Unemployment Compensation and COVID-19

03/18/2020 / Alexander Beeby

The COVID-19 pandemic is causing an ever-changing, difficult situation for many people. Employers are being forced to make difficult decisions affecting the lives of employees—people about whom they care deeply. As government officials attempt to respond to and mitigate the pandemic, many companies are dramatically cutting or eliminating employee hours or even entire workforces. An emergency order has shut down restaurants, bars, theaters, gyms, entertainment facilities, and more. Other industries have also stopped all non-essential services. This article provides some information and resources regarding unemployment benefits under these circumstances to assist you in making these difficult decisions.

Unemployment is a governmental safety net designed to help relieve the pain of dramatic cuts in employee hours. It is particularly suited to supporting employees who see their hours or pay impacted by the pandemic. On Monday, March 16, 2020, Minnesota Governor Walz issued an executive order that loosens the rules of unemployment for this situation—including removing some of the penalties otherwise facing employers.

Generally speaking, employees whose hours are substantially reduced or who are laid off should be eligible for unemployment benefits and should be encouraged to apply for unemployment. Unemployment does not entirely replace the employee’s pay, but it helps ease the pain. Here is a bullet-list of some of the key, additional temporary relief provided by the governor’s order:

  • The normal non-payable week before benefits set in is waived.

  • While people on unemployment are expected to look for replacement work,

    • They are not required to look for work that puts their health at risk (i.e. searching that contradicts social distancing, etc.); and

    • If the layoff or change in hours is temporary, continuing to communicate with the employer meets the requirement.

  • Individuals required to leave for quarantine, care for others, etc. can still qualify.

  • Employers are not penalized in the calculations for future unemployment tax rate as a result of pandemic-caused unemployment benefits.

  • The usual five-week benefit limitation for employers is waived.

  • Strict compliance with unemployment statutes is waived—empowering the Department of Employment and Economic Development (“DEED”) to implement the intent of the emergency order.

Employers who wish to spread hours among a group of employees to avoid a complete layoff of all employees should consider applying for the Shared Work Program available through DEED. The employer pays employees to work up to 50% of their normal hours and full benefits, and the employees receive partial unemployment benefits for the remaining hours, up to the maximum allowed. DEED must approve the employer’s plan before it can be implemented.

You may also permit employees to use their paid-time-off. They would not be eligible for unemployment while their PTO replaces their regular hours.

These conversations are among the most difficult employers face. Remember that people most remember how they were treated. Treating employees with dignity, fairness, and respect will go a long way to supporting their transition. Employers can also help relieve some of the anxiety by explaining the situation and their options—encourage them to apply for unemployment and provide resources. Being laid off is personal to the employee, show that it is personal to you too by communicating it individually, being there for the employee, and addressing their specific needs. Of course, always make sure any layoffs or hour-reductions comply with the legal requirements—nondiscriminatory selection of employees to be laid off, paying the last paycheck within the required time periods, and other applicable requirements.

Again, this is a continuously changing situation, with new emergency orders and relief packages being proposed and enacted. This post should provide some basic information, but you should make sure that you have the most up-to-date information specific to your situation as you make your decisions.

Here are some resources you might find useful in this situation: