Unemployed Employees: Should Employees Who Have Reduced Hours or Are Laid Off Due to COVID-19 File for Unemployment?As more municipalities and states that are dealing with COVID-19 issue orders mandating the closing of non-essential businesses such as bars, restaurants and gyms, many hourly employees are looking at a long period of under-employment. If you are going to temporarily shut down due to virus control, should you tell your employees to go ahead and file for unemployment? Well, right now that kind of depends on your state of residence.

Department of Labor Guidance

On March 12, 2020, the DOL issued guidance highlighting the flexibility under federal law for states to administer their unemployment insurance programs. Specifically, the DOL guidance reminds everyone that federal law permits significant flexibility for states to provide unemployment benefits in the following situations:

  1. An employer temporarily ceases operations due to COVID-19, which prohibits employees from coming to work;
  2. An employee is quarantined with the expectation of returning to work after the quarantine is over; and
  3. An employee leaves employment due to a risk of exposure or to care for a family member.

Federal law does not require that an employee quit to be eligible to receive benefits.

It is important to note that if an employee is receiving paid sick leave or other paid time off, they cannot file for unemployment.

The key, however, is that the states themselves have to amend their laws to loosen the requirements for benefits. Some have, but some have not. Employees should check state websites to be sure.

Some States Have Made Changes

North Carolina, Texas, and Virginia have changed their processes to make it easier for those affected by quarantine to file for unemployment. All three states have waived the waiting period to file for unemployment and even allow filing if an employee simply has a reduction in hours. All three states have also expressly waived the requirement that an individual must show that they are actively seeking work in order to qualify.

North Carolina’s executive order goes even further and states that it will not allocate unemployment benefit charges based on the virus to an employer’s account until it determines that the state cannot recoup the cost from the federal government.

Alabama amended its unemployment rules to allow employees to start filing claims on March 23, 2020, if they fit into one of the following criteria:

  1. They are quarantined by a medical professional or governmental agency;
  2. They are laid off or sent home without pay for an extended period due to the virus;
  3. They are diagnosed with COVID-19; or
  4. They are having to care for a family member diagnosed with COVID-19.

Some states, such as Florida and Mississippi, have not yet made a change (as of March 20).

Should You Encourage Your Employees to File?

Hopefully, for most businesses, a reduction in operation or hours will only be temporary. However, even a temporary stop of a paycheck will cause immense financial strain for many workers. For states where the requirements have been loosened, unemployment may help a struggling employee get by until you can operate at full force again.

Employers pay employment taxes on each employee to fund unemployment benefits. Each state has a varying formula for how it taxes an employer’s payroll. Unemployment claims may affect a future tax rate, but hopefully the federal government and states will recognize the uniqueness of this pandemic and give some relief to employers.

Your employees that qualify under existing and relaxed benefit rules may have no reason to keep from filing for benefits. A discussion with them about partnering together in getting through the quarantine may build loyalty that could pay off when the virus restrictions are lifted.