The US Department of Labor issued Unemployment Insurance Program Letters to enhance State Unemployment provisions during the coronavirus COVID-19 pandemic. What does this mean for employers and the unemployed?
Families First Coronavirus Response Act (FFCRA) Unemployment Compensation Provisions
The Federal government is working with State governments to issue grants, to provide emergency flexibilities related to temporarily modifying certain aspects of the state’s Unemployment Compensation (UC) laws, to provide short-term waivers on interest payments and interest accrual on Title XII advances to states, and full federal funding under certain circumstances of extended benefits paid through December 31, 2020.
To be eligible for the federal funding, States must also demonstrate they have not charged employers directly impacted by COVID-19 due to an illness in the workplace or direction from a public health official to isolate or quarantine workers. Additional temporary emergency flexibilities may be applied to all individuals collecting UC during the temporary emergency.
CARES Act Unemployment Compensation Provisions
The CARES Act Pandemic Unemployment Assistance (PUA) provides for up to 39 weeks of benefits to individuals who are self-employed, seeking part-time employment, or otherwise would not qualify for regular unemployment compensation. This extends not only to the self-employed, but the 1099 worker or the gig-worker as well. And, it also provides extended benefits to individuals who have exhausted all rights to regular UC benefits and exhausted the 13 weeks of extended Pandemic Emergency Unemployment Compensation (PEUC).
The CARES Act authorizes the Department of Labor (DOL) to issue guidance to allow states to interpret their state UC laws in a manner that would provide maximum flexibility to reimbursing employers as it relates to timely payment and assessment of penalties and interest.
The CARES Act also provides individuals who are collecting Unemployment Benefits with an additional $600 per week through July 31, 2020. This is the key federal lifeline support to employees laid off or terminated due to COVID-19. States may not reduce weekly benefit levels to shift this cost to the Federal Pandemic Unemployment Compensation (FPUC).
What does this mean for employers?
The cost of these additional $600 payments to eligible individuals each week is 100% federally funded. States may not charge employers for any FPUC and PEUC benefits paid. These payments can not impact the employer’s experience rating. Any implementation costs and ongoing administrative costs are also 100% federally funded.
The federal government also provides temporary full federal funding of the First Week of Compensable Regular Unemployment. For states without a waiting week, the provision provides 100% federal funding for the total amount of regular Unemployment Compensation to individuals for their first week.
The CARES Act provides state agencies with emergency flexibility for personnel standards on a merit basis limited to engaging temporary staff, rehiring of retirees or former employees on a non-competitive basis, and other temporary actions to quickly process applications and claims.
Let’s see how it all should work…
Under the CARES Act, let’s assume a regular W2 employee applies for normal state UC benefits. If approved, they will receive the normal state benefit amount, plus they will receive an additional $600 per week until July 31, 2020. August 1st the benefit amount drops back down to normal state levels. The $600 per week is fully federally funded and not charged to the employer.
If the claimant exhausts all weeks of normal UC benefit under state law, they are then eligible for up to 13 weeks under the PEUC benefits, plus the $600 per week provision. PEUC is not charged to the employer as it is fully funded by the federal government.
If the claimant exhausts the 13 week under the PEUC benefit, they are then eligible for PUA plus the $600 per week provision.
Let’s look at an example: An employee earned $31,000 annually or about $600 per week. Standard Texas Unemployment Insurance would be about $300 per week, plus the additional FPUC of $600 per week, would give the employee a total benefit of $900 per week.
In the example above, it is reasonable to assume the employee would hesitate to return to work given that they are making more money weekly with all the unemployment benefits than at their job. Also, the “actively seeking work” clause has been temporarily suspended to incentivize people to stay home, which should be in everyone’s shared interest.
First of all, keep in mind that the Unemployment Insurance benefit is only for a maximum of four months. Secondly, each CARES Act has a provision which generally states that “While the Act does provide workers some flexibilities, quitting work without good cause to obtain additional benefits would be fraud….if an individual has obtained the benefit through fraud, the individual is ineligible for any additional benefit payments, must pay back the benefits and is subject to prosecution…” and “States are expected to enforce these provisions.” Each provision has its own language but all have these similarities.
Let’s look at another example
A company lays off employees, and the employees start receiving UC benefits. The company then recalls employees, but they refuse to return to work, allegedly, because the UC benefits exceed their salary. The company then fires the employees for failing to report to work. Are these employees now disqualified from receiving any UC benefits under the fraud provisions? Basically, the employer must prove the employee was fired for failing to report to work. However, the employee may have a claim if the employee had a reasonable fear for health and safety to choose not to return to work. State law will determine the outcome. Check with your State.
The federal government has provided extra Unemployment Compensation funding which require States to temporarily relax requirements for Unemployment benefits. States may not reduce the amount of state benefits and may not charge the employer for those provisions which are fully federally funded. This article merely touches the surface of the many facets of COVID-19 unemployment Benefits. For more information please consult the resources below. Additionally, we advise you to consult an employment attorney before making any decisions that impact your business and employees relating to COVID-19 and unemployment benefits. For more information visit:
This communication is for informational purposes only; it is not legal, tax or accounting advice; and should not be acted upon as such. Please consult your attorney/CPA/Accountant regarding any decisions that impact your company or your employees. This post may contain hyperlinks to websites operated by parties other than UniqueHR. Such hyperlinks are provided for reference only. UniqueHR does not control such websites and is not responsible for their content.