An Option for Employers Looking to Maintain their Work Force
On May 3, 2020, the Department of Labor issued new guidance regarding Short-Time Compensation Programs, commonly known as “work-sharing” programs in many states under the CARES Act, regarding 100% federal reimbursement of certain state Short-Time Compensation payments. Currently, about half the states, including Colorado, have Short-Time Compensation Programs in place.
The Department of Labor’s guidance reiterates that the purpose of these “work-sharing” programs is to avoid mass layoffs by allowing employers to reduce hours for groups of workers, which workers can then obtain reduced unemployment benefits. The guidance clarifies that work sharing can be used in times of reopening businesses that were temporarily closed during the pandemic, serving as a way for employers to bring back much of a business’s work force even in times when social distancing and a decline in business prevents the business from operating at full staff.
Federal Reimbursement under the CARES Act
Section 2108 of the CARES Act provides for temporary 100% federal financing of Short-Time Compensation payments in a state with a Short-Time Compensation Program whether the Short-Time Compensation Program is new or existing. A state without a Short-Time Compensation can enter into an agreement with the US Secretary of Labor to operate a temporary federal Short-Time Compensation program, for which the state will receive federal reimbursement of 50% of the benefit costs.
This guidance reiterates that reimbursement is available for weeks of unemployment through December 31, 2020. In addition to reimbursement, the CARES Act provides $100 million in grants to support states in implementing and administering Short-Time Compensation Programs and promoting and enrolling employers.
What is the Catch?
There are two limitations to reimbursement. First, no reimbursement will be made when Short-Time Compensation is paid to an individual during a benefit year in an amount that exceeds 26 times the amount of regular unemployment compensation. Second, no reimbursement will be made for payment of Short-Time Compensation if the individual is employed by the employer on a seasonal, temporary, or intermittent basis, as defined under state law. If the state law does not define these terms, UIPL No. 22-12 provides guidance on these terms.
Employer participation in a Short-Time Compensation Program is voluntary. An employer must submit a written plan to the state unemployment agency, and the plan is subject to the state’s approval. The employer’s plan must specify the percentage reduction in the workweek for affected employees and be consistent with employer obligations under applicable federal and state laws. Employers must maintain (to the same extent as other employees not participating in the Short-Time Compensation Program) health benefits and retirement benefits for employees in the affected unit, despite the reduced hours. Employees must be available for their workweek to meet the “able and available for work” requirements.
Qualifying for the Program in Colorado
In order to qualify for Colorado’s work sharing program, an employer must reduce the work hours of at least two employees, either within the entire business or within a certain unit, subject to the qualification that the employer would have laid off those employees but for work sharing. Employers must reduce the work hours for that group by at least 10% and no more than 40%. Finally, as noted above, employers cannot rescind or reduce employee benefits while participating in the work sharing program. Employees participating in a work sharing program and receiving partial unemployment insurance benefits are also eligible to receive the federal $600 weekly benefit through July 31, 2020.
Work sharing plans must be submitted to the Colorado Department of Labor and Employment, Unemployment Insurance Employer Services. A form for a request for approval of a work sharing plan may be found here. The Department of Labor and Employment also has handy fact sheets for both employers and employees.