By Gerri Detweiler
When Congress created the Pandemic Unemployment Assistance program as part of the CARES Act, it made unemployment benefits available to the self-employed as well as certain workers who may not be able to work for a variety of coronavirus-related reasons. Pandemic Unemployment Compensation (PUC) added an additional $600 weekly payment through July 31, 2020, to certain eligible individuals who are receiving other benefits, and Pandemic Emergency Unemployment Compensation (PEUC) extends certain benefits.
All of these programs provide some welcome relief to those who qualify. But they’ve also created lots of questions from small business owners and their employees. Here, legal experts tackle questions you may be hearing from your employees or wondering about for your own business.
Please note: The opinions in this article are for informational purposes only, are general in nature, and should not be relied upon or construed as a legal opinion or legal advice. Employers and employees should consult their own attorney for advice about their specific situation.
1. What happens if my employer brings me back to work and pays me back pay for time when I was collecting unemployment?
My employer laid us off on March 19 and directed us to apply for unemployment. I got a call [from my employer] on April 17 saying they were getting the PPP (Paycheck Protection Program) loan and they may pay us on April 24. I had been on unemployment before this. We did end up getting the payment from my employer on the 24th but we have not been asked to come in and work. How do I report this on my weekly claim to unemployment? Would it be considered a severance payment? Can I still receive unemployment?
On my weekly unemployment claim there is no option for reporting this. It only asks if we worked. And on the pay stub I was sent it says the pay period was for 4/6 to 4/19 but I already filed claims for those weeks before I even knew about this. Will I have to pay my UI benefits back?
Answer from Ian Meklinsky, Partner, Fox Rothschild:
In the event your employer returns you to work and pays you “back pay” for some or all of the time you were laid off/furloughed, in most states, you are technically required to repay your unemployment compensation benefit at least with respect to the time period your employer is paying you retroactively for. With that said, states may not have the bandwidth to pursue repayment of the unemployment compensation benefits, but you should be prepared to repay.
2. What happens to workers who are brought back at reduced pay?
I’m currently on unemployment and my employer got approved for the PPP loan. He stated when the funds come in I can no longer collect unemployment (which I understand) and told me that I will be working 20 hours a week instead of 40 hours a week. I’m a server. I will not be making enough to get by. Will I still be eligible for unemployment?
Answer by Travis Hockaday, Attorney at Smith Anderson:
Workers who are working reduced hours as a direct result of COVID-19 may be eligible for unemployment benefits, and should apply if they believe that they may qualify. For instance, in North Carolina, an employee working reduced hours because of a COVID-19-related reason may still be eligible. However, according to the North Carolina Division of Employment Security, the amount of money that these employees earn while working their reduced hours could affect their weekly benefit amounts. They can earn up to 20% of their weekly benefit amount without the earnings counting against their weekly benefits; earnings over that amount are deducted from the weekly benefits. These workers must report the money they are earning on their weekly certification reports for unemployment benefits.
3. Can my employer force me to come into the workplace because they are paying us after obtaining PPP?
I’m a dental assistant and our office has been shut down except for emergencies. My employer is approved for a PPP loan. This means all of the employees will go off unemployment and she will pay us. Can the dentist make us work in the office if it is non-essential or to do menial jobs?
Answer from Ian Meklinsky:
This is a common question we are receiving from employers and employees. An employer who receives a PPP loan, if it wants the loan (either in whole or in part) forgiven, has eight weeks to spend it on otherwise eligible expenses. [NOTE: The recently enacted PPP Flexibility Act extends that period to twenty-four weeks.] As a result, many employers are having employees either return to work (state orders permitting) or are having employees not work and paying them nonetheless. This is permitted. The failure of employers to do this will result in their PPP loan not being fully forgiven.
I understand the concern of employees here, as some may be earning more on unemployment compensation—as a result of the federal unemployment insurance supplement—but employers (state orders permitting) have the right to compel employees back to work.
