The COVID-19 pandemic has forced employers and employment lawyers to brush up on the basics of unemployment law, legal terrain that in the past was largely foreign to them. Pre-COVID-19, employers did not focus on unemployment law because the time needed to learn it outweighed any potential benefit. To a certain degree that remains true.
Unemployment Insurance (UI) is a fund operated by the State of California, and unless employers contest an employee’s eligibility, they will likely have little interaction with the California Employment Development Department (EDD), which administers UI benefits.
Two new concerns brought about by the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and other COVID-related legislation, however, have required California employers to have a better understanding of how unemployment works.
The first, of course, is that with the slew of layoffs, furloughs, and reduced schedules, HR professionals have been thrust into the role of quasi-outplacement counselors, faced with daily questions about UI. Second, because of increases in benefit amounts under the CARES Act, employers are understandably concerned whether employees will decide that it makes financial sense to return to work, or if staying on unemployment is actually beneficial.
The good news is this: Although the laws are complex and changing daily, in most cases there are yes and no answers to most questions California employers have about unemployment benefits.
This e-Alert provides the answers to the most common of those questions.
Which Employees Are Eligible For UI Benefits?
To be eligible for UI benefits, an employee must show:
- he is totally or partially unemployed through no fault of his own,
- he is physically able to work,
- he is available for work,
- he is ready and willing to accept work immediately,
- he is actively looking for work, and
- he earned enough wages through a “base period” set by the State to be eligible for UI benefits (generally, at least $1,300 in the highest quarter of a preceding 12-month period – see this EDD guide for more information).
What Is The Amount of UI Benefits An Employee Can Expect To Receive?
Prior to the COVID-19 pandemic, the EDD calculated the amount of UI benefits by using a formula that corresponded to the amount of earnings an employee earned in a quarter. Those amounts ranged from $40/week for an employee earning under $949 a quarter to $450/week for an employee earning $11,674.01 or more a quarter. The EDD has detailed all UI benefit amounts in this chart.
The CARES Act dramatically increased the amounts employees could expect to receive. Under that law, some employees may be eligible for an additional $600/week between March 29, 2020 and July 31, 2020 if they are unemployed or unable to work for some specific reasons related to the COVID-19 pandemic. The specific eligibility requirements for these expanded benefits can be found here on the EDD’s website.
Are Independent Contractors Eligible For UI Benefits?
Generally, no. But there are two important exceptions.
- First, under the CARES Act, an independent contractor may be eligible to receive the $600/week federal supplemental unemployment insurance if he is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his ability to continue performing his customary work activities, and has thereby forced him to stop working.
- Second, as we have reported in the past, the EDD applies the “ABC” Test under the recently enacted A.B. 5 to determine if an employee is eligible for UI benefits. If an employee is misclassified as an independent contractor, the EDD may audit the employer’s practices to determine if others were similarly misclassified and may assess penalties and late UI contributions.
Are Furloughed Employees Eligible For UI Benefits?
Yes. The EDD considers furloughed employees to be unemployed for purposes of UI benefits.
Can Employees With Reduced Hours Receive UI Benefits?
Yes. In California, someone is considered “unemployed” if his or her regular wages are reduced through no fault of his or her own. There is a complicated formula that applies, but generally speaking, any significant reduction in hours will allow an employee to file an unemployment claim. As an employer, you have an obligation to issue a Form DE 2063, Notice of Reduced Earnings for such an employee.
Is It Beneficial For A Furloughed Employee To Remain Unemployed To Receive UI Benefits Rather Than Returning To Work?
Probably not, though this concern was raised by some Senators before passage of the CARES Act. To be eligible for unemployment benefits, an employee must show that he is available, ready, willing, and able to work. Refusing a request to return to work, unless it was somehow related to the COVID-19 pandemic, would negate those eligibility requirements.
How Do Employees File For UI Benefits?
It can all be done online on the EDD’s website: edd.ca.gov. Employees should click on the link in the middle of the page for “Claims” to start the process.
Employers should have posted this poster detailing the process and should provide these two notices (here and here) to employees who become unemployed.
When Will Employees Begin To Receive UI Benefits?
California Governor Gavin Newsom recently issued an Executive Order allowing the EDD to waive the normal one-week waiting period for UI applicants who become unemployed as a result of COVID-19. The Executive Order also relaxes the requirements on laid off, furloughed or reduced hours employee to seek work actively.
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To be sure, these are just the basics of unemployment law in California, and there are many intricacies in this complex body of law, particularly as to the calculation of UI benefits. As the COVID-19 pandemic continues to cause widespread unemployment, employers can expect the laws to change and the amount of UI benefits available to employees to fluctuate as well.
Questions about COVID-19 and the workplace? Contact the Hirschfeld Kraemer lawyer who normally provides your legal advice, or you can reach out to Dan Handman in the Los Angeles office, email@example.com, (310) 255-1820.
For additional employer-focused information about COVID-19:
Click here to see the Hirschfeld Kraemer EMPLOYER’S GUIDE TO CORONAVIRUS