illinois unemployment issues under covid-19: reduction of … · 2020-04-23 · illinois...
TRANSCRIPT
Illinois Unemployment Issues Under COVID-19: Reduction of Hours vs. Total Unemployment
Presenter:Kimberly A. RossFordHarrison [email protected]
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Thursday April 23, 2020
Unemployment in Illinois – Pre-COVID-19
• Claimants eligible for benefits only for weeks in which they meet all of the eligibility conditions and are not subject to disqualification.• Be unemployed through no fault of your own, • Have been paid $1,600 or more in wages during base period for
insured work, • Have been paid at least $440 of base period wages at any time
during the base period outside the calendar quarter in which claimant’s wages were highest, and
• Be registered for work with Illinois Department of Employment Security (IDES).
• Not getting into detailed calculations, but basically, if person has an employment history and more than just a few hours of work here and there, he will qualify.
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Unemployment in Illinois – Pre-COVID-19
• Weekly Eligibility• Filed claim (certified) for the week as scheduled
using the automated Tele-Serve system, via the Internet or as otherwise directed by IDES staff.
• Served one “waiting week.” The “waiting week” is a qualifying period required by law. Benefits are not paid for this week. It is usually the first week for which claim filed.
• During the week, Claimant was able to work, available for work and actively looking for work.
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Unemployment Eligibility – Key Definitions
• “Able to work” means mentally and physically capable of performing a job for which a labor market exists
• “Available for work” means individual cannot impose conditions on the acceptance of work if conditions leave him/her with no reasonable prospect of work.
• “Actively looking for work” means individual is making an effort that is reasonably calculated to return to work.
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Unemployment in Illinois – Since COVID-19
• Changes under emergency rules adopted by Illinois Department of Employment Security (IDES) and through Governor Pritzker Executive Order• One week waiting period is eliminated• If temporary layoff due to business closure because of COVID-19
virus, individual could qualify for benefits as long as “able and available for” and actively seeking work. Individual would not have to register with the employment service.
• Considered to be “actively seeking work” as long as prepared to return to job as soon as employer reopened.
• This will hopefully discourage employee from not returning to work when work offered by employer – benefits will likely end.
• Employers’ contribution rate increases with each employee who files; unknown whether relief from this will be forthcoming.
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Quitting Job Due to COVID-19 Concerns
• Generally speaking, individual who leaves work voluntarily without a good reason attributable to the employer will be disqualified from receiving UI.
• Determined on case by case basis as to whether attributable to employer.
• Individual generally has a duty to make a reasonable effort to work with employer to resolve whatever issues have caused individual to consider quitting.
• Not getting into issues of new emergency leaves, if employer is allowed to remain open as “essential,” employee who simply does not want to go outside or to work because of COVID-19 will not likely qualify for benefits (but possible exceptions).
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Benefits Available to Employees
• Unemployment Insurance Act• Current maximum Weekly Benefit Amount
(WBA): $484• Note that maximum WBA may also be higher if employee has
dependent spouse or children; however these examples will only use the situation of no dependents. ($577 with dependent spouse; $669 with dependent child/children)
• Federal CARES Act• Additional $600, with limitations• Benefits extended to 39 weeks from 26
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Layoffs/Furloughs v. Reduction in Hours
• Considerations:• What is best for your business?
• Short and long term needs• Value of employees• Extent to which business allowed to stay open• Availability of loans/other benefits to small businesses
• What is best for your employees?• Unemployment benefits• Continuation of medical and other benefits• Health concerns• Stability of having job
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Caveats: Exempt vs. Non-Exempt Employees
• The scenarios and calculations provided for reducing hours, either during the week or by the week, are for Fair Labor Standards Act (FLSA) non-exempt employees, or for exempt employees fully unemployed.
• FLSA is the law that requires employers to pay certain/most employees overtime if they work more than 40 hours in a week.
