Illinois Unemployment Issues Under COVID-19: Reduction of Hours vs. Total Unemployment Presenter: Kimberly A. Ross FordHarrison LLP kross@fordharrison.com 312-960-6111 Thursday April 23, 2020 1
Unemployment in Illinois – Pre-COVID-19 • Claimants eligible for benefits only for weeks in which they meet all of the eligibility conditions and are not subject to disqualification. • Be unemployed through no fault of your own, • Have been paid $1,600 or more in wages during base period for insured work, • Have been paid at least $440 of base period wages at any time during the base period outside the calendar quarter in which claimant’s wages were highest, and • Be registered for work with Illinois Department of Employment Security (IDES). • Not getting into detailed calculations, but basically, if person has an employment history and more than just a few hours of work here and there, he will qualify. 2
Unemployment in Illinois – Pre-COVID-19 • Weekly Eligibility • Filed claim (certified) for the week as scheduled using the automated Tele-Serve system, via the Internet or as otherwise directed by IDES staff. • Served one “waiting week.” The “waiting week” is a qualifying period required by law. Benefits are not paid for this week. It is usually the first week for which claim filed. • During the week, Claimant was able to work, available for work and actively looking for work. 3
Unemployment Eligibility – Key Definitions • “Able to work” means mentally and physically capable of performing a job for which a labor market exists • “Available for work” means individual cannot impose conditions on the acceptance of work if conditions leave him/her with no reasonable prospect of work. • “Actively looking for work” means individual is making an effort that is reasonably calculated to return to work. 4
Unemployment in Illinois – Since COVID-19 • Changes under emergency rules adopted by Illinois Department of Employment Security (IDES) and through Governor Pritzker Executive Order • One week waiting period is eliminated • If temporary layoff due to business closure because of COVID-19 virus, individual could qualify for benefits as long as “able and available for” and actively seeking work. Individual would not have to register with the employment service. • Considered to be “actively seeking work” as long as prepared to return to job as soon as employer reopened. • This will hopefully discourage employee from not returning to work when work offered by employer – benefits will likely end. • Employers’ contribution rate increases with each employee who files; unknown whether relief from this will be forthcoming. 5
Quitting Job Due to COVID-19 Concerns • Generally speaking, individual who leaves work voluntarily without a good reason attributable to the employer will be disqualified from receiving UI. • Determined on case by case basis as to whether attributable to employer. • Individual generally has a duty to make a reasonable effort to work with employer to resolve whatever issues have caused individual to consider quitting. • Not getting into issues of new emergency leaves, if employer is allowed to remain open as “essential,” employee who simply does not want to go outside or to work because of COVID-19 will not likely qualify for benefits (but possible exceptions). 6
Benefits Available to Employees • Unemployment Insurance Act • Current maximum Weekly Benefit Amount (WBA): $484 • Note that maximum WBA may also be higher if employee has dependent spouse or children; however these examples will only use the situation of no dependents. ($577 with dependent spouse; $669 with dependent child/children) • Federal CARES Act • Additional $600 , with limitations • Benefits extended to 39 weeks from 26 7
Layoffs/Furloughs v. Reduction in Hours • Considerations: • What is best for your business? • Short and long term needs • Value of employees • Extent to which business allowed to stay open • Availability of loans/other benefits to small businesses • What is best for your employees? • Unemployment benefits • Continuation of medical and other benefits • Health concerns • Stability of having job 8
Caveats: Exempt vs. Non-Exempt Employees • The scenarios and calculations provided for reducing hours, either during the week or by the week, are for Fair Labor Standards Act (FLSA) non-exempt employees, or for exempt employees fully unemployed. • FLSA is the law that requires employers to pay certain/most employees overtime if they work more than 40 hours in a week. • Often confused concept. • “Hourly” and “Salaried” is NOT the same as Exempt and Non-Exempt . • “Salaried” is simply a method of calculating pay. It does not mean that if you pay a “salary,” you don’t have to pay overtime. • Whether employee is non-exempt and entitled to overtime is dependent on job duties, not method of payment and not job title. 9
