Furloughs and More: Employer Options During the COVID-19 Pandemic

The COVID-19 pandemic has created major disruptions in Washington State’s economy. Local governments are struggling with the implications of this disruption, including the impact on revenues and the likelihood of significant budget shortfalls. At the same time, while essential workers may be fully deployed, many other employees are not able to do their jobs for any number of reasons, such as Governor Inslee’s Stay Home-Stay Healthy Order, personal or family health issues, lack of child care, or a lack of available work under these emergency conditions.

Recent federal legislation, such as the Families First Coronavirus Response Act (FFRCA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, has significantly expanded benefits available to employees and options available to employers in response to this pandemic. This blog article summarizes some of the expanded unemployment benefits and eligibility now available under the CARES Act and the choices available to local government.

Understanding the Terminology

The terminology in this area can get confusing. A permanent layoff constitutes a final separation from employment and is the equivalent of a “reduction in force.” The employee’s position is being eliminated and the employer does not intend to replace it. However, the state Employment Security Department (ESD) refers to furloughs and standby as forms of temporary layoffs.

An employer will likely have quite different reasons for choosing a form of temporary layoff over a permanent layoff. While a permanent layoff is an acknowledgement by the employer that a position is no longer necessary, a temporary layoff will provide both an employer and employee with greater flexibility if, in the future, conditions warrant a return to work.

The New Range of Options — A Lot Has Changed!

ESD has a nice summary of the recent changes to unemployment benefits under the CARES Act. Here is a quick rundown of what is new:

• The definition of workers entitled to unemployment benefits has expanded and now potentially includes employees who are furloughed, on standby, or have had a reduction in hours. For more on employee eligibility, see ESD’s employee webpage, COVID-19 benefits scenarios, and a handy checklist (See page two for expanded benefits related to the COVID-19 pandemic).
• Unemployment benefits have expanded. According to ESD, an additional $600 per week will be available to nearly everyone on unemployment from March 29 through the week ending July 25, and benefits will be extended an additional 13 weeks for a maximum of 39 weeks. The federal government will fund the entirety of this additional benefit amount.
• Reimbursable employers (those who reimburse the ESD for benefit charges paid to former employees instead of paying a quarterly tax) will receive relief. The CARES Act allocates federal funds for paying reimbursable employers for 50% of the benefit amounts that employers typically pay back to ESD. The procedures have not been finalized, but it appears the ESD will pay benefits, the employer will reimburse 100% of those benefits back to ESD, and then ESD remits half of the money back to the employer using federal funds. It’s complicated, but ultimately, a reimbursable employer should receive back 50% of the amount it pays in benefit charges for the time period of March 13, 2020 through December 31, 2020.

Summarizing the Available Options

Everyone is affected by the COVID-19 emergency, but the revenue impacts will be felt differently depending on revenue sources. Jurisdictions relying heavily on sales and lodging tax revenues are likely to be particularly hard hit. In addition to revenue impacts, local governments are considering how much available work there is for employees while the "Stay Healthy, Stay at Home" Order is in effect, and projecting what staffing levels will be necessary under the “new normal” that will subsequently emerge.

These issues will inform how a local government decides to address employment and staffing issues. Here are some of the major options:

Permanent layoffs/Reductions in force

A local government may decide, based on revenue forecasts, lack of available work, or a combination of the two, that permanent layoffs are required. MRSC’s webpage on Reductions in Force contains a helpful summary of issues to consider. Note that CARES Act regulations will include a requirement that laid-off workers be notified of their potential eligibility for unemployment benefits at the time of separation. An employer is required to pay out accrued leave in accordance with its personnel policies at the time of separation of employment, and the former employee may be eligible for health care coverage through Washington Apple Health. Washington’s paid sick leave law provides that accrued, unused paid sick leave is reinstated, and the previous period of employment is counted if the former employee is rehired within 12 months of separation.

Temporary layoffs — furloughs and standby

Both furloughs and standby are forms of temporary layoffs according to ESD. Furloughs are a form of temporary layoff that may consist of a complete stoppage of work or reduced work hours over a period of time (for example, a reduction of one day a week for a year). Note that unemployment benefits are determined on a weekly basis, so furloughing an employee for one day per week may not trigger eligibility for benefits. Standby is now available, with ESD approval, to both full and part time employees who have an expected return-to-work date within twelve weeks.  Since a temporary layoff is not considered a permanent separation, employers may continue providing benefits and do not need to cash out accrued leave.

Shared work and partial employment

SharedWork is an optional ESD program that allows employers to reduce hours by as much as 50 percent, while their employees collect partial benefits to replace a portion of any lost wages. ESD uses the SharedWork chart to deduct the employee’s earnings from their weekly benefits. If approved for SharedWork, an employer may request relief of benefit charges. The term “partial employment” describes employees who continue to work but at reduced hours. To be considered partially employed, an employee: must (1) have originally been hired as full-time; (2) worked at least 40 percent of their regular full-time hours during the period of reduction (16 hours); and (3) expect to return to their employer full-time within four months. ESD uses this standard chart to deduct their earnings from their weekly benefits. 

Does paying for health care benefits while on temporary layoff affect employee eligibility?

Continuing to pay for an employee’s health insurance does not affect their ability to receive unemployment benefits. Consider contacting your insurance carrier to determine who is eligible to participate in your health plan.

Represented Employees and a Word about Consultation with Legal Counsel

All of these decisions should be made in consultation with your agency’s legal counsel. This is especially true if your decisions will involve union-represented employees. In such an event, an agency will need to ensure that any action it takes is negotiated and complies with applicable collective bargaining agreements.