Legal Alert

CARES Act Provides Enhanced Unemployment Compensation Benefits

by the Labor and Employment Group
March 27, 2020

Late Wednesday, March 25, 2020, the Senate voted unanimously to advance the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The House approved the bill on Friday March 27, 2020. President Trump reportedly intends to sign the bill into law immediately.

Pandemic Unemployment Assistance Program

Subtitle A of Title II of Division A of the CARES Act, entitled the Relief for Workers Affected by Coronavirus Act, creates a temporary Pandemic Unemployment Assistance program to provide payment to those not traditionally eligible for unemployment benefits who are unable to work as a direct result of COVID-19. The Act also provides enhanced benefits for all workers eligible for unemployment. Unlike the Families First Coronavirus Response Act (FFCRA), which only applies to private employers with fewer than 500 employees, the CARES Act applies to all employers regardless of size.

The Act extends coverage to workers who are self-employed, seeking part-time employment (if permitted under state law), do not have sufficient work history, or otherwise would not qualify for regular unemployment under state or federal law and become unemployed or cannot find work due to COVID-19. This provision covers independent contractors.

Covered individuals are those who are unemployed, partially unemployed, or unable to work because:

  • They have tested positive for COVID-19 or are experiencing symptoms of COVID-19 and are seeking a medical diagnosis;
  • A member of their household has been diagnosed with COVID-19;
  • They are providing care for a family or household member who has been diagnosed with COVID-19;
  • A child or other person in the household for whom they have primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of COVID-19, and such school or facility care is required for the individual to work;
  • They cannot reach the place of employment, or the place of employment is closed, because of a quarantine imposed as a direct result of a COVID-19 outbreak;
  • They were scheduled to commence employment and do not have a job or are unable to reach the job as a direct result of a COVID-19 outbreak;
  • They have become the breadwinner for a household because the head of the household has died as a direct result of COVID-19; or
  • They had to quit their job as a direct result of COVID-19.

Covered individuals will receive benefits for weeks of unemployment, partial unemployment, or inability to work caused by COVID-19 beginning on or after January 27, 2020 and ending on or before December 31, 2020, for as long as the unemployment, partial unemployment or inability to work caused by COVID-19 continues. The weekly benefit amount is equal to the amount authorized under the state law where the covered individual was employed. For self-employed individuals, the weekly benefit is calculated under 20 C.F.R. § 625.6.

Unemployment Expansion for All Eligible Workers

The Act also enhances unemployment compensation benefits for all eligible individuals – whether eligible under the expansion in the CARES Act or under applicable state law. The enhanced benefits include an additional $600 per week (even if this takes the employee above their pre-unemployment earnings level), the elimination of waiting periods (a measure many states already have taken), and an additional 13 weeks of eligibility for benefits (39 weeks in total). It is anticipated that these benefits will be carried out through agreements between each state and the federal government.
Governmental entities and non-profit organizations can be reimbursed for half of what they pay in unemployment compensation. States will be fully reimbursed for the amount of Federal Unemployment Compensation paid out, plus related administrative costs incurred by the state. While it is likely that employees of non-profit organizations and religious organizations, which may normally be exempt from state unemployment requirements, are covered by the federal expansion of benefits under the CARES Act, it is yet to be seen how states will administer those provisions.

Short-Term Compensation Program

The Act provides funding to support states that develop a “short-time compensation” program for employers that reduce hours in lieu of a layoff (but not for seasonal, temporary or intermittent employees). Many states already have so-called “work share” programs that provide for partial unemployment benefits when employers do hours reductions, or partial furloughs, in lieu of layoffs. Under such a program, employees whose hours have been reduced would receive pro-rated unemployment benefits, and the federal government would fund 100% of the costs employers incur by retaining employees at reduced hours through December 31, 2020. This is intended to provide an incentive for employers to reduce employee hours in lieu of laying off employees.
The Act provides similar enhanced benefits under the Railroad Unemployment Insurance Act.

Additional Eligibility Considerations

Employees who are able to telework with pay and those who are receiving Emergency Paid Sick Leave (EPSL) or FMLA-Public Health Emergency Leave under the FFCRA, or are receiving paid leave under an employer plan or state or local law, cannot simultaneously receive unemployment benefits under the CARES Act.

One concern for employers in essential industries, such as health care, is whether the expanded eligibility definition in the CARES Act will allow employees who are afraid to work due to fear of contracting COVID-19 to claim that they had to “quit as a direct result of COVID-19” and receive unemployment benefits, even though no health care provider has certified that they are unable to work and there is work available for them.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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