• Often confused concept.• “Hourly” and “Salaried” is NOT the same as Exempt and
Non-Exempt.• “Salaried” is simply a method of calculating pay. It does not mean
that if you pay a “salary,” you don’t have to pay overtime.• Whether employee is non-exempt and entitled to overtime is
dependent on job duties, not method of payment and not job title.
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What is Best for the Business?
• Every business is different, with different ability to remain open (legally and from financial standpoint), with different eligibility for loans both under CARES Act and other sources, different numbers of employees, different abilities and desires to keep current employees.• This can only be decided by each individual company
• Don’t tell employees they are eligible for unemployment. Up to the State of Illinois/IDES. Can advise them to file.• Every employee is different.• Some may have other jobs. Some may have dependents. • Ultimately, employer has no control.• These numbers/calculations are not exact, just a guideline.• Beware of the employee who is terminated for non-COVID-19
reasons who tries to claim benefits.
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What is Best for Employees?
• UI benefits may still be available for employees who work reduced hours. • Weekly Benefit Amount (WBA) is 47% of average weekly wages.• Average weekly wages calculated by looking at two highest
quarters in Base Period and dividing by 26.• Base Period is first four quarters in last five complete calendar
quarters prior to the benefit year.• Quarters are January through March, April through June, July
through September, and October through December.• Example: Employee laid off March 15, 2020. Therefore, the quarters
considered are July-September 2019, April to June 2019, January to March 2019, and October to December 2018.
• That amount gets reduced down to 47%
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Calculation of WBA
• Example: Employee earned $11,700 and $14,300 in two highest quarters in the Base Period for total of $26,000. • $26,000 ÷ 26 = $1000 • $1000 x 47% = $470.• Therefore, WBA is $470.
• Employees (generally) earning $1030/week or more will max out at $484.
• WARNING! ALL NUMBERS IN THE FOLLOWING CALCULATIONS ARE APPROXIMATE AND FINAL DETERMINATIONS ARE MADE BY IDES!! THESE ARE FOR ESTIMATED ILLUSTRATIONS ONLY!!
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Calculations for Reduced Hours – Illinois Law
Whether employee receives UC benefits for reduced hours is all about the math, algebra to be exact!• If the employee’s hours are reduced to an amount that results
in pay of more than 70.5% of his/her regular wages in a particular week, that employee will not be considered unemployed (that week) and will not be entitled to any UC.
• If employee’s hours are reduced to an amount that would result in pay of less than 70.5% of his/her regular wages in a particular week, employee may be considered underemployedand may (generally*) be entitled to UC.• *Note that certain other payments can result in a different
conclusion, such as receipt of payment for accrued paid time off, paid sick leave, pension, separation pay as part of RIF, or work at another employer. Again, these are general estimates, not exact.
• Note also that these calculations apply to employees who don’t max out WBA (i.e. earning less than $1030/wk)
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Calculations for Reduced Hours
• Now to show the work:• “Magic” numbers:
• 23.5%• 70.5%
• Here’s why: 820 ILCS 405/402. Reduced Weekly Benefits• Eligible individuals are paid their WBA, minus the “part of wages
(if any) payable to him with respect to such week which is in excess of 50% of his weekly benefit amount…” Translation:
• If the individual earns less than 50% of his WBA, he/she will receive his/her full WBA plus the wages earned. (50% of WBA = 23.5% of average weekly earnings) (assuming no other deductions)
• If the individual earns more than 50% of WBA, he/she may or may not receive a reduced WBA (examples to follow)
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Calculations for Hours Reduction During the Week
The following scenarios do not consider the CARES Act (covered later), or an increased benefit amount for dependents, or a reduction for any other payment such as vacation.• Scenario 1: Employee earns an average of $1000 per week.
