As we discussed in prior posts, the CARES Act made five significant changes to unemployment benefits in response to the COVID-19 pandemic:
- Creating Pandemic Unemployment Assistance (PUA) for individuals who were not previously eligible for unemployment benefits or who have exhausted all other forms of unemployment benefits;
- Providing individuals who exhausted regular unemployment compensation with 13 additional weeks of Pandemic Emergency Unemployment Compensation (PEUC);
- Giving all claimants through July 31, 2020, with $600 weekly in Federal Pandemic Unemployment Compensation (FPUC);
- Eliminating a one-week waiting period for benefits; and
- Promising reimbursing employers (such as governmental agencies and nonprofit employers) payment of 50% of their unemployment claims between March and December 2020.
Although the CARES Act provided good news for reimbursing employers (e.g. 50% reimbursement), it also left many important questions unanswered for such employers. For example, how would the 50% reimbursement work? Would reimbursing employers have to front the extra $600 weekly payments? Would reimbursing employers be responsible for all of the extra benefits in the CARES Act, such as PUA, PEUC, or the first week of benefits? Those questions were not addressed in subsequent guidance issued by the Department of Labor (“DOL”). On April 27, 2020, however, the DOL finally issued guidance document 18-20, which directly answered the most important issues facing reimbursing employers. Our summary of that guidance is the following:
Q: Do reimbursing employers have to pay the full value of claims before getting the 50% reimbursement?
Yes. Reimbursing employers hoped that the state would only bill them for half of a claimant’s amount, instead of billing for 100% of the amount and then providing reimbursement at a later date. According to the DOL’s guidance, however, reimbursing employers must pay the full amount due in order to be eligible for reimbursement: “Upon payment from the reimbursing employer of the amount owed in lieu of contributions, the state may reimburse the employer for up to one-half of the amount of compensation paid by the state attributable to service with the employer.” The Connecticut DOL has confirmed to us that, regardless of whether the reimbursing employer pays monthly or quarterly, the employer must pay its bill in full before reimbursement can be processed. The reimbursement will apply to all claims during that period, however, and not just COVID-related claims.
Q: The CARES Act allows for payment in lieu of a one-week waiting period. Do reimbursing employers have to pay for that first week?
No. The guidance makes clear that, because the first week is paid for through CARES Act money, reimbursing employers should not be billed for that week.
Q: The CARES Act provides an extra $600 a week to all claimants. Do reimbursing employers have to pay that extra $600 weekly?
Thankfully, the answer to this question is no. These $600 payments are fully reimbursable by the federal government, and the DOL’s guidance makes clear that these $600 payments should not be billed to reimbursing employers.
Q: What about the extra 13 weeks of PEUC, and the up to 39 weeks of PUA? Can those be billed to reimbursing employers?
No. Just like with the $600 payments and the first week’s payment, any PUA or PEUC received by a claimant formerly employed by a reimbursing employer should not be billed to that reimbursing employer.
Q: If a reimbursing employer took advantage of Connecticut’s Shared Work Program, does this guidance relieve reimbursing employers from responsibility for making payments?
No. Although the CARES Act provides federal funding for short-time compensation benefits, the DOL’s guidance states that this does not “relieve reimbursing employers of responsibility to make required payments in lieu of contributions.” Thus, if a reimbursing employer participates in the Shared Work Program, that employer must pay any charge before the employer is eligible for reimbursement from CARES Act money. In effect, this operates in the same way as regular unemployment compensation claims–in both situations, reimbursing employers do not make contributions on an ongoing basis so they must pay the full charge before being eligible for the reimbursement available under the CARES Act.
As the federal and state governments provide additional guidance on unemployment and other aspects of the CARES Act, we will continue to update employmentlawletter.com and our firm’s COVID-19 Resource Center. If you have specific questions regarding this guidance, please contact Peter Murphy.