COVID-19 Crisis Management Guide: Small Businesses
Part 3 – Work Sharing Program
EMPLOYMENT DEVELOPMENT DEPARTMENT
The State of California is also stepping up to the plate in an effort to assist small businesses during the COVID-19 downturn by having the Employment Development Department (EDD) reintroduce its Work Sharing Unemployment Insurance Program. Geared toward preventing layoffs, the idea behind the Work Sharing Program is to have an employer reduce payroll by an amount that would be made up for through Unemployment Insurance paid directly to employees. On top of saving jobs, EDD is also touting program benefits to employers in the form of not having to seek, hire, and train up new employees post-pandemic, once operations ramp up from economic regrowth.
To be eligible, an employer must have experienced a reduction in revenue generating operations, which will cause a potential layoff situation. With respect to potential layoffs, a minimum of two employees, comprising at least 10% of the regular workforce or a unit of the workforce, must be affected by a reduction in wages and hours worked for the applying employer to qualify. Other program requirements include that (i) the reduction in weekly wages and hours worked must be at least 10%, not to exceed 60%; (ii) the employer must maintain employee health and retirement benefits under the same terms and conditions as prior to the reduction; and (iii) corporate officers and major stock holders may not participate, amongst other specific conditions that can be found at https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm
On top of employer requirements, participating employees must also meet requirements including (i) being a part of the employer’s permanent regular workforce and not a temporary or seasonal worker; (ii) having qualifying wages in the base quarters used to establish a regular California unemployment insurance (UI) claim; and (iii) having completed a normal work week before participating in the Work Sharing Program.
To begin the process, fill out the Work Sharing Plan Application, DE 8686, and submit to EDD representatives. Detailed instructions and the form itself can be found online at: https://www.edd.ca.gov/pdf_pub_ctr/de8686.pdf
If the application is approved, the EDD Special Claims Office will send a letter of approval, a claim packet for each applicable employee, and a 10-week supply of weekly certifications for each affected employee. You’ll need to issue these certifications to the participating employees each week for the duration of the program.
UI Benefits under the Work Sharing Program will be paid weekly, proportionate to the percentage of reduction in hours and wages, e.g., a 20% reduction in hours and wages would entitle the approved employee to 20% of the UI benefits he/she would have received if his/her employment were actually terminated. Accordingly, the employer will be charged for Work Sharing Unemployment Insurance in the same manner as for regular UI benefits.
Managing this program from the employer point of view will likely be more of a burden then most are prepared for. Remember that this administrative responsibility will be on top of trying to jump start your company that has been slumbering during the COVID-19 quarantine period. Adding to that burden is the knowledge that participation in the Work Sharing Program will increase your unemployment insurance tax rate, although significant layoffs will have the same result if terminated employees file for unemployment benefits. Don’t forget about the CARES Act, and look into how you can benefit from this newly instated act.
NOTE: One word of caution, while it is possible for exempt employees, i.e., salaried employees, to participate in the EDD Work Sharing Unemployment Insurance Program, it may also be possible that courts would consider such participating exempt employees to have been converted to non-exempt employees upon reduction of their hours and salary, subjecting their employment to overtime and other non-exempt wage and hour requirements. Get a Free Consultation from Venerable Law now.