The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on Friday March 27, 2020, expands the scope of individuals who are eligible for unemployment benefits, including those who are “furloughed” or otherwise unemployed as a direct result of COVID-19, including self-employed individuals, independent contractors, gig workers, and those who have exhausted existing state and federal unemployment benefits. Although each state is solely responsible for determining eligibility for and the amount of unemployment benefits, employers should understand how its employees are financially protected during furloughs and layoffs. Moreover, understanding potential unemployment benefits may better inform how and when an employer implements such strategies.
Under CARES, unemployment benefit programs are joint federal-state programs. Each state determines eligibility criteria and benefit amounts provided they do not conflict with federal guidelines (as set forth below). For a state to provide increased unemployment benefits to affected individuals, the CARES Act requires that the state must enter into specific agreements with the federal government. Given the current state of the pandemic and the uncertainty that prevails, we anticipate that all states will ultimately enter into such agreements.
As outlined below, the CARES Act covers four groups of individuals who may receive enhanced unemployment benefits, without regard to the number of employees an employer may have. With respect to each group, the CARES Act provisions expire December 31, 2020. This article addresses the provisions applicable to for-profit companies and those non-profit organizations subject to unemployment insurance tax.
Individuals Who Become Eligible for Unemployment Benefits
Furloughed or Laid Off Employees
Assuming they meet their resident state’s eligibility criteria, individuals who are furloughed or laid off are able to receive enhanced benefits. Such individuals will receive the weekly benefit as determined by the state for a maximum of 39 weeks (versus the 26), plus Pandemic Unemployment Compensation (“PUC”) equal to $600 per week. The federal government will provide funding to states to pay for the first week of unemployment benefits – i.e, no customary one-week waiting period. The PUC amounts ends on July 31, 2020.
Notably, each state will determine whether the individual satisfies its eligibility criteria. Employers only role in this process will be to respond to the state level unemployment claim with truthful answers about the employee’s furlough/layoff.
CARES Expands the Group of Workers Eligible for Unemployment
The CARES Act expands unemployment benefit assistance to workers who are eligible under state and federal law before COVID-19 as well as extending benefits to workers who (before CARES) were not otherwise entitled to benefits under existing state or federal law – e.g., self-employed individuals and gig workers. The benefits cover weeks of unemployment, partial unemployment, or inability to work caused by COVID-19 during the period January 27, 2020 through December 31, 2020. The federal government will provide funding to pay for the first week of unemployment benefits.
To be eligible for this special expansion of benefits, individuals must provide self-certification to the state that they are (1) partially or fully unemployed, or (2) unable and unavailable to work because:
- They have been diagnosed with COVID-19 or have symptoms of it and seeking diagnosis.
- A member of their household has been diagnosed with COVID-19.
- They are providing care for a family or household member diagnosed with COVID-19.
- A child or other person in the household for whom they have primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 health emergency, and such school or facility care is required for the individual to work.
- They cannot reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 health emergency.
- They were scheduled to start employment and do not have a job or cannot reach their place of employment as a result of the COVID-19 public health emergency.
- They have become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19.
- They had to quit their job as a direct result of the COVID-19 public health emergency.
- Their place of employment is closed as a direct result of the COVID-19 public health emergency.
- They meet other criteria established by the Secretary of Labor.
Individuals who are teleworking for pay or receiving paid sick days or other paid leave are not eligible for this form of expanded coverage. As a general rule, this does not include health benefits; however, employers should check their relevant state unemployment laws for specific payments that would cause ineligibility.
Each state will evaluate the self-certification and determine whether the individual satisfies all relevant criteria.
For individuals who satisfy the relevant criteria, they will receive the weekly benefit as determined by the state for a maximum of 39 weeks, plus PUC equal to $600 per week (the combination of which is referred to as “Pandemic Unemployment Assistance”). Again, PUC amounts end on July 31, 2020.
Individuals Previously Approved for Unemployment Benefits
These individuals will continue to receive their weekly unemployment benefit for a maximum of 39 weeks. Because most states provide 26 weeks of unemployment benefits, the CARES Act effectively expands coverage for 13 weeks. In addition the weekly unemployment benefit, they will receive PUC equal to $600 per week through July 31, 2020.
Individuals Who Have Exhausted Unemployment Benefits
Under the CARES Act, individuals who have exhausted unemployment benefits under state law, have another opportunity to receive benefits, referred to as “Pandemic Emergency Unemployment Compensation.” If they satisfy the state’s eligibility criteria, they may receive 13 weeks of additional benefits, plus PUC equal to $600 per week through July 31, 2020.
Observations
- If an employer places an employee on a reduced schedule, depending upon the employee’s rate of pay, he or she may receive a “windfall” by receiving PUC. That is, the employee may receive more through unemployment benefits than he or she would have at work. The Senate debated this and an amendment seeking to limit unemployment benefits beyond what workers would have received in wages had they remained employed was defeated, indicating this windfall may be Congress’s intent. It is unclear, however, how this will actually work.
- As indicated above, each state determines eligibility for unemployment benefits. Although it may be tempting for a caring employer to advise a furloughed or laid off employee on eligibility and amounts of benefits, we do not recommend doing so. Rather, the proper role for the employer is to honestly and timely respond to all state inquiries, including responses indicating that the employer now has work available for the worker.
- Although we expect that all states will execute agreements with the federal government to provide the enhanced unemployment benefits, it is possible that, for whatever reason, there may be outliers.
- The CARES Act does not address whether a state has the authority to adjust PUC for employees who are considered “partially unemployed” under state law. The federal government or the states will have to provide additional guidance with regard to this issue.
Given that the federal government has issued these additions to unemployment benefits, employers should consider how this may affect their business decisions. Although the CARES Act implements a federal component to unemployment, employers should also remain conscious that state unemployment agencies—not the CARES Act—determine eligibility.
Respective state unemployment websites can be found here. For more information, please contact your Foley relationship partner or the Foley colleagues listed below. For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the websites of the CDC and the World Health Organization.
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