In response to record-breaking levels of unemployment caused by COVID-19, on March 27, 2020, the federal government passed the Coronavirus Aid, Relief and Economic Security Act (CARES) Act, which expanded and enhanced unemployment compensation (UC) benefits. Through July 31, 2020, some of these enhanced benefits may result in jobless and furloughed workers earning more compensation in unemployment than when they were working. As a result, many employers fear that these workers will avoid returning to work while simultaneously earning more money. However, as the U.S. Department of Labor (DOL) and state UC agencies have emphasized, employees must have a specified reason for refusing offers to return to work to remain eligible for unemployment benefits. Additionally, the DOL has long urged states to exercise due diligence in the administration of their UC programs so as to maintain the integrity of the system. On May 11, 2020, the DOL issued additional guidance emphasizing this point in the context of the enhanced UI benefits provided under the CARES Act.
Federal UC Compliance
To maintain the integrity of the UC System, the DOL requires states to comply with federal UC laws by preserving eligibility determination processes for UC claims. The two key requirements are: maintaining weekly certification processes and participation in the interstate benefits system. States that fail to enforce these requirements risk losing the federal support needed to operate their UC programs. States also risk losing the tax credits for employers under the Federal Unemployment Tax Act (FUTA).
Weekly Certification
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Although states have flexibility in waiving some aspects of their UI programs due to COVID-19, the weekly certification process remains mandatory. States can adjust “able to work” and “available to work” requirements but must require claimants to certify unemployment on a weekly basis. If a state suspends this process, it will be considered out of compliance with federal UC law.
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Through the weekly certification process, claimants must report any income earned while collecting UI. This information allows states to determine whether a claimant meets the definition for unemployment, and the correct amount of unemployment benefits, particularly when the claimant is working part-time or reduced hours.
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Part of this process involves employers, who are asked to certify whether a current or former employee is totally or partially unemployed upon receipt of an employee’s claim. Employers can also indicate whether the employee has been offered work and, thus, is no longer unemployed through no fault of his or her own.
Interstate Benefits System
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For employers in a state to receive up to a 90 percent tax credit against their federal unemployment tax liability under FUTA, the state must check for interstate wages.
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This involves participating in a payment arrangement based on an individual’s wages and employment received under more than one state’s UC system.
Relation to CARES Act
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The weekly certification process and check for wages in other states are required components when determining an individual’s eligibility for Pandemic Unemployment Assistance (PUA) or Pandemic Emergency Unemployment Compensation (PEUC) under the CARES Act.
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PEUC eligibility requires a determination that the claimant lacks rights to regular UC, and is able to work, available to work, and actively seeking work. Such determination is accomplished through the weekly certification process.
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PUA eligibility requires a determination that the individual is ineligible for regular UC or extended benefits, which also necessitates the weekly certification process. As PUA expires December 31, 2020, it is important to remind claimants that self-certification of lack of work as a result of COVID-19 is performed under penalty of perjury.
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A state that fails to determine eligibility of claimants risks the DOL finding that its system is inadequate and subsequent termination of their agreement to administer the CARES UC programs.
As states process high levels of UC claims while simultaneously reopening businesses, there will continue to be a heightened focus on the integrity of UC programs. Employers and employees should be aware of the DOL’s commitment to reducing UC fraud and overpayment and understand their responsibilities to provide accurate information. For employers, that means regularly verifying UC claims filed by current and former employees to correct any false information and ensure accurate benefit charges. Employees must be careful to report all earnings received during any certifying week as well as return-to-work information. Such actions will assist states as they partner with the DOL in preventing and identifying UI improper payments and fraud, and minimize employer exposure to liability.
If you have any questions regarding this Alert, please contact the authors, Julie Adams, jadams@fordharrison.com, partner in our Charlotte office, or Laura Alrutz, lalrutz@fordharrison.com, associate in our Jacksonville office. Of course you may also contact any member of the Coronavirus Taskforce or the FordHarrison attorney with whom you usually work.
FordHarrison is closely monitoring the spread of Coronavirus and associated federal and state legislation and has implemented continuity plans, including the ability to work remotely in a technologically secure environment when necessary, to ensure continuity of our operations and uninterrupted service to our clients. We are following all CDC guidelines and state and local laws as applicable. We are committed to ensuring the health and welfare of our clients, employees, and communities while continuing to provide our clients with the highest quality service. Please see our dedicated Coronavirus Taskforce and Coronavirus – CARES Act pages for the latest FH Legal Alerts and webinars on Coronavirus and workplace-related provisions of the CARES Act, as well as links to governmental and industry-specific resources for employers to obtain additional information and guidance. For more information or to be connected with a Coronavirus Taskforce or CARES Act attorney, please contact clientservice@fordharrison.com.