The unprecedented disruption caused by the coronavirus of 2019 (COVID-19) has forced many employers to consider furloughing and/or laying off employees. Below we answer some frequently asked questions about employer rights and responsibilities related to unemployment insurance.
Note: Individual state law dictates an employee's eligibility for unemployment insurance benefits, but the federal government is providing states with greater flexibility to ensure as many individuals affected by COVID-19 are eligible as possible.
Q: What is the difference between a furlough and a layoff?
A: In general, a furlough is a short-term unpaid leave of absence with a definite end date. With a furlough, an employee is expected to return to work in the near future. A layoff is when an employer directs the employee to stop all work, typically on a permanent, long-term, or indefinite basis. However, there is no single definition of these terms, so check your state law for more information, including the impact of these classifications on unemployment eligibility, final pay, and other benefits.
Q: If my state ordered my business to close because of COVID-19, will employees be entitled to unemployment benefits? What if we close because of a lack of work due to COVID-19?
A: Depending on the state, the length of the closure, and the employee's work history, employees who are prevented from coming to work because their employer temporarily ceases operations due to COVID-19 may be eligible for unemployment benefits. Most states have issued guidance addressing this issue.
Q: If employees file for unemployment what will that do to my unemployment rate?
A: In general, the more employees use unemployment benefits, the higher the employer's rate will be. However, several states have suspended rules that would require an employer's account to be charged if employees are filing unemployment claims for certain reasons related to COVID-19. In such cases, an employer's unemployment insurance rate wouldn't increase. Check your state unemployment agency for details.
Q: Can my employees be eligible for unemployment benefits if I tell them to stay home because I think they are at risk of spreading or contracting COVID-19?
A: Some states are allowing employees to collect unemployment benefits in such situations. Check your state unemployment agency for details.
Q: If an employee is receiving paid sick leave or paid family leave during a company closure, will they be entitled to unemployment benefits?
A: Generally, an employee who is receiving paid sick leave or paid family leave would be receiving pay and therefore ineligible for unemployment benefits while being paid.
Q: If an employee is unable to work because they have COVID-19 or because they are taking care of someone who does, would they be eligible for unemployment benefits?
A: Some states are allowing employees to receive unemployment benefits in such situations, so check with your state unemployment agency. Keep in mind that the Families First Coronavirus Response Act and some state and local laws require employers to provide paid sick leave to employees in these and certain other situations. Employees would generally need to exhaust such paid leave before being eligible for unemployment benefits.
Q: What if I need to temporarily reduce my employees' hours as result of COVID-19? Are these employees eligible for unemployment benefits?
A: Generally, if there's a reduction in available work hours for employees, the employees may be eligible for partial unemployment benefits.
Q: For the purposes of unemployment benefits, what information do I need to provide employees who are subject to a layoff or furlough?
A: Some states require employers to provide a separation notice, though specific requirements vary by state. For example, California requires employers that are laying off employees to furnish a specific notice along with the employer's name, employee's name and social security number, the type of employment action (layoff, discharge, etc.), and the date. Check your state law for specific requirements.
Q: My state typically requires individuals who collect unemployment benefits to be looking for work. Does this mean employees whom I furlough during the crisis will need to look for a new job?
A: Check with your state. The federal government has given states the authority to suspend work-search requirements (and many have), but states aren't required to do so.
Q: If I am laying off/furloughing employees, am I required to file for unemployment benefits on my employees' behalf?
A: At least one state—Georgia—is requiring employers to file unemployment benefits on employees' behalf as a result of COVID-19. Some other states are encouraging employers to do so. Check with your unemployment agency to determine whether you can/should/must file unemployment benefits on your employees' behalf.
Q: Are business owners and self-employed individuals entitled to unemployment insurance for reasons related to COVID-19?
A: Under the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act, business owners, self-employed individuals, part-time workers, and those with limited work histories may be eligible for temporary unemployment benefits assistance during their period of unemployment ending on or before December 31, 2020, if certain conditions are met.
To receive unemployment benefits under this program, individuals must certify that they are otherwise able and available to work (as defined by their applicable state law), but they are unemployed, partially unemployed, or unable to work because of COVID-19.
The individual must also certify that they don't have the ability to telework with pay and they aren't receiving paid sick leave or other paid leave benefits. Check with your state unemployment agency for details.
Q: Does the CARES Act make any additional changes to unemployment benefits?
A: Yes, here's a summary of some of the additional unemployment changes made by the CARES Act:
- Emergency Increase in Unemployment Compensation Benefits (Section 2104): Provides for a federal-state partnership to make payments of regular compensation to individuals in amounts determined under state law plus $600. States will be fully reimbursed by the federal government for the extra payments.
- Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States With No Waiting Week (Section 2105): States that do not impose a waiting week for unemployment benefits will be fully reimbursed by the federal government.
- Pandemic Emergency Unemployment Compensation (Section 2107): States may enter into a partnership with the federal government for an additional 13 weeks of federally funded unemployment compensation to individuals who have exhausted all rights to unemployment benefits under state and federal law for that benefit year (excluding benefits that ended before July 1, 2019) and are not otherwise receiving unemployment compensation under any state, federal, or Canadian law. Individuals must be able to, and be actively seeking, work.
Impacted employers should check with their state unemployment agency for more information on unemployment benefits for COVID-19. Employers should also communicate with employees regarding their eligibility for unemployment benefits and provide any notices required by law.