Expansion of work share programs under the CARES Act
Among other temporary revisions to unemployment assistance programs, the recently passed CARES Act includes provisions aimed at expanding the effectiveness of state “short-time compensation” programs, also known as “work share” programs. In general, state work share programs tend to be underutilized by employers. However, during the ongoing COVID-19 crisis, businesses should consider whether a work share program can benefit them and their employees, particularly in light of the modifications put in place by the CARES Act. Below is guidance to help you decide if participating in a state work share program (if available) is the right path for your company.
What are work share programs?
Work share programs are state-implemented programs that provide an alternative to layoffs for employers experiencing economic difficulties or slow downs in available work. Under these programs, employers may elect to keep employees, some or all of whom may otherwise be laid off, working at reduced schedules. Those employees experiencing a reduction in hours are allowed to collect a percentage of their unemployment compensation benefits proportional to their reduced work hours. In order for employees to be potentially eligible for partial unemployment benefits, their employer must have a work share plan approved by the appropriate state agency.
The CARE Act aims to incentivize employers’ use of work share plans by providing federal funding to cover the amount of work share compensation paid under a state’s program, through December 31, 2020. Covered work share payments are limited to no more than 26 times the amount of regular compensation payable under the state’s unemployment benefits program and are not available for seasonal, temporary, and intermittent workers.
Not all states currently have work share programs. Employers in these states are likely to see more impact from the work share provisions of the CARE Act because the statute permits the creation of new work share programs.
Can I implement a work share plan?
Currently, 26 state have operational work share programs – Arizona, Arkansas, California, Colorado, Connecticut, Florida, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.1
If your state already has a work share program, then your business can develop a work share plan and apply to the state for approval. The partial unemployment benefits will be paid to your employees in accordance with your state’s normal procedures for unemployment benefits. If your state does not have an existing program, for a work share plan to be an option for your business, your state must elect to create a new program, now, under a CARES Act agreement with the federal government. If this occurs, and you prepare a work share plan that is approved by the state, your company will be required to pay to the state half of the amount of work share compensation paid by the state to each employee.
Is a work share plan a good option for my business?
The effectiveness of a work share plan depends largely on the characteristics of your particular business and the specific nature of the financial hardship you are going through or anticipate going through due to the COVID-19 crisis. You should consider whether you expect the work slow down to be temporary (e.g. a few months) or have longer-lasting impacts on your business. Also consider the scope of work loss – is it impacting only part of your business or it is systemic? Work share plans are generally best suited for temporary business interruptions and those that will permit reduced schedules across multiple work units or affecting a broader group of employees. Under these circumstances, a work share plan will likely have the most benefit on your business while having the greatest mitigating impact on your employees.
Another consideration is whether your state has an existing work share program or elects to create one under the CARES Act. If the later, the direct costs to your business from a work share plan are likely to be greater. The cost may be worth it, though. For example, if you stand to lose employees with specialized training or skill sets as part of a layoff, the added cost of keeping those employees under a work share plan may end up resulting in greater overall benefits to your company. Every business has its own unique set of considerations that will weigh into a decision about a work share plan.
McDonald Hopkins’ team of experienced employment attorneys is available to provide guidance and insight on how work share programs, as well as on all other aspects of recent COVID-19 related legislations (state and federal), can help your company during this difficult time.
1 More information on the specific work share programs in Michigan, Ohio, and Florida, including how your business can apply for approval of a work share plan, may be found on each states’ respective agency websites, or by clicking the links above. Illinois does not have an operational work share program.