American Jobs Act Includes Several Provisions that Would Impact Employers

President Obama has formally released a draft of his jobs bill to Congress for consideration. As discussed during his address to a joint session of Congress last Thursday, several provisions of the American Jobs Act (pdf) are aimed at easing payroll taxes for employers, promoting hiring of the unemployed and veterans, and prohibiting discrimination against the unemployed. Generally, the Act pieces together a number of bills that have already been introduced in some form within the past year or two.

Unemployment Discrimination

Subtitle D of the American Jobs Act – Prohibition of Discrimination in Employment on the Basis of an Individual's Status as Unemployed – incorporates a previously-introduced bill that would make it unlawful for an employer or employment agency to discriminate against individuals based on their unemployment status or history of unemployment. The Fair Employment Opportunity Act of 2011 would, among other things, prevent employers and employment agencies from refusing to consider or offer a job to an unemployed individual; prohibit the publication in any medium of an advertisement or announcement for a job that includes language indicating the unemployed need not apply; and entitle those discriminated against to bring a civil action against the employer or employment agency for actual, compensatory and punitive damages. These terms would apply to employers with 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year. A person would be considered to have a “status as unemployed” if the individual, “at the time of application for employment or at the time of action alleged to violate this Act, does not have a job, is available for work and is searching for work.”

While is it unlikely that this provision will be enacted as part of the President’s jobs plan, alleged discrimination against the unemployed has received a great deal of attention from the Equal Employment Opportunity Commission (EEOC) and lawmakers in recent months. In February, the EEOC held a public meeting to address what it considers an “emerging practice” of excluding currently unemployed job-seekers from applicant pools. Several panelists at that hearing endorsed legislation such as the Fair Employment Opportunity Act. Another bill by the same name was introduced earlier this year that would include “unemployment status” as a protected category under Title VII of the Civil Rights Act. This development will be closely followed.

Work Share Program

Part III of the legislation would encourage employers to develop temporary work sharing positions in lieu of layoffs, and entitle those employees working reduced hours to receive proportionate unemployment benefits.

Under the terms of this bill, employer participation in short-time compensation programs would be voluntary. Those participating would need to certify that reducing employees’ hours was a measure taken in lieu of implementing temporary layoffs, and submit written work share plans for state agency approval. If unionized, the employer would also need to provide a written plan describing the short-time compensation program for union approval. Employees whose workweeks are reduced by at least 10 percent (but no more than 60 percent) would be eligible for the pro rata portion of unemployment compensation they would have received if totally unemployed.

Employers that hire workers on a seasonal, temporary, or intermittent basis, or those currently engaged in labor disputes would be ineligible to participate.

If an employer provides health and retirement benefits under a defined benefit plan, or contributes to such plans, it must certify that such benefits will continue to be provided to employees participating in the short-time compensation program under the same terms and conditions as though the workweek of such employee had not been reduced or to the same extent as other employees not participating in the program.

Payroll Tax Cuts

During his address, the President touted temporary payroll tax relief provisions contained in the bill that he claimed would promote hiring. Such measures include a temporary 50 percent payroll tax cut for employers on their first $5 million in payroll. Specifically, the bill would cut the current rate of 6.2 percent on payroll expenses to 3.1 percent. In addition, the bill sets forth a temporary employer tax credit for increased payroll. Under the terms of the bill, employers would receive a 100% refund on payroll taxes paid on added workers or wage increases for current workers above the level of last year’s payroll. This benefit would be capped at $50 million in new wages.

The measure provides more specific tax credits for hiring veterans and the long-term unemployed. Namely, Section 201 of the Act would provide a tax credit of up to $5,600 for veterans who have been unemployed for at least six months. The bill provides for a second tax credit of up to $9,600 that would increase the existing credit for employers that hire veterans with service-connected disabilities who have been unemployed six months or longer.

As for the long-term unemployed, the bill would provide employers with a tax credit of up to $4,000 for each individual who was without work for at least 6 months during the 1-year period ending on date of hire.

Other notable sections of this bill would do the following:

  • Extend Emergency Unemployment Compensation. Among other provisions aimed to help the unemployed, Title III of the measure would extend emergency unemployment benefits an additional year.
  • Prevailing Wages. Section 5 of the Act stipulates that all laborers and mechanics employed by contractors and subcontractors on projects funded directly by the bill must be paid the prevailing wage rate.
  • Extension of 100% Expensing. This bill would extend 100 percent business expensing of investments in certain business assets through 2012.

At this point it is unclear which, if any, of these provisions will advance. 

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Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.