4. There’s not enough work at our workplace. Can my employer make me make up hours off the clock later?
Is an employer allowed to “bank” hours that you don’t work and have you pay them back later if they pay you your full 40 hour weekly amount, but you end up not working all those hours in a week because either your business is not busy enough or you can’t keep proper social distancing with your coworkers?
Answer by Travis Hockaday:
Employees must be paid for time worked.
Employees classified as exempt under the Fair Labor Standards Act (FLSA) must be paid their full, predetermined salary for any workweek in which they perform any work, regardless of the number of days or hours worked, unless a specific exception under the FLSA applies.
Employees classified as non-exempt under the FLSA must be paid at their hourly rates for all time worked, and for overtime if applicable. Non-exempt employees should not be asked, required, or permitted to work “off the clock” under any circumstances.
5. Can my employer require me to use my vacation time?
I work in accounts payable. During the last three weeks my hours have started to dwindle, and I am now only working three days a week. I have been using my personal/vacation time to compensate for the loss. My employer received the PPP. Do I have to keep using my personal time to cover lost hours?
Answer from Nick Oberheiden, Attorney & Founder of Oberheiden, P.C.:
If you are able to work and you choose not to do so, then your employer can require you to utilize vacation time that you have accrued—and your employer can place limitations on the use of vacation time that apply generally to all employees (e.g., vacation time can be subject to manager approval).
With regard to the PPP and unemployment specifically, there are really two separate issues: If you are eligible for unemployment benefits, even temporarily, then you can file for and receive unemployment. If you are not eligible for unemployment because you are still employed and “available to work” (meaning you do not have a disability or illness that prevents you from working), then your employer can require you to either work or take vacation time.
Under the Emergency Paid Sick Leave Act (EPSLA), which is a part of the Families First Coronavirus Response Act, certain employees are eligible for paid time off and they do not need to exhaust their vacation hours prior to taking paid leave under the EPSLA. This includes employees who are self-isolating following a COVID-19 diagnosis and those who are caring for their child at home because their child’s “school or place of care has been closed, or the child care provider of such child is unavailable, due to coronavirus.” There are various other laws that may potentially come into play as well, and right now employers and employees alike need to be making decisions based on the specific facts and circumstances at hand.
6. Can my employer make me do work not related to my job (including personal errands) while our workplace is closed?
Are employers who get a PPP loan allowed to use it for “free labor,” having employees do work that they might not be qualified to do? For example, if there isn’t enough work to do based on your job description, can they transport you to an off-site location to install a personal property cow fence? Or to weed their property?
Answer from Rania V. Sedhom, Managing Partner, Sedhom Law Group:
The short answer is yes, unless you are a collectively bargained employee or have an employment contract. However, if you are an at-will employee, an employer can ask you to help with personal errands and to work on matters that are unrelated to your job as long as the employer is paying you properly under the Fair Labor Standards Act and applicable state wage laws, the job is not harmful to your health, and you are capable of doing the job. Of course, the employer should not be requesting that you perform tasks unrelated to your job that may jeopardize your health.
In either case, the request needs to be reasonable. If an employee is uncomfortable with a particular task, s/he should voice her concern. Is the task demeaning? Morally or ethically repugnant? Subjecting you to health issues? Check your job description. Most descriptions have all encompassing verbiage like “and other duties as requested by your manager” or “and other duties as assigned” or something similar. This language provides flexibility to the employer.
7. I would rather stay on unemployment. Is it my choice?
I was laid off, I am now collecting unemployment (including the extra $600/week) and my employer applied for the PPP loan AFTER they laid me off. I am actually making a lot more money on unemployment, so if they get the loan and want to bring me back, am I required to take my job back?
