The Shared Work Program is Another Option for Employers
One of the new programs under the CARES Act legislation is the Shared Work Program. The concept is fairly simple. Rather than furloughing or laying off an employee, an employer may instead reduce the number of hours each employee works between 10% and 40%. The Arizona Department of Economic Security (“ADES”) will then make up the loss in pay.
This FAQ from the ADES provides this helpful example of how the Program works.
A business facing a 20% reduction in production usually lays off one-fifth of its workforce. Under an approved Shared Work plan, a company could employ its total workforce by reducing the workweek to four days. This allows the employer to carry out the 20% reduction without initiating layoffs. Each employee participating in the reduction would receive a partial payment equal to 20% of his or her individual weekly UI benefit amount in addition to income for the four days of work.
If the employee was only eligible for Arizona unemployment benefits, it might not be attractive because the weekly unemployment benefit ranges from $122 to $240. The Federal Pandemic Unemployment Compensation provides an additional federal benefit of $600 per week. The additional benefits are only for a period of four months.
In other words, employees can get up to $840/week, which is equivalent to $43,680 per year, in combined state and federal unemployment benefits, assuming they are normally paid $840/week or more.
This Program therefore makes the most sense for employees who earn $43,680 per year (or less) because it would allow them to continue making the same amount of money they would normally earn through payments from their employer and the ADES. One caveat for employers is that it will affect their experience rating.
The employer must complete the Shared Work Plan Application, which is valid for one year. The completed application and list of participants needs to be submitted at least 10 days prior to the effective date. However, with the current volume of claims, it may take longer to process the application. Employers will be notified by mail of the approval of their proposed Plan.
A word of caution. Decreasing an employee’s scheduled work hours below 30 hours per week may trigger a COBRA qualifying event. If an employer is looking to keep employee’s benefits intact, and not create a COBRA event, they will need to check with their health insurance carrier, as some are waiving the 30-hour work requirement during the COVID pandemic.
About the Author: Jeff Silence is also an employment law attorney at Jaburg Wilk. He counsels employers on compliance with all employment laws including the new and complex federal laws related to COVID-19.