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Employers in the COVID-19 Era Need to Have a Good Grasp on Unemployment Insurance Issues: Things are Changing Fast!

UNDERSTANDING THE UNEMPLOYMENT INSURANCE SYSTEM IN AMERICA: Unemployment insurance benefits in the United States started in Wisconsin in 1932. Then came the Social Security Act of 1935 in which the U.S. Federal government encouraged individual states to adopt unemployment insurance plans.

In today's world, the unemployment insurance system across America is run differently in each state. This creates a lot of confusion currently in the COVID-19 era. An employer might read an article about how unemployment insurance benefits are being handled in one state and mistakenly think that the information applies to every state. It doesn't. Each state operates under its own unemployment insurance laws and regulations.

Unemployment insurance is a form of social insurance where employers pay into their state unemployment insurance system on behalf of their employees so that that their employees have income support if they lose their jobs through no fault of their own. The U.S. Department of Labor (USDOL) oversees America's unemployment insurance system, but the individual states run their own basic unemployment insurance programs.

THE NEW CARES ACT: Under the new CARES Act (Coronavirus Aid, Relief and Economic Security Act), which is relief provided by Congress in response to the COVID-19 pandemic, all states across America will be allowed to provide up to 13 additional weeks of Federally funded extended unemployment insurance benefits to workers who exhaust their regular state unemployment insurance benefits. Under the CARES Act, workers applying for unemployment insurance benefits can receive a maximum of 39 weeks of unemployment insurance benefits.

There is a great variety in how many weeks of unemployment insurance benefits different states allow. For example, Massachusetts provides up to 30 weeks of unemployment insurance benefits under normal circumstances. But Missouri provides up to only 13 weeks of unemployment insurance benefits. Florida provides only 12 weeks of unemployment insurance benefits whereas Montana provides 28 weeks of unemployment insurance benefits.

The CARES Act also creates a new program which specifically covers self-employed Americans, gig workers and independent contractors who are out of work or have significantly reduced hours as a result of the coronavirus pandemic. These are individuals who would not normally be eligible for unemployment insurance because they are not employees. Companies who use independent contractors are shocked that independent contractors are now eligible for unemployment insurance benefits (under certain COVID-19 related circumstances).

Historically, the purpose of unemployment insurance benefits was to "shield the employee from the perils of unemployment." But now, with the covering of independent contractors and gig workers, we are shielding this new category of worker from the perils of lack of work due to COVID-19!

WHO GETS THE WEEKLY $600: Federal funding under the CARES Act provides an extra flat $600 per week until July 31, 2020 to anyone who gets unemployment insurance benefits. It appears that independent contractors and gig workers may also get this weekly $600.

The problem with distributing the flat amount for unemployment insurance claimants across America is that the State unemployment insurance systems were hit with this responsibility almost without warning. The various states, many of which reportedly have antiquated computer systems, were simply not ready to field millions of claims for unemployment insurance from both traditional employees and also from independent contractors and gig workers who qualify. There has been utter chaos online state by state across America as these claimants attempted to apply for unemployment insurance benefits. Unemployment insurance agency websites crashed and phone lines were backlogged.

The various unemployment insurance agencies across America have to struggle to administer these brand new unemployment insurance programs. Many of the unemployment insurance agencies are struggling themselves as employers because they are themselves suffering from lack of state funding and lack of personnel (they are short staffed due to COVID-19 related reasons).

STATES ARE CATCHING UP IN TERMS OF MEETING THE NEEDS OF CLAIMANTS: Various states have recently been able to start distribution of the $600 per week federal benefit which is available to certain claimants until July 31, 2020. Each state is different. Some states have not even begun to distribute the $600 because they do not have the computer programs and technology to do so yet. Many states indicate on their respective websites that they will make the $600 weekly benefit retroactive to a specified date.

WHAT SHOULD EMPLOYERS DO?: I am receiving many phone calls from concerned employers who are wondering if their employees would be better off financially in filing for unemployment insurance or rather working part time with reduced hours.

In many cases, employees who are let go from relatively low paid jobs will end up making more if they are able to collect unemployment insurance benefits. Adding the regular state unemployment insurance benefit to the $600 federal weekly benefit creates a total weekly amount often exceeding what the low paid worker made while fully employed.

