Business Guide to Coronavirus Stimulus Package: Unemployment Benefits
Businesses are making strategic decisions about what to do with employees during this Covid-19 crisis. The last piece of the puzzle, and the last article in this Coronavirus Business Guide, is Unemployment Benefits. What aid is available? How long will it last? When does it make more sense for a business to “furlough” an employee? What does «furlough» even mean? Here are the answers for which you have been waiting.
Unemployment Benefits under CARES Act
First, understand that unemployment benefits are handled at the State level. So, that means there will be some delay and inefficiency in getting from Point A (federal legislation) to Point B (actual checks in the mail), and there will be some differences from State-to-State. Our firm is headquartered in Florida, so we will provide some additional detail for Florida businesses. That said, here is basically what everyone can expect. Request Consultation
Pandemic Unemployment Assistance
The CARES Act includes a Pandemic Unemployment Assistance program (“PUA”), which expands the definition of a “covered individual.”
- full and part time employees (W-2)
- independent contractors (including gig workers)
- religious workers (workers laid off from churches)
- workers who do not have sufficient work history to normally qualify under State law
Workers who cannot work due to any one of the following circumstances:
- diagnosed with COVID–19 or experiencing symptoms and is seeking diagnosis
- a member of a household where someone has been diagnosed with COVID-19
- provides care for a family member or a member of the household who has been diagnosed with COVID-19
- takes care of a child or other person in the household who is unable to attend school or daycare as a result of COVID-19
- cannot reach the workplace because of a quarantine or isolation order
- has been advised to self-quarantine due to COVID-19 concerns
- was scheduled to commence employment (i.e. does not currently have a job) but now cannot go in due to COVID-19
- has become the breadwinner or major supporter for a household because the former head of the household died as a result of COVID-19
- had to quit his or her job as a direct result of COVID-19
- cannot work because the place of employment is closed as a result of COVID-19 (telework not an option)
Covered individuals get the amount they would normally receive under State unemployment law (maximum of $275/week in Florida), plus an additional $600 per week.
So, a Florida employee could potentially get $875/week or $3,500/month.
How long do benefits last?
As long as the unemployment is due to the Coronavirus, regular benefits can extend up to 39 weeks in most states. However, the extra $600 per week is only available through July 31, 2020. Note: Florida only provides 12 weeks of unemployment benefits. So, in Florida, once the 12 weeks runs out, the worker will continue to get just the $600/week under PUA. Request Consultation
What is “furlough”?
Furlough is an unpaid leave of absence. So, technically, the workers still retain their positions, but they cease working and do not earn a salary. The idea, of course, is that furloughed workers will one day return to their jobs. Also, workers usually continue to receive their company benefits during the furlough.
By contrast, being terminated or laid-off is permanent. If the worker comes back to the company after being terminated or laid-off, then that “return” is actually new employment. All previous arrangements are open for renegotiation. That may be beneficial for the company, or maybe not . . .
Usually, furlough is temporary and short-term. Otherwise it would make more sense to both the company and the worker to just terminate the employment and move on. However, there is no defined limitation on how long a furlough can last. So, under the current circumstances, where workers probably cannot get another job for as long as the Coronavirus crisis continues, it seems likely we will see unusually long furloughs.
Advantages to furlough?
Yes, probably. For most business owners, telling workers they are «furloughed» is a lot easier than saying «terminated.»
Most importantly, furloughed workers are entitled to unemployment benefits, including the extra PUA money. So, as a business owner or manager, you do not have to terminate workers in order for them to receive benefits.
Let me hasten to qualify this statement by saying that, normally, whether a furloughed worker can collect unemployment or not is determined at the State level. Under PUA, though, the federal government has extended benefits to all furloughed employees as long as the meet the criteria above.
As a business owner, you would probably prefer to bring back your staff out of a sense of loyalty, as well as the fact that they are already trained. So, the furlough option may be one to carefully consider. Request Consultation
As it stands now, these PUA payments will be counted as income for tax purposes as well as for determining eligibility for some welfare programs, though not for Medicaid or Children’s Health Insurance. This may be only a minimal concern, though, since nobody is going to get rich off of unemployment payments, even with the extra PUA money.
Unemployment Tax Liability
If you are wondering if your business is going to have to pay higher unemployment rates in order to compensate for the additional payments to employees, the answer is «maybe.» The CARES Act does not address this issue, probably because unemployment is administered at the State level. So, the answer could be different on a state-by-state basis. It is still too early to provide much guidance in this regard. And, as a practical matter, it probably will not affect your decision-making, especially given the CARE Act tax breaks for businesses.
Immediate Availability. The normal one-week waiting period is waived under the PUA. So, unemployed or furloughed workers can apply immediately for unemployment benefits.
This is important because we are still waiting for the Families First business loans to become available. However, the paid leave requirements went into effect April 1, 2020. So, for companies that are in real danger of running out of money, terminating or furloughing can be a stop-gap measure.
Short Term/Work Share Programs. This might make sense to a lot of employers. The concept of Work-Sharing or Short-Term compensation is where the company does not have enough work to give someone a full-time position but does have some work to offer. The conundrum for some workers is that they face losing their unemployment benefits if they take on work. That creates a sort of all or nothing scenario for them. It can be a disincentive to taking on partial or temporary work.
This kind of perverse disincentive is resolved by States that allow such short-term/work-share without penalty. Florida does have a short-term/work-share program, which could be very useful for businesses that have not completely shut down but are significantly affected by the Covid-19 crisis.
So, now you have all the pieces of the puzzle and can put together a plan of action for your business: business loans, tax breaks, paid leave, and unemployment. We all want what is best for our employees and, presumably, helping the company survive the Coronavirus crisis is in the employees interest. They will understand that. Now, it is a numbers game.
Understanding the interplay between the available business loans, tax breaks, paid leave obligations and unemployment benefits is the whole game at this point. You have to weigh your options and make the best choices you can for your business.