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Businesses Can’t Reach Consensus on Extending Extra Jobless Aid

July 31, 2020, 9:01 AM

The business lobby and management attorneys are divided over the best way to narrow the federal boost to unemployment insurance, just like Senate Republicans.

Generally, employers looking to scale-up operations want Congress to replace the $600 weekly benefits supplement that officially expires Friday with a less-generous amount to ensure people aren’t disincentivized from seeking work because they earn more on unemployment. But precisely how to accomplish that is where the management position breaks down into a complex, employer-specific debate about which of the proposals lawmakers are discussing is most workable.

“No consensus. No position. Mess,” a prominent Republican lobbyist for management said, referring to the business community.

The complicated how-to is a source of disunity among GOP senators and White House officials who are struggling to break an impasse with Democrats over how to handle expanded unemployment benefits in the next round of virus-relief legislation.

Some businesses would prefer to maintain a flat supplement in the $200-$400-per-week range because of its one-size-fits-all simplicity. This would entail easier math and more nationwide consistency for multistate employers, without the risk of lengthy processing delays from state agencies that may jeopardize their employees’ ability to make ends meet.

Others, particularly businesses paying lower wages or with part-time employees, tend to believe the wiser approach is to transition state unemployment processing to a model based on a percentage of a workers’ past earnings—as Senate GOP leadership proposed July 27. That’s because employers would have more flexibility to adjust schedules to meet demand, and it would eliminate the chance that low-earners would get more money from even a more modest supplement.

“It’s just a difficult dilemma. It’s hard to handicap whether one is better than the other,” said Bob Robenalt, who represents employers as a partner at management-side law firm Fisher Phillips in Columbus, Ohio.

Workers unable to find jobs due to the dangers of Covid-19 infection have the most at stake—they’ll start receiving significantly downsized unemployment checks next week, unless lawmakers and the administration reach a breakthrough deal. But the waiting game is painful for businesses, too.

“Many employers both large and small are waiting to see how the unemployment issue is resolved to determine when and how to bring back workers,” said Ashley Cuttino, who leads the unemployment response team at management firm Ogletree Deakins. “For some employers it impacts if they will return employees on a full-time or part-time basis.”

Employer positions vary depending on factors such as industry salary range, the business’s stage of reopening, and worker scheduling considerations. Geographic factors also add complexity, including local cost-of-living and the broad spectrum of state unemployment compensation laws.

Wage Replacement Uncertainty

Senate Republicans propose slashing extra weekly payments to $200 for two months, before converting to a formula based on 70% of workers’ past wages capped at $500 when combined with regular state unemployment compensation. Democratic leaders and worker advocates continue to call for the across-the-board $600 payments to be renewed into January.

And in the aftermath of bipartisan talks reaching an impasse July 29, Sen. Mitt Romney (R-Utah) introduced an alternative proposal that would give states two options on how to extend the bonus benefits.

The concept of calculating extra unemployment insurance based on past earnings would offer larger, multistate corporations more options to customize phased worker call-back plans by locality, management lawyers said. This model also comes with inherent obstacles that force even its supporters to question its viability.

“The across-the-board number has a different impact in California versus South Carolina because of our cost of living, because of our base salaries,” said Cuttino, who practices out of Greenville, S.C. “This means a reduction to a percentage would be better and the fairest way to do it across the country—if it can be administratively done by the employment agency.”

Even a $200-per-week boost in unemployment may pay people more to remain on unemployment, especially in low-income areas or in the case of part-time workers, she said. But Cuttino acknowledged it might be too difficult for states to convert their IT systems to an individualized model—invoking the primary reason state workforce agencies have advised Congress to keep the supplement at a flat number.

The Republican proposal seeks to address the burden on states by giving them two months of lead time to reprogram their systems for 70% wage replacement. Plus, states that aren’t ready to launch the individualized model after two months would be able to apply to the labor secretary for a waiver granting them two additional months.

Scheduling Concerns

Alex Meier, an attorney at Seyfarth Shaw in Atlanta, has been helping businesses target scheduling so employees can return at limited hours, but without exceeding their state’s earnings cap to remain eligible for partial unemployment benefits. This requires constant monitoring of hours.

Regardless of the state, if a worker qualifies for at least $1 of unemployment, they’d also be eligible for the $600 federal sweetener under the expiring supplement. Businesses are motivated to adjust schedules with this in mind out of recognition that the boosted benefits help their employees meet basic living expenses for a period when employers can only afford to offer minimal hours, Meier said.

“A wage-replacement-based system would be better for matching scheduling needs of employers when you have a reduced demand,” he added. This would give employers more flexibility to tailor scheduling to customer demand, with less concern about rendering workers ineligible for partial benefits and the supplement.

Still, Meier said that while wage replacement would be best in theory, the challenges it would create for state unemployment systems—with great variation in states’ logistical capabilities and readiness—might make it too unwieldy for employers as well. A fixed weekly bonus would allow companies operating in multiple states to form a consistent staffing strategy instead of having to deviate according to each state’s individual plan.

“I honestly think that certainty would be appreciated over almost anything else right now,” he said.

Some business lobbyists have floated the idea of a $300-$400 weekly boost as a reasonable compromise, while others say a gradual switch to wage replacement is the only way to remove the incentive for some workers to remain on unemployment.

Glenn Spencer, who heads the employment policy division at the U.S. Chamber of Commerce, said it may not make a difference for some businesses.

“Whether it’s a percentage or a flat rate, they’re less concerned about that than they are about ensuring that you’re not getting more on UI than you would if you were working,” Spencer said.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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