“Work sharing” allows employers to reduce employee wages or hours instead of doing a layoff or furlough by reducing the hours of retained employees subject to a specific plan created by the employer. Work sharing enables employees to keep their jobs while simultaneously receiving unemployment benefits to supplement the lost income. At present, 27 states have enacted work sharing programs (oui.doleta.gov/unemploy/docs/stc_fact_sheet.pdf), though the requirements and benefits vary from state to state.
What is work sharing? Work sharing, also called “short-term compensation,” should not be confused with job sharing, which allows two part-time employees to share one full-time job. Instead, “work sharing” refers to cutting workers’ hours to avoid cutting workers’ jobs, effectively sharing the burden across employees when an employer has to scale back labor costs due to financial pressures, such as those presented by the coronavirus COVID-19 pandemic. Reducing hours instead of reducing headcount saves money, saves morale, and saves the maximum number of employees for when business levels later return to pre-emergency levels.
Essentially, a Work Sharing Plan is a vehicle through which a state can approve a company’s employees for unemployment benefits despite their continued employment. The critical advantage of this arrangement is that it ensures employees will not have their unemployment benefits denied because they remain on the payroll. Although most states are currently relaxing requirements for unemployment benefits in the COVID-19 crisis and are heavily incentivized to do so by the recent coronavirus-related federal legislation, Work Sharing Plans ensure that employee applications for unemployment benefits are not bounced because the individual remains employed, their hours were not reduced significantly enough to otherwise qualify for unemployment benefits, or because the individual is not searching for work. Depending on the state, these requirements may be ordinary criteria for unemployment benefits, even though they are in the process of being relaxed in many states because of the COVID-19 crisis, if they have not already been waived on an emergency basis.
For a practical example of how compensation works for employees in a Work Sharing Plan, consider the following: An employee normally works a 40-hour work week. The employee’s work week is reduced by eight hours, or 20 percent. If the employee had been laid off, totally unemployed, and determined eligible for unemployment compensation, let’s assume the individual would have received a weekly benefit amount of $270.00. If the employer submits a Work Sharing Plan and the plan is approved, under the plan, the employee would receive $54.00 of benefits (or 20 percent of $270) in addition to the 32 hours of wages earned from the employer.
Additionally, unemployment benefits can be available in nonconsecutive weeks for employees on a Work Sharing Plan. For example, consider an employee who normally works 40 hours in a week. While on the Work Sharing Plan, the employee’s hours are reduced to work for only 24 hours, and therefore the employee receives unemployment benefits as a result of the hours shortfall. The following week the employee could take 40 hours of vacation and not apply for unemployment benefits. The week after that, the employee could return to their schedule of 24 hours, and again receive unemployment benefits as a result of the hours shortfall.
A key value of adopting a work sharing approach is that it can blunt the blow of economic hardship for both employers and employees in a number of ways. By keeping employees on the payroll, employers can often preserve their employees’ eligibility for benefits like health insurance, provided that the individual’s work schedule involves sufficient work hours for them to continue to be eligible for coverage. Employers can also carry eligible employees by giving them employment, which makes them eligible for the paid sick leave and family and medical leave benefits under the Families First Coronavirus Response Act (“FFCRA”), through which employers receive reimbursement through payroll tax credits for these payments to employees. Retaining employees also critically keeps talent, which employers have already invested resources in developing, plugged into the company’s operations as they confront the difficult challenges of the current economic environment, and at the ready for when prior business levels resume.
There is also little downside to these programs, apart from the costs of keeping labor employed, and an employer’s unemployment insurance premium costs. Importantly, work sharing programs do not preclude employers from conducting layoffs or furloughs. For instance, an employer can later lay off individuals originally included in a Work Sharing Plan at the employer’s discretion. In adjusting to economic circumstances, an employer can simultaneously create a Work Sharing Plan for the core group of employees it is able to retain, and at the same time lay off or furlough other employees. These options give employers flexibility that is often lost with a layoff.
If an employer seeks to create a Work Sharing Plan, there are generally some basic steps to follow, which vary somewhat in each state.
- Be legally registered to conduct business in the state.
- Ensure that the reduction in hours for each employee is both above the minimum hours reduction (often 10 percent) and below the maximum hours reduction (which may range from 40 percent to 60 percent), and affects the requisite number of employees.
- If workers are unionized, obtain approval from the labor union representing the employees.
- Submit the Work Sharing Plan for approval to the designated state agency, with all required information and documentation, which will include, for example, the affected work units to be covered by the Work Sharing Plan, and, for each participating employee, their full name and Social Security Number. These submissions will facilitate approval of unemployment benefits.
- Notify employees in advance of the intent to participate in the Work Sharing Plan and obtain their consent if required under state provisions.
Links to all of the 27 state Work Sharing Program websites are here:
Arizona: des.az.gov/digital-library/shared-work, des.az.gov/services/employment/unemployment-employer/unemployment-insurance-benefits-shared-work-program-faqs
New Hampshire: nhes.nh.gov/nhworking/stay/index.htm
New Jersey: lwd.dol.state.nj.us/labor/ea/empinfo/Shared_Work.html
New York: labor.ny.gov/ui/dande/sharedwork1.shtm
Rhode Island: dlt.ri.gov/ui/ws.htm
Texas: twc.state.tx.us/businesses/shared-work, texasworkforce-wordpress-com.cdn.ampproject.org/c/s/texasworkforce.wordpress.com/2020/03/19/twc-encourages-employers-to-enroll-in-shared-work-program/amp/
An additional advantage to a Work Sharing Plan is the logistical simplicity and speed associated with implementing a Work Sharing Plan. The applications are not particularly technical, and state agencies are taking rapid action to approve them to preserve jobs and ensure ready access for employees to the unemployment compensation benefits they provide. This speed will likely only increase in coming weeks as state unemployment agencies receive funding allocated by the recently enacted FFCRA, resulting in approvals more quickly than the typical 30-day deadline in which state agencies must approve or deny a Work Sharing Plan.
The simple and efficient interim measure of obtaining approval for a Work Sharing Plan gives employers long-term options and immediate cost-savings as they decide what to do next, without having to confront the technically complicated and 60-day notice obligations many employers face through the federal WARN Act and state law equivalent statutes when pursuing a layoff, or a furlough resulting in a reduction in hours of 50 percent or more. This flexibility may prove especially valuable for the ever-changing contours of the impact the COVID-19 situation may have on business, and the fluidly evolving responses being enacted by Congress and other governmental authorities.
Blank Rome’s Coronavirus Response Task Force continues to update businesses on these and other emerging issues in the rapidly developing legal landscape for employers. Breaking updates can be viewed on our Coronavirus (“COVID-19”) Task Force page here.