WBA would be $470 (47% of $1000) in a week in which no work is performed.• If employee is reduced to two (2) days per week (or the
equivalent part-time work of 16 hours), and is thus earning $400 that week, here’s the formula:
• 50% of WBA = $235• $400 is more than 50% of WBA• $400 - $235 = $165• $470 WBA - $165 reduction = WBA of $305• Therefore, WBA that week is $305, plus earnings of $400 = $705
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Calculations for Hours Reduction During the Week
• Scenario 2: Employee earns an average of $1000 per week. WBA would be $470 (47% of $1000) in a week in which no work is performed.• If employee is reduced to half hours during the week, and is thus
earning $500 that week, here’s the formula:• 50% of WBA = $235• $500 is more than 50% of WBA• $500 - $235 = $265• $470 WBA - $265 reduction = WBA of $205• Therefore, WBA that week is $205, plus earnings of $500 = $705
• Therefore, same end result as Scenario 1.
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Calculations for Hours Reduction During the Week
• Scenario 3: with different pay rate but same calculations: Employee earns an average of $600 per week ($15/hr for 40 hours/week). WBA would be $282 (47% of $600) in a week in which no work is performed.• If employee is reduced to half hours during the week, and is thus
earning $300 that week, here’s the formula:• 50% of WBA = $141• $300 is more than 50% of WBA• $300 - $141 = $159• $282 WBA - $159 reduction = WBA of $123• Therefore, WBA that week is $123, plus earnings of $300 = $423
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Calculations for Hours Reduction During the Week
• Scenario 4: Employee earns an average of $600 per week ($15/hr for 40 hours/week). WBA would be $282 (47% of $600) in a week in which no work is performed.• If employee is reduced to 23% of hours (earnings) during the
week, and is thus earning $138 that week, here’s the formula:• 50% of WBA = $141• $138 is less than 50% of WBA• Therefore, no reduction of WBA at all.• Therefore, WBA that week is $282, plus earnings of $138 = $420
• Therefore, comparing this scenario to Scenario 3, employee receives nearly the same amount whether working half their hours (Scenario 3) compared to only 23% of their hours (Scenario 4).
• This is approximately 20 hours/week of work compared to approximately 9 hours per week, for almost the same net amount.
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“Magic Number” Calculation (70.5%)
• Scenario 5: Employee earns an average of $1000 per week. WBA would be $470 (47% of $1000) in a week in which no work is performed.• If employee’s hours are reduced to 71% of usual hours during the
week, and is thus earning $710 that week, here’s the formula:• 50% of WBA = $235• $710 - $235 = $475• $475 > $470 WBA and therefore, employee not eligible for any UC.• Therefore, earnings that week are $710, for working approximately
28.4 hours.• If employee working 70% of hours (approx. 28 hours), then $700 –
235 = $465. $470 - $465 = $5 in WBA for this employee. (Very important $5 difference because of CARES Act.)
NOTE: These calculations are different for employees whose benefits max out at $484.
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Calculations for Reductions by the Week
The following scenarios and calculations are for an employer who reduces hours in full week increments by having employees work one week on, then one week off.
• Scenario 6: Employee earns $1000 per week, with a WBA of $470. If employee works one week, he earns $1000, and if he does not work at all the following week, he will receive $470 in unemployment, for a total of $1470 over two weeks. Compare this to Scenario 2, in which reduction in hours each week by 50% yields the employee only $1410 over two weeks (slightly less).
• Scenario 7: Employee earns $600 per week, with a WBA of $282. If employee works one week, he earns $600, and if he does not work at all the following week, he will receive $282 in unemployment, for a total of $882 over two weeks. Compare this to Scenario 3, in which a reduction in hours per week by 50% yields the employee only $846 over two weeks.