If the partially unemployed worker is able to collect even $1 of unemployment insurance, that worker will get the weekly $600 added to their state unemployment insurance amount, but only until the end of July 2020 (unless there is new federal legislation passed to extend it; there are rumors that the date might be extended).

Independent contractors are now seemingly eligible for unemployment insurance benefits, but we have not yet seen how this will be evaluated and administered state by state. For one thing, independent contractors don't have a set weekly paycheck, so the independent contractor will have to provide documentation of money earned over the past year (usually it would be their IRS Form 1099 for 2019).

A SOMEWHAT UNEXPECTED TENSION: It is becoming clear that one unexpected tension is arising and will continue to arise between companies who have laid off or fired workers and workers who are now enjoying a relatively high amount of unemployment insurance benefits. These workers don't want to come back to work. The worker is now making more money being on unemployment (and the worker also may fear exposure to COVID-19 being at work).

On the websites for state unemployment insurance agencies, this matter is touched upon in the frequently asked questions section of the website. The state unemployment insurance website suggests that the employer can file a complaint with the state unemployment insurance agency by reporting that the worker is turning down available work in preference to remaining on unemployment.

WILL THE EMPLOYER BE CHARGED FOR COVID-19 RELATED UNEMPLOYMENT INSURANCE CLAIMS?: As of the writing of this article, we don't know. Usually, employers find that their unemployment insurance rate goes up for several years when a worker gets unemployment insurance benefits and those benefits are charged to the unemployment insurance account number of that employer. However, there are certain circumstances under which employers will find their unemployment insurance accounts are not charged. It is certainly possible that there will be a legislative decision made (or perhaps guidance from the USDOL directing states to institute a program) whereby COVID-19 unemployment insurance benefits should not be charged to the employer's unemployment insurance account number but rather should be charged to a pool.

If legislation is passed making claims related to COVID-19 non-chargeable to the employer, then employers furloughing or laying off workers due solely to COVID-19 would not be required to contribute to the benefit costs, and the costs would be "pooled" between all employers. This would likely result in increased unemployment tax rates in future years for all employers because the entire pool of employers would need to be tasked with replenishing the benefit trust fund.

Therefore, with each and every unemployment insurance claim (even ones that the employer doesn't wish to protest), employers should make it clear to the state unemployment insurance agency that the claim is COVID-19 related.

THESE ARE UNUSUAL TIMES: Several clients have called me recently to tell me that they have received a Notice of Claim in the mail which already is "not timely." In other words, the Notice of Claim has a reply due date which has already passed. The client wants to know if I think it is a waste of their time to protest the Notice of Claim in view of the fact that the reply due date has already come and gone. My advice to the client is to absolutely protest the Notice of Claim!

I instruct the client to note in the beginning of the protest in capital letters and bold that the Notice of Claim arrived on [fill in date of arrival] and the company opened its mail immediately on that day and discovered the reply due date had come and gone. I tell the client to state there are witnesses in the company who are willing to testify under oath that the Notice of Claim from the unemployment insurance agency arrived on a specific date and was opened immediately.

If the envelope in which the Notice of Claim arrived has a postmark, I tell the company to attach a copy of the envelope as an exhibit to the protest. The company should note that it has always been timely in protesting unemployment insurance claims and request that this protest be considered timely because the company immediately protested the Notice of Claim under these circumstances. Then explain why they are protesting including any needed references to COVID-19 (with the hope that perhaps any unemployment insurance benefits will not be charged to the company but rather to the entire pool of employer accounts).

CONCLUDING THOUGHTS: We are entering a brave new world in terms of a virtual ocean of legal issues involving unemployment insurance benefits, new legislation, coverage of independent contractors with unemployment insurance benefits, etc. The problems throughout America's unemployment insurance system are massive ranging from computer issues to new laws being passed quickly and thrust upon state unemployment insurance agencies (who have to understand and figure out to administer the laws and figure out on a case by case basis who is eligible).

This situation could not have even been imagined several months ago. It is a tremendous learning curve for employers, employees, independent contractors, federal and state agencies, and our society.

Things have moved fast and much is not fully understood yet. Be advised therefore to work with an experienced employment lawyer on the specific facts of any unemployment insurance case as it arises.

Questions? Contact attorney Nancy Joerg in our St. Charles, Illinois office at [email protected] or at (630) 377-1554

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