One of the oddities about the CARES Act is that it has incentivized unemployed folks to want to remain unemployed rather than return to work.
I have written about this before. Under the CARES Act, there is a provision that allows eligible persons entitled to state unemployment benefits to collect an additional $600 supplemental payment through July 31, 2020.
For many people, this supplement has resulted in a greater weekly payment than the person would earn by working. That is because when the $600 supplement is added to the state unemployment benefit, the total amount exceeds the average weekly wage for the person.
We have seen competing interests arise over the last several weeks as business owners have started to obtain access to PPP loans through a different provision of the CARES Act. In order for the business owner to obtain full available forgiveness of the loan, the owner has to retain all of his pre-COVID employees on the payroll.
As a result, employers have been calling laid-off employees back to work. And the employees have been replying, “really?” There is no incentive to return. Pay is better out of work and there is no potential exposure to a deadly virus while sitting at home.
So what can be done? Well, right now it seems as if employers can require the employees to come back for the lower pay and if the employee refuses then the employer can notify the department of labor of the employee’s refusal to return, resulting in ineligibility for continued unemployment benefits. This is what is known as an “unintended consequence.” Legislators are pretty adept at causing them when they legislate in a rush.
This was the problem a few weeks ago.
A new one is coming this week.
Governor Lamont has announced that some businesses are going to begin gradually opening up this coming Wednesday, May 20. There will be limitations on how customers are served and so workers who have not already returned will probably not be at full employment. Hours will be limited. Some workers will be recalled and others will not be. This is creating a problem for employers.
First, how does an employer decide who to bring back? In the old days, laid-off employees would be desperate for a recall so that they could get off unemployment and start collecting a full check. But these days, nobody wants to get off unemployment until July 31 goes by because unemployment is more lucrative than work.
But employers can make a return to work acceptable for employees. In Connecticut there is a program called “Shared Work” that allows employers to bring employees back to work on partial employment. As long as the employee works between ten percent and sixty percent of his pre-layoff hours, he will remain eligible for unemployment while working. And in that scenario, according to the CARES Act regulations, he will also remain eligible for the $600 supplement through July 31.
So if an employee gets called back, there is incentive to return because his total paycheck will include wages earned, partial unemployment, and the federal supplement. The total will exceed what he is receiving currently. So next week if an employee is called back to work and feels safe in doing so, he should go back. His wallet will be appreciative.