CARES Act – What Employers Should Know (Part II): Unemployment Insurance Benefits

As businesses and employers parse the 880-page Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which President Trump signed into law on March 27, 2020, we offer this analysis of the unemployment compensation provisions in the Act. This Employment Law Commentary is part of a series addressing the employment-related provisions of the CARES Act, all of which are available at our Coronavirus (COVID-19) Resource Center.

The CARES Act builds on and partially modifies the Families First Coronavirus Response Act (“FFCRA”) enacted on March 18, 2020. As we described in our Employment Law Commentary analyzing the FFCRA, the FFCRA provides $1 billion in emergency grants for unemployment programs and auxiliary measures, like easing work search requirements and eliminating waiting time requirements for individuals to receive unemployment compensation.

The CARES Act goes much further, with three game-changing unemployment insurance components:

(1) Pandemic Unemployment Assistance, which allows states to extend unemployment benefits through December 31, 2020, to self-employed individuals, gig-economy workers, independent contractors, and others who would not be eligible otherwise; (2) Pandemic Unemployment Compensation, which provides people receiving unemployment benefits through their state programs with an additional $600 weekly benefit until July 31, 2020; and (3) Pandemic Emergency Unemployment Compensation, which allows states to provide an additional 13 weeks of unemployment assistance to workers who are unemployed due to COVID-19. The CARES Act also gives states $100 million to support work sharing programs that allow employees to receive unemployment benefits when their employers reduce their hours and wages in lieu of layoffs.

The federal government will cover not only the entire cost of these measures—allocating substantial sums to do so—but will also cover the administrative costs associated with implementing these measures.

Pandemic Unemployment Assistance

The Pandemic Unemployment Assistance provision may be the most groundbreaking unemployment insurance provision in the CARES Act. This provision extends unemployment benefits to “covered individuals” who are not ordinarily eligible for unemployment benefits, such as self-employed people, gig-economy workers, independent contractors, and people who have exhausted their regular unemployment benefits. “Covered individuals,” for purposes of Pandemic Unemployment Assistance are people who are both (1) not otherwise eligible for regular unemployment compensation under state or federal law and (2) able to self-certify that they are otherwise able to work and available for work except that they are unemployed, partially unemployed, or unable or unavailable to work because:

  • The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • A member of the individual’s household has been diagnosed with COVID-19;
  • The individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID-19;
  • A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for the individual to work;
  • The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency;
  • The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID-19 public health emergency;
  • The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19;
  • The individual has to quit his or her job as a direct result of COVID-19;
  • The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency; or
  • The individual meets any additional criteria established by the Secretary of Labor for unemployment assistance.

Employees who can telework and who otherwise are receiving paid sick leave or other paid leave are not eligible for Pandemic Unemployment Assistance. Covered individuals are eligible to receive the regular benefits they would have received if eligible under state law, plus the additional $600 per week benefit that is available to all unemployed workers under the Pandemic Unemployment Compensation provision described below. This program applies to the period beginning on or after January 27, 2020 and will be in effect until December 31, 2020. The Act also waives the usual one-week waiting period to receive benefits. Significantly, the federal government will reimburse the states the entire cost of providing these benefits.

Pandemic Unemployment Compensation

The CARES Act’s Pandemic Unemployment Assistance provision increases state law unemployment benefits by an additional $600 per week until July 31, 2020, provided the state agrees to participate in the program. The $600 federal benefit will be paid across the board, regardless of the recipient’s income. Thus, unemployed people can conceivably receive more in unemployment benefits than they earned before they became unemployed. The Act also contains measures to prevent states from trying to deduct or offset the federal payment from other types of benefits. For example, states receiving funds to distribute Pandemic Unemployment Compensation may not reduce “the amount determined under the State law” nor factor in additional compensation received by individuals through Medicaid or the Children’s Health Insurance Program. This program applies to the period starting from the date upon which a state government enters into an agreement to receive the relevant funds from the federal government.

Pandemic Emergency Unemployment Compensation

The CARES Act will also allow participating states to provide up to 13 weeks (until December 31, 2020) of unemployment benefits to individuals who: (1) have already exhausted their unemployment compensation benefits (i.e., the individual has received the maximum available under a state’s unemployment compensation laws or the individual’s right to unemployment compensation has expired); (2) do not currently qualify; and (3) are simply “able to work, available to work, and actively seeking work.” The benefit amounts will be the same as those available to individuals eligible for Pandemic Unemployment Assistance and Pandemic Unemployment Compensation (i.e., their regular weekly benefit, plus $600 increase). This program applies to the period starting from the date upon which a state government enters into an agreement to receive the relevant funds from the federal government.

More information regarding the CARES Act is available from our Coronavirus (COVID-19) Resource Center, where we discuss the CARES Act’s loan programs to provide liquidity to businesses (as well as eligibility and application processes for these); the CARES Act’s bankruptcy relief measures and financial services provisions; how the CARES Act imposes limitations on employee compensation for businesses receiving aid; the CARES Act specific tax relief provided for individuals and businesses; and, finally, the CARES Act’s impact on federal contractors.