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‘Work Sharing’ Offers Lifeline to Companies Eyeing Virus Rebound

April 23, 2020, 1:13 PM

A little-used tool to avert layoffs called “work sharing” that lets employees tap into jobless benefits when their hours are reduced could gain traction when businesses gradually reopen.

Also called “short-time compensation,” the federally authorized program allows workers in at least 26 participating states to receive partial unemployment insurance to cover hours they’re no longer working instead of being laid off. The program has been used for decades to keep workers at least semi-employed during recessions.

Congress recently poured money into the program as part of the federal stimulus package, anticipating it could be used to combat layoffs amid the coronavirus pandemic. Those hopes waned as states faced a deluge of unemployment insurance claims and employers considered the administrative burdens that come with work sharing.

Nearly four weeks after the $2.2 trillion CARES Act (Public Law 116-136) was signed into law, not a single new state has tapped into federal funds to create a new work sharing program, a senior Labor Department official told Bloomberg Law. However, the number of short-time compensation claims has risen in the states where it already existed.

Interest in the program is starting to resurface now that companies and their attorneys are preparing to resume operations, but not necessarily all at once. Virginia and Kentucky are among states that have started developing new plans, opening a window for more employers to bring furloughed workers back at reduced schedules to smooth the pandemic recovery.

“The fact is that the program is not as well known as it should be,” said Sen. Jack Reed (D-R.I.), Capitol Hill’s longtime chief proponent of work sharing, in an interview. We’re going to continue to make the point that this is a very good program and over the course of the next month this might be even more attractive to some companies, as they see some demand coming back but not enough to reemploy the workforce.”

Work sharing is among the options large companies are discussing as they consider pathways to phase employees back to the job, said Roger King, senior labor and employment counsel of HR Policy Association.

“That’s one of the big pluses of the program. A lot of employer business is going to be slow to come back. Put aside the amount of business volume; there are safety issues and practical operational issues that limit how many employees come back at any given time,” said King, whose trade association exclusively represents large corporations. “It works on both ends of the discussion.”

‘Huge Lift’

States that initiate new work sharing arrangements under the relief law on a temporary basis get 50% of the pro-rated benefits reimbursed. The original 26 states with STC and those that join them by enacting permanent shared work laws would have every penny of the benefits paid by the federal government, sweetening the deal for businesses who would otherwise have to foot the costs.

Thus far, there’s been little interest.

“We, maybe, had two inquiries” from states about STC “the whole time we’ve been dealing with Covid,” said the senior DOL official. The official emphasized that states have prioritized their responsibilities of processing more than 22 million new jobless claims filed nationwide over the past month while also reprogramming their systems to start paying benefits to gig workers and a $600 supplemental check to all benefits recipients.

Many states haven’t had the bandwidth to launch work sharing from scratch, but when they do, the department stands ready to help, the official said.

“That’s all just a very huge lift in this current environment,” the official said.

Nearly 40,000 employees on shared work plans filed for pro-rated unemployment benefits in the week ending April 5, DOL reported Thursday. That’s a tiny sliver of the 12.5 million overall jobless claims filed the same week, but it’s still a 54% jump from a week earlier.

The modest uptick was driven by states and employers who already had advanced familiarity with short-time compensation before the virus.

Washington, for instance, received more than 2,000 shared work applications from employers during the one month period ending April 9, more than 30 times higher than the same period last year, state workforce agency spokesman Nick Demerice said. Nebraska also reported a significant increase, mostly in health care, social assistance, manufacturing, and retail industries, the state labor department’s spokeswoman Grace Johnson said.

California’s Employment Development Department is gearing up for a rise in applications by allowing employers to start submitting online applications in May, an EDD spokesperson said.

The program is also starting to draw interest from companies new to short time compensation.

There’s no set expiration dates for state and local stay-at-home orders, as governors review whether enough virus testing and protective equipment is available to lift the bans on public gatherings. That means businesses are struggling to determine how to phase in fluctuating staffing levels, while staying attached to enough workers who are trained and ready for full deployment at the appropriate time.

“Having an option to keep people employed at some reduced percentage of their hours and pay but having that option to quickly say, ‘OK we’re ready to go full steam here,’ I think would be important for companies,” said Carolyn Rashby, of counsel at Covington & Burling in San Francisco.

Employer Concerns

Some employers aren’t as excited after they hear about varying state eligibility laws.

“I had one client that was giddy about it and they were doing it for four people. The larger employers I’ve talked to have sort of said, ‘Eh, I don’t think so,’” said William Weissman, an attorney with Littler Mendelson in Walnut Creek, Calif. “Like so many things, it’s great in theory; it’s hard to implement in practice.”

Some states require all participating workers at a company be reduced by an identical number of hours, while other states allow for a balance of different schedules. In states such as Pennsylvania, an employer with an approved shared work plan would need to re-apply if it wants to make modifications, like moving a worker from two days to three days per week.

“Such arrangements tend to work better in certain industries, such as manufacturing, where a temporary shut down or reduction in work for a short-term, set period of time—such as for retooling a plant or performing maintenance for a two-week period—are the norm,” said George Voegele, Jr., an attorney with management-side firm Cozen O’Connor in Philadelphia.

“They do not necessarily work well when you have an open-ended crisis, where the company cannot predict its staffing needs beyond the next week or two.”

Katharine Abraham, a work share advocate and member of former President Barack Obama’s Council of Economic Advisers, says the pandemic caused business activity to cease so suddenly that the policy has had more limited utility than she initially expected.

“For businesses that are still operating, I would’ve liked to see more use of work sharing than we did,” said Abraham. “But things just moved so fast, which is why I’m now thinking about, OK, we’re going to start resuming economic activity; is there a role for work sharing there?”

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

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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