Labor Department Issues Guidance for States on Unemployment Eligibility of Individuals Affected by COVID-19

The U.S. Department of Labor (DOL) has issued guidance to states regarding unemployment compensation (UC) eligibility for individuals affected by the coronavirus (COVID-19) [DOL Unemployment Program Letter No. 10-20, 3/12/20].

The DOL has said that the unemployment Insurance program requires individuals to be able and available for work and to actively seek work. However, states have significant flexibility in implementing these requirements, as well as in determining the type of work that may be suitable given the individual’s circumstances. What this means is an individual may be quarantined or otherwise affected by COVID-19 but still eligible for UC, depending on state law.

The DOL provided a few scenarios that are meant to help states assess UC eligibility for individuals affected by COVID-19. An individual does not need to quit or be discharged from employment to potentially be eligible for benefits. As such, the DOL is encouraging states to review their laws in light of COVID-19’s effects.

Scenario 1. If an employer or employing unit temporarily shuts down due to COVID-19 with the expectation that the individual will return when business resumes, federal law would permit a state to treat the separation as a temporary layoff.

Scenario 2. If an individual is quarantined by a medical professional or under government direction, and the employer has instructed the individual to return to work after the quarantine is over or has not provided clear instruction to do so, federal law would also permit a state to treat the separation for the period of the quarantine as a temporary layoff.

Scenario 3. If an individual is quarantined by a medical professional under government direction or leaves employment due to a reasonable risk of exposure or infection (i.e.; self-quarantine) or to care for a family member and either does not intend to return to the employer or the employer will not allow the individual to return, federal law would permit state law to determine whether the separation is a quit or a discharge and whether the circumstances are allowable under the state’s good cause/just cause provisions.

Employer charging and trust fund impacts.
Many states do not charge individual employers for benefit costs under certain limited circumstances. If an employer’s unemployment tax rate account is charged for benefits, the result may be an employer paying a higher unemployment tax rate.

According to the DOL, when determining in the context of COVID-19 whether certain unemployment benefits should be charged to employers, states should consider how to fairly distribute the costs to employers. If states consider changing their laws to increase the availability of unemployment benefits in the context of the COVID-19 virus, they should also consider the impacts on unemployment trust fund solvency.

The DOL notes that there are currently 21 states and jurisdictions below the recommended solvency standard and only 31 states that meet the eligibility criteria for interest-free borrowing.

Eliminating the waiting week for unemployment. 
In most states, an individual who is otherwise eligible for benefits must first serve a waiting period. This is not federally required, although it is a longstanding practice in the unemployment program that may give states time to assess eligibility and deter fraud. However, to facilitate individuals’ ability to comply with quarantine orders, the DOL recommends states consider temporarily waiving such requirements.

Promotion of short-term compensation. 
The Short-Time Compensation (STC) program (or “work sharing”) helps employers avert layoffs by allowing employers with a state-approved STC plan to reduce the hours of their employees in lieu of layoffs while permitting these employees to receive payment for partial unemployment.

In the context of COVID-19, the DOL says that the STC program can be an important resource for employers whose business temporarily declines. There are currently 28 states who have enacted or amended work-sharing laws in response to changes made by Congress in the Middle Class Tax Relief and Job Creation Act of 2012. The DOL strongly urges states to consider implementing and using work sharing to avert layoffs.