What is Best for the Business? • Every business is different, with different ability to remain open (legally and from financial standpoint), with different eligibility for loans both under CARES Act and other sources, different numbers of employees, different abilities and desires to keep current employees. • This can only be decided by each individual company • Don’t tell employees they are eligible for unemployment. Up to the State of Illinois/IDES. Can advise them to file. • Every employee is different. • Some may have other jobs. Some may have dependents. • Ultimately, employer has no control. • These numbers/calculations are not exact, just a guideline. • Beware of the employee who is terminated for non-COVID-19 reasons who tries to claim benefits. 10
What is Best for Employees? • UI benefits may still be available for employees who work reduced hours. • Weekly Benefit Amount (WBA) is 47% of average weekly wages. • Average weekly wages calculated by looking at two highest quarters in Base Period and dividing by 26. • Base Period is first four quarters in last five complete calendar quarters prior to the benefit year. • Quarters are January through March, April through June, July through September, and October through December. • Example: Employee laid off March 15, 2020. Therefore, the quarters considered are July-September 2019, April to June 2019, January to March 2019, and October to December 2018. • That amount gets reduced down to 47% 11
Calculation of WBA • Example: Employee earned $11,700 and $14,300 in two highest quarters in the Base Period for total of $26,000. • $26,000 ÷ 26 = $1000 • $1000 x 47% = $470. • Therefore, WBA is $470. • Employees (generally) earning $1030/week or more will max out at $484. • WARNING! ALL NUMBERS IN THE FOLLOWING CALCULATIONS ARE APPROXIMATE AND FINAL DETERMINATIONS ARE MADE BY IDES!! THESE ARE FOR ESTIMATED ILLUSTRATIONS ONLY!! 12
Calculations for Reduced Hours – Illinois Law Whether employee receives UC benefits for reduced hours is all about the math, algebra to be exact! • If the employee’s hours are reduced to an amount that results in pay of more than 70.5% of his/her regular wages in a particular week, that employee will not be considered unemployed (that week) and will not be entitled to any UC. • If employee’s hours are reduced to an amount that would result in pay of less than 70.5% of his/her regular wages in a particular week, employee may be considered underemployed and may (generally*) be entitled to UC. • *Note that certain other payments can result in a different conclusion, such as receipt of payment for accrued paid time off, paid sick leave, pension, separation pay as part of RIF, or work at another employer. Again, these are general estimates, not exact. • Note also that these calculations apply to employees who don’t max out WBA (i.e. earning less than $1030/wk) 13
Calculations for Reduced Hours • Now to show the work: • “Magic” numbers: • 23.5% • 70.5% • Here’s why: 820 ILCS 405/402. Reduced Weekly Benefits • Eligible individuals are paid their WBA, minus the “ part of wages (if any) payable to him with respect to such week which is in excess of 50% of his weekly benefit amount …” Translation: • If the individual earns less than 50% of his WBA, he/she will receive his/her full WBA plus the wages earned. (50% of WBA = 23.5% of average weekly earnings) (assuming no other deductions) • If the individual earns more than 50% of WBA, he/she may or may not receive a reduced WBA (examples to follow) 14
Calculations for Hours Reduction During the Week The following scenarios do not consider the CARES Act (covered later), or an increased benefit amount for dependents, or a reduction for any other payment such as vacation. • Scenario 1: Employee earns an average of $1000 per week. WBA would be $470 (47% of $1000) in a week in which no work is performed. • If employee is reduced to two (2) days per week (or the equivalent part-time work of 16 hours), and is thus earning $400 that week, here’s the formula: • 50% of WBA = $235 • $400 is more than 50% of WBA • $400 - $235 = $165 • $470 WBA - $165 reduction = WBA of $305 • Therefore, WBA that week is $305, plus earnings of $400 = $705 15
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