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CARES Act $600 “Kicker”
• $600/week payment through Federal Pandemic Unemployment Compensation (FPUC)
• As of April 7, 2020, IDES began processing these payments retroactive to March 29, 2020• Payable until week ending July 25, 2020
• Payments do not count against employers’ tax rate• Extends out regular UC benefits availability to 39 weeks
from 26 (Pandemic Emergency Unemployment Compensation (PEUC)
• Can (and often will) result in higher total compensation for unemployed and underemployed individuals than they were earning at the time! (Examples to follow)
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CARES Act Eligibility for Those Not Entitled to UC
• CARES Act also provides federally funded unemployment benefits to self-employed, independent contractors and others who are not typically eligible for regular UC. (Pandemic Unemployment Assistance – PUA)
• IDES website currently inconsistent, stating in one place that those in this category should wait to apply and that it will provide more information soon, while on a 4/15/20 update, recommending that everyone in these categories apply for UC.• Part of eligibility requirement is that they need to not be eligible
for regular UC, so need the denial from IDES as proof.
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CARES Act Scenarios
A. Employee earns $1000 per week, with WBA of $470. If weekly hours reduced to point where employee earning only $400 (i.e. about 16 hours), then employee would receive $305 from “regular” Illinois UC (Scenario 1), plus $400 wages, plus additional $600, for total of $1305, or $2610 for two weeks.
B. Employee earns $1000 per week and is fully unemployed, such that he/she would receive $470 in Illinois UC unemployment benefits plus $600 under CARES Act, for total of $1070/week, or $2140 for two weeks.
C. Employee earns $1000 per week and is scheduled to work one week on and one week off. He/she would earn $1000 in Week 1, then in Week 2, receive $470 in “regular” Illinois UC benefits, plus $600 under the CARES Act, for a total of $2070 for two weeks.
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CARES Act Scenarios, Cont’d
• Thus, previous 3 scenarios yield different total benefits (over 2 weeks), but in each case, employee is receiving MORE THAN he/she was earning prior to the unemployment/ underemployment.• Employee working the most hours (Scenario C) receiving the
least overall.Compared to this:D. Employee earns $1000 per week and has hours cut to point of
earning $710/wk (Scenario 5) (or anything more than about70.5% of prior weekly earnings), then the employee noteligible for regular UC, and thus also not eligible for the $600 under CARES Act, and therefore only receives $1420 for two weeks of work (i.e. about a third less than those fully unemployed, and nearly half as much as someone working 16 hours/wk – Scenario A).
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CARES Act Results: Intended? Fair?
• The lower the regular earnings, the more pronounced the issue becomes regarding paying employer more in UC than earning:• For example, a fully unemployed individual who was only earning
$400 per week prior to termination will now receive $188 in Illinois UC, plus $600 under the CARES Act, for a total of $788, nearly double his/her regular wages.
• Whether this result was an intended or unintended result, or whether it is fair to employees, to employers, or to no one, this is what employers must deal with.• But remember, if employer has work for employee, ultimately up
to the employer what to do, and if employee disgruntled because “forced” to work when could receive more to not work, that might cause loss of UI, (and may tell a lot about employee).
• Employers should report to IDES that they offered job back and if employee refused to return.
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Other Considerations - General
• Check with medical insurance carriers to determine if employees still eligible for health insurance with reduced hours.
• If full layoff/furlough, or if reduced hours cause inability to participate in plan, send COBRA notice.
• If employer agrees to pay some or all of employee’s medical insurance (or any other benefit) and expects reimbursement, suggest enter into written agreement regarding reimbursement (i.e. future payroll deductions, direct reimbursement if not re-hired, etc.)• Illinois Wage Payment and Collection Act requires payroll
deductions to be in writing, given freely at the time of deduction.• Significant reduction in hours may allow employee to voluntarily
quit and still claim “good cause” attributable to employer to qualify for unemployment
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Other Considerations – Reduction in Pay
• For FLSA-Exempt employees, strongly recommend consultation with employment lawyer prior to reducing pay (or cutting hours). May lose exemption, possibly permanently or for significant time after crisis over.• Must be aware of pay requirements for exempt employees when
they work partial days or partial weeks.• Must ensure still meet salary threshold ($35,568/yr; $684/wk)
after reduction.• Full unemployment for Exempt employees same as for non-
exempt.• Before reducing pay of any employee, must provide written
notice to employee. (IWPCA)• Best practices are to get the reduction acknowledged in writing.
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