Unemployment Insurance (UI) and Covid 19
§§ 2101 et seq of the CARES Act
UI is a federal state program dating back to the Great Depression that provides checks to some workers who lose jobs and income. It is financed by state and federal UI taxes that employers pay as part of payroll. These taxes are quite low and typically only on the first $7,000 of a worker’s salary. The taxes are also experience rated, i.e. if your employees use the program, you pay a higher tax.
Benefits are often very low – between 1/3rd and ½ of the worker’s salary, and also capped such that higher wage workers receive an even lower % of their wages.
Benefits are typically time limited – 26 weeks; however some states cover as little as 14 weeks.
Because so many decisions are made at the state level, the benefits, the time length of coverage and the eligibility factors vary widely. In 2015 only 25% of unemployed workers were actually qualifying for and receiving UI. At the top of the list (65-50% receiving benefits) were New Jersey, Connecticut, Massachusetts and Pennsylvania. At the very bottom (15-20% receiving benefits) were South Carolina, South Dakota, Louisiana, Georgia and Florida. North Carolina had led all 50 states in reducing eligibility and duration of benefits.
Finally, many “flex” workers such as those in the gig economy, the self employed, part timers, etc. are not eligible for any benefits. In addition, those employees in the informal sector (e.g. cash under the table) are ineligible as well.
The CARES Act makes a number of temporary improvements with 100% federal financial participation – the most notable are an extra $600 in weekly benefits (but only through 7/31/20), the inclusion of the gig workers or flex employees for the rest of the calendar year, the addition of 13 weeks of extended benefits. The federal $600 weekly supplement is not considered income that would otherwise disqualify an individual, parent or child from receipt of Medicaid (MediCal) or CHIP. See CARES Act §§ 2101 et seq. The expansion of eligibility is for the year beginning 1/27/20 and ending 12/31/20. The duration of benefits is 39 weeks. There will be no waiting periods for the benefits to start at state option with 100% federal funding.
The following are newly eligible for UI. Individuals may self certify that they are able to work but unable to work due to any of the following:
1. Covid 19 diagnosis or showing symptoms
2. In household of someone with Covid 19
3. Providing care to a family member with Covid 19
4. Can’t work because their kids are home from school due to Covid 19
5. Can’t get to work due to Covid 19
6. Self quarantined due to Covid 19
7. Breadwinner due to a death from Covid 19
8. Quit job due to Covid 19
9. Place of business closed due to Covid 19
10. Self employed, or seeking part time work or does not have sufficient work history or other reasons not eligible for UI
The following are ineligible
· Can telework with pay
· Receiving paid sick leave or other paid leave
The states will have full federal flexibility to staff up to meet the increasing #s of UI claims.
States cannot substitute the new federal funds for their existing benefit levels.
States can enact short-term compensation programs and negotiate them with the Department of Labor. This is also known as work sharing; it allows an employer to temporarily reduce work hours and have UI make up the difference in worker’s pay (in whole or in part).
Our next big problem is state by state implementation — a challenge that is way beyond the capacity of most states’ employment agencies. https://www.politico.com/news/2020/04/01/unemployed-workers-benefits-coronavirus-159192 The biggest challenge for states are the brand new categories of temporary UI eligibility for the self employed and the many others in the gig economy. https://www.cnbc.com/2020/04/01/unemployment-for-gig-self-employed-workers-mired-in-confusion-delays.html
State computer systems and phone lines are being overwhelmed by the volumes of claims in some states. https://www.cnbc.com/2020/04/02/state-unemployment-offices-scramble-to-handle-jobless-claims-surge.html States in the industrial Midwest like Michigan and Pennsylvania and Kentucky are experiencing the highest application rates while farm states are experiencing a high but comparatively lower rate of applications.
Prepared by: Lucien Wulsin
Dated: 4/1/20