligible if they have been let go involuntarily. Or they might receive more severance pay if they are fired (especially, if without “cause”) rather than quitting.

In the United States, at least, this usually depends only on specific company policies and contracts rather than external laws. But there can definitely be a significant financial impact in some cases.

Striking a Balance

The legal risks are real. Some employees might sue after you let them go. And even the prospect that they might can keep you awake at night. Let’s face it, even one employment discrimination suit can prove costly, both in time and potential liability.

But, remember, we’re talking about firing bad employees. Either they’ve treated others disrespectfully, performed poorly, or otherwise failed to live up your expectations. Regardless of race, age, gender, and other factors, you should have defensible grounds to let them go. If you’re not sure about that, then speak with your employment lawyer.

Still, I do worry that the Gary Vee philosophy isn’t problem-free. Some employers could overreact and fire someone too soon without considering all relevant factors.

Perhaps the most important consideration is how have you treated other employees who’ve underwhelmed you? Have you let some slide, but now want to swing a quick axe? Saying “Gary Vee told me to!” won’t necessarily work if you’re now firing an older employee after letting a younger get away with more in the past.

Keep in mind that allowing a bad employee to hang around too long can also lead to legal problems. Harassers may not stop harassing. Aggressive employees could become violent. Sloppy employees could become too sloppy or even dishonest. Sometimes you even have to balance your legal risks. Who’s more likely to sue and what will it cost? HR, like other aspects of your business, isn’t always easy, I’m afraid.

Final Thoughts

You should do what’s right for your business. That includes complying with legal obligations. But beyond that you have options. Generally, I agree, bad employees need to go. But one employer’s nightmare could still be another employer’s treasure . . . perhaps.

 

For more, read 5 Tips for Firing Problem Employees