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.
In light of the recent coronavirus pandemic, many businesses will inevitably be forced to reduce employees’ hours and thus their compensation. As a result, employees may be eligible to file for partial unemployment benefits. There are, however, a number of other potential options available to employees in the Golden State.
Short-Term Disability Insurance Benefits1
California has an employee-funded short-term disability insurance (SDI) fund. If an employee is unable to work due to having or being exposed to COVID-19 (certified by a medical professional), the employee can file an SDI claim. SDI benefit amounts are approximately 60-70 percent of wages (depending on income) and range from $50-$1,300 a week. Thus, an SDI claim can pay an employee significantly more than unemployment. Further, because SDI is employee-funded, employers are not charged for the benefits paid under the SDI, which in turn prevents their tax rate from increasing.
In light of recent events, the governor has waived the one-week waiting period for SDI benefit claims; therefore, an employee can begin to collect SDI benefits from the start of any disability.
If employees are not sick, but are unable to work because they are caring for ill or quarantined family members with COVID-19 (certified by a medical professional), they can file a Paid Family Leave (PFL) claim. Similar to SDI, PFL benefit amounts are approximately 60-70 percent of wages (depending on income) and range from $50-$1,300 a week. The governor has waived the one-week waiting period for PFL as well. As with SDI, PFL is employee-funded, and so does not impact an employer’s tax rate.
Work Sharing Plan3
If employees are neither sick nor caring for sick family members but still unable to work due to business closures, another option is a Work Sharing Plan. Work Sharing allows employers to reduce employees’ wages or hours without resorting to layoffs or total furloughs, while allowing employees to keep their jobs and also receive unemployment insurance (UI) benefits. About half of U.S. states have some form of work share program in place with varying requirements and benefits.
A Work Sharing Plan eliminates the requirement imposed on employees to seek other employment. Another advantage of Work Sharing Plans is that they have the potential to result in more UI benefits than a straight UI benefit claim because Work Sharing is based on a reduction in hours while UI benefits are based on a reduction in hours and income.
For example, assume an employee works 40 hours and makes $1,000. Then assume the employee’s wages are reduced by 10 percent ($100 reduction). If the employee filed a standard UI claim (not part of a Work Sharing Plan), the employee would receive no UI benefits because the reduction in wages is not sufficient to generate any UI benefits. However, under the Work Sharing Plan, the employee would receive $45.00 per week in UI benefits, 10 percent of the maximum of $450 per week in UI benefits.
Further, an employee can work no hours for up to three weeks and still be considered part of the Work Sharing Plan eligible to receive UI benefits. If the employee works again in the fourth week, the three-week period restarts. This provides employers flexibility to structure work hours while letting employees receive benefits. Benefits can be available in nonconsecutive weeks. For example, an employee normally works 40 hours a week. While on the Work Sharing Plan, the employee might be scheduled to work for only 24 hours, and obtains benefits. The next week the employee takes 40 hours of vacation and does not apply for benefits. In week three, the employee is again scheduled for 24 hours, and receives benefits again.
To participate, an employer must take certain steps and meet all of the following requirements:
- Be a legally registered business in California.
- Have an active California State Employer Account Number with the California Employment Development Department (EDD).
- At least 10 percent of the employer’s regular workforce or a unit of the workforce, and a minimum of two employees, must be affected by a reduction in hours and wages.
- Hours and wages must be reduced by at least 10 percent and not exceed 60 percent.
- Health benefits must remain the same as before, or they must meet the same standards as other employees who are not participating in Work Sharing.
- Retirement benefits must meet the same terms and conditions as before, or they must meet the same as those benefits provided to other employees not participating in Work Sharing.
- The collective bargaining agent of employees in a bargaining unit must agree to voluntarily participate and sign the application for Work Sharing.4
- Identify the affected work units to be covered by the Work Sharing plan and identify each participating employee by their full name and Social Security number.
- Notify employees in advance of the intent to participate in the Work Sharing program.
- Identify how many layoffs will be avoided by participating in the Work Sharing program.
- Provide the EDD with any necessary reports or documents relating to the Work Sharing plan.
- Not include any seasonal, leased, temporary employees, corporate officers or major shareholders.
To start a Workshare Plan, an employer files an application on Form DE 8686, which becomes effective on the Sunday of the week before the application is filed. A Work Share Plan remains in place for one year, but may be renewed.
If employers want to use a Work Sharing Plan, they should include the names of all employees who might apply. This will avoid any issues with an employee receiving Work Share Plan benefits rather than ordinary UI benefits.
If none of the above options are available or workable, employees who have reduced hours or compensation may still be available for general UI benefits under certain conditions. Like SDI and PFL, the one-week waiting period for UI benefits has been waived.
We anticipate that further changes may be coming in the near future.
1 See EDD webpage on COVID-19, available at https://www.edd.ca.gov/about_edd/coronavirus-2019.htm.
3 See EDD webpage on Work Sharing Plans, available at https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm.
4 If a union does not want to participate, a Work Sharing Plan can still be implemented for non-union employees so long as other requirements are satisfied.