The CARES ACT & Unemployment Insurance
On March 28th, 2020 the President signed the Coronavirus Aid, Relief, and Economic Security (CARES Act). This approximately 850 page Act covers many employment related issues affected by the current pandemic, including unemployment insurance. Unfortunately, as we previously communicated, the bill leaves many unemployment insurance questions unanswered. Below is a brief summary of key portions of the law as they relate to unemployment insurance:
*Claimants who lose their jobs, have hours reduced, or are otherwise unemployed due to the pandemic, are covered by the CARES Act. Each eligible claimant will be entitled to an additional $600 per week in UI benefits over and above the state UI benefit, through July 31,2020. This additional weekly payment is funded by the federal government and will not be charged to employers. The relief bill does not indicate how or whether a claimant working part-time or reduced hours would be affected. A claimant’s eligibility for benefits is determined by the law in the state in which the claimant files a claim. States have different rules and formulas for the eligibility of claimants working less than full time hours. It is unclear if a claimant working part-time and collecting partial UI benefits will receive the same $600 per week that a totally unemployed claimant will receive. The relief bill does not address that point. If the $600 were reduced it might discourage claimants from working part-time, which is of course not the intent of the relief bill. If the $600 weekly payment is not reduced for claimants working part-time, it would benefit them to work the maximum amount of time permitted in their state, and collect partial unemployment plus the additional benefit of $600 per week. If an employee asks, the best thing to do until we get some clarity is to advise them that you do not know the answer and the employee should reach out to the state Department of Labor. To reiterate, this relief bill only applies to claimants who become unemployed as the result of the Covid 19 virus.
*Claimants will be entitled to an extra 13 weeks of benefits over and above the normal state allowed benefits (which in most states is 26 weeks) if the unemployment rate reaches a certain level in that state. It appears all states will reach that level over the next months. Claimants in states which allow for 26 weeks of benefits (including NY and NJ) would thus receive up to 39 weeks of benefits. This additional 13 weeks would be funded by the federal government and at this time is scheduled to end in December of this year.
*Many states have a one week waiting period after a person files a claim, before they can collect UI benefits. For states that waive this waiting period (including New York) the federal government will reimburse states for the first week of benefits paid to eligible claimants. As a result of this we believe that an employer should be relieved of charges for that first week, although the law is not 100% clear on that point.
*A basic requirement of UI eligibility is that claimants who file claims must be ready, willing, and able to work. However, if a claimant is unable to meet this requirement because of the Covid 19 virus, this standard will be waived. While the law does not say so explicitly we believe that a claimant who is fearful of contracting the virus and is not not willing to go to work may be found eligible.
*If a claimant is furloughed and elects to use accrued sick time or vacation time the claimant will not be permitted to collect UI for the period while he or she is using that time. While the law is silent on whether an employee can be mandated to use that time, we do not believe that employees can be required to do so. If a claimant is not furloughed but actually laid off and paid accruals, we believe that this will not affect UI payments, as it did not do so prior to the current situation.
* Individuals who formerly were not eligible for UI benefits such as independent contractors, students and various other classes of workers, will now be entitled to collect. They will be entitled to at least the state minimum UI benefit plus the $600.00 weekly. Whether they will be entitled to a greater benefit if they can demonstrate greater earnings is unclear, as is who will pay for these benefits. The relief bill implies that these benefits will be covered by the federal government, but that is not certain at this time.
*There is a provision of the law the law that provides a tax credit for employers who maintain employees on the payroll and for employers with less than 500 employees, to receive loans related to payroll. The loans can be forgiven, for employers who continue to keep employees on the payroll. We are not experts on this point but suggest that you may want to consult your tax advisor or attorney about these programs before you separate employees and decide whether to continue to pay them in full or in part (whether by furlough, lay-off or reduction in hours), or whether to simply allow them to collect UI benefits including the additional $600 weekly benefit. If employees continue to receive their regular pay (or the up to 25% reduction set forth in the law relating to employers with fewer than 500 employees) those employees should not be eligible for UI as they are in effect still earning their regular wages.
We realize that each employer may be facing unique situations so please feel free to reach out to us. We may not have firm answers, as the law needs to be applied and interpreted, but we can try to chart a course that works for you and at least identify the issues of concern.
We will continue to provide updates as they become available.
We hope that you and your staff remain healthy in these trying times. These are tough times for all businesses (we at IUI and UCC received record numbers of claims last week!) but we are confident that when this passes we will remain strong and vibrant.