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Illinois Employers Need to Understand Changes to Unemployment Insurance Due to Covid-19

In this remarkable era of coronavirus legislative relief from Congress, many new laws are impacting employers. This naturally is very stressful because there is suddenly "a new normal" about so many aspects of the workplace. Employers are being asked to adapt very quickly to a virtual ocean of new legislation, and the unemployment insurance area is one of those areas deeply impacted.

Coronavirus Aid, Relief and Economic Security Act (CARES Act): On March 27, 2020, President Trump signed the CARES Act (Coronavirus Aid, Relief and Economic Security Act) into law. For someone who is used to the "old unemployment insurance system," the CARES Act introduces a shockingly different approach to providing claimants with unemployment insurance benefits.

Let's look at some of the unique and startling features of the CARES Act as it applies to unemployment insurance benefits:

1. Independent contractors are now eligible for unemployment insurance benefits! Yes, this is truly stunning because, in the past, independent contractors were not eligible for unemployment insurance benefits. The Illinois Unemployment Insurance Act provides for the payment of benefits to eligible unemployed employees (not independent contractors).

But now, Congress has created the CARES Act which intentionally is designed to financially help independent contractors, gig workers, and other such self-employed workers who are now out of work and therefore unemployed and need such financial assistance in the form of unemployment insurance benefits [in Illinois, from the Illinois Department of Employment Security (IDES)].

2. Will employer's IDES account be charged? In general, the contribution rate of an Illinois employer is based, in part, on the amount of unemployment benefits paid to the employer's former employees. That has been the past system in Illinois. Now we have the CARES Act, and we are not sure what will happen to each employer's unemployment insurance rate with the legislative granting of unemployment insurance benefits to so many workers across the State of Illinois-both employee claimants and independent contractor claimants.

It is not known at this time if the Illinois employer's IDES account will be "charged" for all of these COVID-19 related claims. My best guess is that there will be a system set up whereby these charges (to individual companies' IDES Accounts) will be made against a state pool of money rather than to the employer's IDES account number. My educated guess (but of course I cannot make a guarantee of any kind) is that the employer's unemployment insurance contribution rate will not go up because of COVID-19 claims made against the employer's IDES account number. Time will tell.

There is some precedent under Illinois unemployment insurance law where an employee receives unemployment insurance benefits without his/her ex-employer's IDES account number being charged (through a rate increase) for those benefits. Rather, the benefits are charged against a state pool of money. For example, when a Claimant is awarded unemployment insurance under the 601B1 exception to voluntary leave of the Illinois Unemployment Insurance Act (when the Claimant is deemed physically unable to perform his or her work by a licensed and practicing physician), a special "pool" of state money pays for the departing employee's unemployment insurance benefits (which means the employer's IDES Account is not charged for these unemployment insurance benefits, and the employer's unemployment insurance rate will not increase as a result of this type of a claim).

3. No waiting period. Unemployment insurance benefits are handled by each state. Each state has its own unemployment insurance system. Illinois has always had a one week waiting period. A waiting week occurs during the first week of unemployment when a jobless worker satisfies all the requirements for eligibility, but does not receive any unemployment insurance benefit payment for his/her first week of unemployment. In the past, unemployment insurance benefits started with the second week of joblessness.

However, under the CARES Act, the Federal government will pay for that first week of unemployment. This means the Claimant (whether employee or independent contractor) will start drawing unemployment insurance from the very first day of being unemployed.

4. Federal government will pay an additional $600 per week. Another unusual feature of the CARES Act is that a Claimant (whether a traditional employee or an independent contractor) will receive $600 per week from the federal government. This $600 per week payment is on top of the Claimant's unemployment insurance amount that the IDES would normally give that person (based upon the Claimant's wages and other factors).

The $600 per week increase (on top of regular unemployment insurance benefits) will last through July 31, 2020. After July 31, 2020, the Claimant (either a traditional employee or an independent contractor) may continue to get state unemployment insurance benefits but no longer the extra $600 per week.

It is expected in Illinois that unemployment insurance benefits will extend beyond the usual 26 weeks to an unusually long period of up to 39 weeks. One area of confusion that the IDES must face is the challenge of trying to figure out the "wages" to use in calculating the unemployment insurance benefits for independent contractors. We will learn more about this as the IDES wrestles with this unique challenge.

5. All of these changes have absolutely shell-shocked the Illinois unemployment insurance system. I have received many phone calls from frustrated people telling me there is no way to reach the IDES by phone or computer. Systems are jammed and overloaded.

The IDES has periodically added some helpful information to the IDES website (for example, the best times to try to access the claims process online). Hopefully systems will improve over time.

How to respond to a Notice of Claim due to a COVID-19 related reason: The most common question I have received as an employment lawyer representing employers is how an employer should respond when a Notice of Claim comes to the employer telling the employer that a Claimant has filed for unemployment insurance benefits due to a COVID-19 related reason.

Even if the Illinois employer doesn't want to protest the unemployment insurance claim (whether it is by an employee or an independent contractor), my suggestion thus far has been to respond with some written communication to explain to the IDES that the claim for unemployment insurance benefits is related to an issue caused by COVID-19.

This detailed explanation by the employer is to create a written record that the particular unemployment insurance claim was made because of a COVID-19 related reason and not because of some other unrelated reason. This written record will hopefully protect the Illinois employer (especially if the situation evolves to where the Illinois employer's IDES account number will not be charged if and only if the unemployment insurance benefits were granted to a Claimant because of a COVID-19 related situation).

We're doing our best to offer advice and commentary but must stress that things have moved fast and will continue to move fast, so beware that any statement made about the CARES Act or any other new legislation is preliminary and is based upon only current information. As state and federal agencies provide additional guidance, our opinions may be revised.

For assistance with figuring out the best course of action in view of these dramatic new laws regarding unemployment insurance benefits in Illinois, contact Attorney Nancy Joerg at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at [email protected].

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