The following provides our thoughts and opinions regarding the subject at hand. This should not be construed as legal advice and we recommend that you consult with an attorney to confirm the best approach consistent with the laws in your jurisdiction.
Additional legislative action is expected to be taken at the federal and state levels to provide employers with favorable options for retaining employees through loans/tax credits (note that these options might not be available for layoffs which have occurred prior to the enactment of these options). We will update this post as new information becomes available.
As the leader of a business, one of your chief concerns is the well-being and health of your employees. With many businesses’ operations being significantly impacted as a result of remediation efforts to slow the spread of COVID-19, business owners are facing the most difficult questions including, “Should I retain or lay off my employees?”
Good employees are one of the most important ingredients to any successful business, so retention of these employees through this unprecedented event will greatly help your business and our economy bounce back quickly. We have been speaking with our customers across the country and they have shared some great and creative ways to put their employees to work in light of the challenges they have faced:
Restaurant owners are bringing their dining experience to their customers by using their staff to deliver take-out food curbside or by car/bike.
Gym owners are taking the opportunity to put their employees to work by performing “Spring Cleanings” or performing virtual training sessions for gym members.
Owners in other industries are using employees with extra capacity to assist in marketing efforts by engaging with customers through social media and phone calls.
We are always impressed by the resourcefulness of SBEs and their ability to adapt to the circumstances at hand. However, we understand that this approach will not work for every business. We also know that business owners must consider if a layoff is what is best for employees in order to take advantage of unemployment benefits and to preserve the viability of their business.
Federal and state governments are working quickly to respond to the economic hardship caused by this event. States continue to update their unemployment insurance (UI) programs to take advantage of the flexibility made available by recent federal actions. Due to the nuanced nature of our states’ UI programs, owners and employees will be required to consult their states’ labor and employment departments. Here is a great source to quickly navigate to your state. Many states have a webpage dedicated to UI program updates and FAQs related to COVID-19. However, we can speak broadly about what we currently know and think:
The Family First Act, enacted on March 18, 2020, provides paid leave benefits to employees in the form of 10 days of sick leave and up to 12 weeks of family and medical leave (10 weeks of which are paid). Payments to employees under these programs will be reimbursed through refundable tax credits against employer payroll taxes.
If an employee is receiving payments under the Family First Act, the employee will generally not be eligible for benefits under a state UI program.
Many UI programs have an eligibility requirement based on a history of wages being earned in that state. If an employee has not worked long enough or earned sufficient wages in the state, they may not be eligible for UI.
Some states have UI programs that offer partial assistance to employees while continuing to work reduced hours for employers.
An indefinite layoff of your employees may have different implications to an employer than a temporary furlough.
Consider whether your employees are exempt or non-exempt under Fair Labor Standards Act.
In some states, furlough is an attractive alternative to an indefinite layoff. Notable differences between a furlough and a layoff include:
Furloughed employees are generally given a specific date or condition for when paid employment will resume. Keep in mind that furloughed employees are free to look and accept other employment while on furlough.
Furloughed employees generally retain important benefits such as health and life insurance.
Because a furlough retains the employment relationship, an employer can save on time and costs related to laying off and rehiring employees.
If you find yourself in the position of having to lay off or furlough employees, please keep the following in mind: