What Companies Should Know About Unemployment Insurance Under the CARES Act

03.30.2020

The COVID-19 pandemic has many companies evaluating whether employee furloughs or layoffs will be necessary to reduce payroll expense. While the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides a number of options for eligible companies to consider to avoid layoffs, the new law also grants enhanced unemployment benefits for workers who do suffer job loss as a result of the coronavirus outbreak. 

For example, the CARES Act creates a temporary Pandemic Unemployment Assistance program for covered individuals who are unemployed, partially unemployed, or unable to work as a result of the COVID-19 public health emergency.  The program is expansive—making unemployment benefits available to sole proprietors, independent contractors, the self-employed, and those with insufficient work history who typically would not qualify for regular unemployment benefits.  Under the CARES Act, a “covered individual” is anyone who provides self-certification that he or she is able and available for work but is unemployed, partially unemployed, or unable to unavailable to work because of any of the following reasons: 

• The individual been diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis;
• A member of the individual’s household has been diagnosed with COVID-19;
• The individual is providing care for a family member or household member who has been diagnosed with COVID-19;
• The individual is the primary caregiver for a child or other person in the household who is unable to attend school or another facility as a direct result of COVID-19;
• The individual is unable to get to work because of a quarantine imposed as a direct result of COVID-19;
• The individual is unable to get to work because a health care provider has advised him or her to self-quarantine due to concerns related to COVID-19;
• The individual was scheduled to begin employment and does not have a job or is unable to reach the job as a direct result of COVID-19;
• The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19;
• The individual has to quit his or her job as a direct result of COVID-19; or
• The individual’s place of employment is closed as a direct result of COVID-19. 

A “covered individual” does not include someone who: 

• Has the ability to telework, with pay; or
• Is receiving paid sick leave or other paid leave benefits. 

Benefits are payable for the period beginning on January 27, 2020 and ending on December 31, 2020, and covered individuals may receive assistance for up to 39 weeks (a period which may be extended by law).  The amount of assistance allowed by the CARES Act is the amount authorized under state unemployment compensation law plus $600 per week for up to four months.  Lastly, the waiting week rule—which requires an individual serve one full week of unemployment before he or she can start accruing benefits—has been waived.  The CARES Act provides that compensation is paid to individuals for their first week of regular unemployment without a waiting week.  The waiting period waiver is consistent with actions already taken by most states. 

The CARES Act significantly loosens the unemployment eligibility requirements to include independent contractors, gig workers, freelancers, and people who are self-employed.  Part-time workers, furloughed employees, and people who can no longer physically get to work as a direct result of COVID-19 can seek benefits, and employers should encourage them to do so.  It is therefore important for companies to know what these new and enhanced unemployment benefits can provide to employees who are laid off, so that they can make informed decisions about whether a layoff is the best course of action. 

As with all personnel issues surrounding COVID-19, when in doubt, consult experienced employment counsel.

---

The Hirschler Recovery Team: It may soon be a rare business enterprise that is able to insulate itself from the negative economic effects of the COVID-19 pandemic.  While we hope the economy will rebound once the pandemic begins to abate, until then, the Hirschler Restructuring and Creditors Rights Group stands ready to assist clients in addressing the financial challenges of these economically unsettled times.  Whether you are facing the loss or interruption of business, challenging financing relationships, the need to downsize or restructure, or other creditors’ rights issues, the Hirschler team will work with you toward a successful outcome.  Contact us to understand your options and devise a recovery strategy that protects your business and financial health.