An Alternative to Laying Off Employees
The coronavirus (COVID-19) has had a disastrous effect on many small businesses that, with a reduction in business, cannot afford to keep their employees working. Many businesses are considering the use of layoffs, or outright terminations, to get their businesses through these tough economic times. But before making that critical decision, they should know that the California Employment Development Department (EDD) offers an alternative that may benefit both the business and the employees: the Unemployment Insurance (UI) Work Sharing Program.
The Work Sharing Program offers employers the opportunity to cut back on the number of hours their employees work — thereby saving money — while allowing the employees to collect partial unemployment pay for the hours lost. The employer benefits by keeping employees and not spending the money to hire and train new employees when business picks up. Employees benefit by keeping their jobs. Employers can also rotate work-sharing days among those under the plan to lessen the impact on individual employees.
Program Disadvantages
Employers must be aware of the program’s disadvantages. Employers must fill out and distribute weekly Forms DE 4581WS, Work Sharing Certification, and they will likely see an increase in their unemployment insurance rate, since employee benefits are paid from an employer’s reserve account like normal unemployment. Employers should review their latest Form DE 2088, Notice of Contribution Rates and Statement of UI Reserve Account, for information on their UI account balances.
If an employee has income from any employer other than the work-sharing employer, wages will be deducted dollar-for-dollar from Work Sharing Program benefits paid to the employee. The Work Sharing Program may not be used as a transition to a layoff.
How to Join the Program
Employers must submit a Form DE 8686, Work Sharing Unemployment Insurance Plan Application, to the EDD and agree to several conditions to qualify for the Work Sharing Program:
- The employer must reduce both the workweek and wages paid to each participating employee by at least 10% but not more than 60%;
- The reduced workweek must apply to at least 10% of the workforce or 10% of one specific department or unit (minimum of two employees; companies with only one employee generally will not qualify for work sharing);
- The plan expires either at the end of the 12th calendar month after the plan’s effective date or an earlier date agreed upon by the employer and the EDD. Employers whose work-sharing plans are expiring have 10 days from the date of expiration to renew;
- The cutback can be for only one week or any combination of weeks for up to six months (subject to renewal); and
- If a collective bargaining agreement(s) covering the affected work unit(s) is in effect, the DE 8686 must have the concurrence, in writing, of each appropriate bargaining agent.
Employees under this program may collect a percentage of unemployment benefits equal to the percent of the workweek they lost. To qualify for program benefits, participating employees must meet these criteria:
- Be regularly employed by the work-sharing employer;
- Complete a normal workweek (with no hour or wage reductions) prior to participating in the Work Sharing Program;
- Be available for all work offered by the work-sharing employer; and
- Accept any work offered by the work-sharing employer.
For more information on the Work Sharing Program, go to www.edd.ca.gov/unemployment/Work_Sharing_Program.htm.
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This article is reproduced with permission from Spidell Publishing, Inc.