April 08, 2020
Employment Law Alert
Employment Law Alert
The Department of Labor issued new guidance on the CARES Act, including guidance on the additional $600 weekly payment for individuals receiving state unemployment insurance and certain individuals who would otherwise be ineligible for benefits. This alert describes the CARES Act’s UI provisions and the DOL’s new guidance.
On March 27, 2020, the president signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as part of the $2 trillion stimulus package intended to stabilize the economy during the devastating coronavirus pandemic. On April 4th and April 5th, the U.S. Department of Labor (DOL) issued new guidance on the CARES Act, including guidance on the additional $600 weekly payment for individuals receiving state unemployment insurance (UI) and certain individuals who would otherwise be ineligible for benefits under their applicable state-based UI system. This alert describes the CARES Act’s UI provisions and the DOL’s new guidance.
Under the CARES Act, individuals who receive state-based unemployment payments (in accordance with state law or the CARES Act) are eligible for an additional $600 per week under the CARES Act’s Federal Pandemic Unemployment Compensation Program (FPUC). The DOL’s new guidance sets forth certain key details as to which state-based UI recipients will be eligible for these additional $600 payments and for how long.
No FPUC payments for quitters without good cause
The DOL’s new guidance emphasized that “individuals are only entitled to benefits if they are no longer working through no fault of their own and … individuals must be able and available to work.” To that end, the DOL’s guidance warns that “quitting work without good cause to obtain additional benefits under the regular UI program or the CARES Act qualifies as fraud.” Importantly, if an individual obtains benefits under the CARES Act through fraud, the individual will be ineligible for any additional benefits payments, must pay back the benefits received, and is subject to criminal prosecution under federal law. The DOL’s guidance makes very clear that any flexibilities granted to the states with respect to UI benefits and FPUC payments are limited to dealing with the impact of COVID-19.
FPUC eligibility already started
The $600 FPUC payments will be payable by each state for weeks of unemployment beginning after the date on which the state enters into the applicable agreement with the DOL to receive benefits under the CARES Act. According to a DOL news release, as of March 28, 2020, all states have executed such agreements. Therefore, the first week for which FPUC payments may be paid is the week ending April 4, 2020, or April 5, 2020, depending upon the day on which the unemployment week ends in the applicable state. All FPUC payments will cease on July 31, 2020, unless extended by Congress.
Individuals receiving $1 of unemployment benefits are eligible for the $600
Under the CARES Act, any person who is otherwise entitled under state or federal law to receive regular unemployment compensation is entitled to the additional $600 weekly FPUC payment for all weeks of total or partial unemployment, as defined by the applicable state’s law. Based on the calculation of total or partial unemployment benefits under state law, “[i]f the individual is eligible to receive at least one dollar ($1) of underlying benefits for the claimed week, the claimant will receive the full $600 FPUC.”
States may not charge employers for FPUC benefits paid
The DOL’s guidance mandates that states cannot charge employers for any FPUC benefits paid to employees in the state and that the payments cannot otherwise impact an employer’s experience rating.
The $600 FPUC payments are taxable income.
As has been widely reported, the CARES Act also provides benefits to individuals who have traditionally been ineligible for state-based UI. Through the CARES Act’s Pandemic Unemployment Assistance (PUA) program, certain individuals who are not otherwise eligible for state-based UI payments (including individuals who have exhausted their UI entitlement, independent contractors, self-employed individuals, and those with limited work history) may still be eligible for both: (1) PUA payments in an amount equivalent to what they would receive under their state-based UI program, if they were eligible, and (2) the additional $600 under the FPUC program.
To qualify for the PUA program, an individual must be unemployed, partially unemployed, or unable or unavailable to work due to one of several COVID-19-related reasons. The DOL’s guidance sets forth certain key details as to who will be eligible (and ineligible) to participate in the PUA, the amount individuals will receive through PUA, and for how long these benefits will last.
PUA payments and timeline
The weekly benefit amount that an individual will receive under the PUA is equal to the amount that the individual would have been paid as UI in the state where the individual was employed. These PUA payments are payable for all qualifying weeks from January 27, 2020, to December 31, 2020.
Additional $600 weekly payments for PUA recipients
For weeks of unemployment beginning on or after March 27, 2020, and ending on or before July 31, 2020, individuals eligible to receive PUA are also eligible to receive an additional $600 per week under the FPUC.
Who qualifies for PUA?
The PUA covers individuals who are not qualified for regular unemployment compensation, extended benefits under state or federal law, or pandemic emergency unemployment compensation, including individuals who exhausted all rights to such benefits, self-employed individuals, individuals seeking part-time employment, and individuals lacking sufficient work history. Further, to be eligible under the PUA, the individual must be unemployed, partially unemployed, or unable or unavailable to work due to one of several COVID-19-related reasons.
The DOL’s guidance provides some examples as to each of the COVID-19-related reasons that may qualify an individual for PUA under the CARES Act:
Who doesn’t qualify for PUA?
The PUA is generally not payable to individuals who have the ability to telework with pay or who are receiving paid sick leave or other paid leave benefits. However, under certain circumstances, individuals may still be eligible for PUA if they are receiving paid sick leave or other paid leave benefits for less than their customary work week or if they are teleworking for less and are being paid less than they worked prior to the COVID-19 pandemic.
Applications for FPUC benefits will be handled by the applicable state agency for the state in which the individual was employed. FPUC-eligible individuals who are already receiving state-based UI do not need to separately apply for FPUC. However, FPUC-eligible individuals who are not already receiving state-based UI will need to apply for state UI benefits and should do so as soon as possible.
Applications for PUA benefits will also be handled by the applicable state agency for the state in which the individual was employed. In several states, state agencies are already accepting applications for PUA benefits. But, in some states, the applications are not yet ready. Individuals should check their state agency’s website to determine if, and when, the agency will be accepting applications.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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