Unemployment Insurance Changes Resulting from the Families First Coronavirus Response Act, California’s Employment Development Department’s UI Work Sharing Program, and The Coronavirus Aid, Relief, and Economic Security Act

Families First Coronavirus Response Act – HR 6201’s Division D – Emergency Unemployment Insurance Stabilization and Access Act of 2020

The Emergency Unemployment Stabilization and Access Act of 2020, a part of the FFCRA, amends Section 903 of the Social Security Act (42 U.S.C. 1103) by providing $1,000,000,000.00 ($1 billion) in emergency grants to states for their respective activities related to the processing and payment of Unemployment Insurance (UI) benefits when certain conditions are met. The federal funding formula for the grants is based on taxes collected and determines each state’s share of the $1 billion. Notably, action by state legislatures is not required to activate funding.

The first phase of this law releases $500 million within 60 days and will be used for staffing, systems, technology, and other administrative costs.

States must meet the following requirements in order to receive an emergency grant:

• The state must require employers to provide notification to its workers that UI is available at the time of their separation from employment. Notification language may be based on the model language issued by the Secretary of Labor.
• The state must ensure that applications for UI, and assistance with the application process, are accessible: (a) in-person; (b) telephone; or (c) online. (The CARES  Act amended Section 4102 (B) of the Emergency Unemployment Insurance Stabilization and Access Act of 2020 which previously required states to have available at least two of the three accessibility methods listed.)
• The state must notify an applicant when their application is received and is being processed, and in any case where an application is unable to be processed, the state must provide information as to the steps an applicant can take to ensure successful processing.

The second phase of emergency funding is triggered when a state’s unemployment rate has increased by at least 10 percent. These particular states are able to receive 100 percent federal funding for Extended Benefits under Section 4105, compared to the standard requirement that the states fund 50 percent of the benefit.

States with 10 percent or more unemployment must meet the following requirements to qualify for the additional funds:

• The state must have expressed its commitment to maintain and strengthen access to the unemployment compensation system with respect to initial and continued claims.
• The state must have demonstrated steps that it has taken or will take, to ease eligibility requirements and access to UI such as: (a) waiving work search requirements for COVID-related claims; (2) waiving the waiting week; and (3) relieving employers from being “charged” for COVID-19 claims, which would increase their tax rate.

Section 4103 of the Act provides states with access to interest-free loans to assist with the payment of regular UI benefits through the end of this year. Additionally, the Secretary of Labor is required to provide technical assistance to states that want to set up work-sharing programs, where employers reduce hours for their workers instead of laying them off, and the worker then receives partial unemployment benefits to make up the difference in their wages.

California’s UI Work Sharing Program – Assistance For Employers and Employees When Hours and Wages Are Reduced From COVID-19

All California employers, and their respective businesses and/or services, have been impacted by COVID-19 and many are experiencing significant downturns in the form of reduced production, reduced hours for their employees, and/or inability to provide employment at all.

The alternative to layoffs for employers experiencing slowdowns is California’s Employment Development Department’s UI Work Sharing Program, which could potentially permit retention of trained employees by reducing their hours and wages with a partial offset from UI benefits.

This Program assists employees whose hours and wages have been reduced by providing UI benefits, allowing job retention, and avoiding financial hardships resulting from loss of wages, and assists employers by minimizing or eliminating the need to lay-off workers, allowing retention of trained employees which will ensure a quick transition once business conditions improve and avoid the cost of recruiting, hiring and training new employees in the future.

Workers that are approved to participate in the Work Sharing Program receive weekly UI benefits equal to the percentage of hours and wages reduced, not to exceed 60 percent.

Employers must meet all of the following requirements in order to participate:

• The business must be registered in California.
• The business must possess an active California State Employer Account Number.
• At least 10 percent of the regular workforce (or unit thereof), and a minimum of 2 employees must be affected by a reduction in hours and wages.
• The hours and wages must be reduced by at least 10 percent but no more than 60 percent.
• The employer must identify the affected work units to be covered by the Work Sharing plan and identify each participating employee by their full name and Social Security number.
• The employer must identify how many layoffs would be avoided by participating in the Program.
• The employer must provide EDD with any necessary reports or documents relating to the Work Sharing plan.
• For a bargaining unit, the collective bargaining agent of employees must agree to voluntarily participate in the Program and sign the application for Work Sharing.
• The employer must notify employees in advance of its intent to participate in the Program.
• Employees’ health benefits and retirement benefits must remain the same, or meet the same standards as other employees not participating in the Program.

Employers may not use the Work Sharing Program as a transition to a layoff.

Employees must meet all of the following requirements in order to participate:

• The employee must be a part of the employer’s permanent regular workforce and not a leased, intermittent, temporary, or seasonal employee.
• The employee must have qualifying wages in the base quarters used to establish a regular California UI claim which can be calculated using either the Standard Base Period or the Alternative Base Period.
  • Standard Base Period: First four of the last five calendar quarters prior to filing the claim.
  • Alternative Base Period: Most recently completed four calendar quarters prior to filing the claim.

• The employee must have completed a normal work week with no hour or wage reductions prior to participating in Work Sharing.

Employers may apply for a Work Sharing plan by completing the Work Sharing (WS) Unemployment Insurance Plan Application (DE 8686) located on the EDD website.

Importantly, employers must re-apply periodically and there may potentially be an increase in the employer’s UI tax rate. However, pursuant to the Emergency Unemployment Insurance Stabilization and Access Act of 2020,  as described above, states receiving 100 percent of emergency funding are required to prove employers are relieved from being “charged” for COVID-19 claims, which would increase their tax rate.

CARES (Coronavirus Aid, Relief, and Economic Stability) Act – H.R. 748

The CARES Act expands the Families First Coronavirus Response Act regarding UI benefits for workers to include those not typically eligible for UI by supplying federal funding for independent contractors, those that are self-employed, and individuals with limited work history. Also included in the newly passed bill is the following:

• Workers will be paid $600/week on top of the UI benefits they receive at the state level for up to four months.
• Incentives to states that repeal any “waiting week” provision that prevent unemployed workers from receiving benefits as soon as they are laid off by fully funding the first week of UI.
• Federal funding for an additional 13 weeks of unemployment benefits through December 31, 2020 when workers have exhausted their state unemployment benefits.

Kronick attorneys across all of the firm’s practice groups – Natural Resources, Public Agencies, Labor & Employment, and Business/Healthcare – are providing clients and the community with ongoing updates as conditions warrant. In the meantime, please feel free to contact us for assistance with issues arising from the current health crisis.