Answer from Nick Oberheiden:
If an employee has been laid off, he or she cannot be forced to accept a “new” position with the company. However, in order to remain eligible for unemployment benefits, a former employee must be “available to work,” which means that he or she must be actively looking for employment and not suffering from a disability or other medical condition that impairs his or her ability to work. If a former employee declines an offer for a position that he or she is capable of filling, or if the company hires a replacement employee, then the former employee’s unemployment eligibility could be terminated.
It is also important for former employees to keep in mind that the additional $600 per week they may be receiving under the federal CARES Act expires on July 31, 2020. Once this expires, unemployment benefits will return to their normal below-wage level.
8. What do I do if I am self-employed, applied for unemployment benefits, and was denied?
I applied for unemployment insurance in California once the CARES Act/PUA was open to the self-employed. I was thrilled to receive a “Notice of Unemployment Insurance Award” letter in the mail, only to see that my benefit amount is $0, and it shows $0 as my wages. I know this comes from not being paid wages as a sole proprietor.
Answer from Rania V. Sedhom:
Check your application to determine whether you applied for traditional unemployment benefits (UI) or benefits under the Pandemic Unemployment Assistance (PUA). Self-employed individuals, including independent contractors, should apply for PUA (and are also eligible for the enhanced $600 weekly benefit from the federal government). A denial from UI will not affect your eligibility for PUA. Depending on when you applied, several states may not have been ready to process PUA applications. Some states were not ready until as late as April 21, 2020.
Also, self-employed individuals who have the ability to work from home or telework, or who are receiving other paid benefits, may be ineligible for PUA benefits. All PUA denials can be appealed.
The state in which you apply sets the rules for applying for PUA. For example, some states require self-employed people to file a separate application to receive benefits under the PUA program. In other states, applicants must first receive an unemployment denial before they can be considered for eligibility under the PUA program.
9. Can my employer cut benefits after getting PPP?
My employer just received the PPP loan. Now she is saying she will no longer be paying into our IRA or paying for our health insurance. Can she do this even though she used to pay for both before she received the loan?
Answer from Peter L. Frattarelli, Partner and Chair of Labor & Employment at Archer & Greiner P.C.:
Yes, in most circumstances, employers can do this, although there may be some financial consequences to the employer. First, as far as the IRA contributions, employers often make contributions to certain IRAs, and (more often), also make matching contributions to an employee’s 401(k) account. To provide these benefits, employers have to set up written “plan documents” which set the rules for these contributions, including whether and how soon an employer can stop making them.
The only possible exception would be for employees with contracts and union employees, where those contracts would determine if an employer can stop making these payments. The problem for employees is that most of these “plan documents” give the employer the discretion to decide to stop, and often with only a few days’ or even no advance notice. So, an employee can check with their employer and look at those plan documents, but in most cases, the employer can decide to stop these payments.
As far as health insurance, the answer is more murky. Again, other than union employees or employees with written contracts, employers can change how much it pays towards health insurance, or stop paying this benefit altogether without running afoul of any employee protection laws. But there are two limits to this:
First, in some cases, depending on the insurance carrier and the plan documents, those kinds of changes cannot be done during the middle of a “plan year,” but would have to wait until the open enrollment period (which occurs on different dates for each health care plan). Second, any employer subject to the Affordable Care Act, which is generally employers with more than 50 employees, may be subject to ACA financial penalties (really, taxes) for not offering the same level of health insurance. This means that other than possibly having to wait until the end of a plan year, the employer is free to make these changes and an employee does not have any legal options to change that.
The PPP as currently written does not impact this. The advantage of the PPP to employers is that this money is a loan that does not have to be repaid if the money is used for the permitted reasons. The PPP does discourage employers from bringing back employees at a lower salary, as the amount of the loan that does not have to be paid back is lowered if salaries are not at least 75% of what they were before the COVID crisis. But the amount of the PPP loan to be repaid is not affected by any changes an employer may make to IRA/401(k) contributions or health insurance.
About the Author
Known as a credit expert, my passion is making credit and financing simple. I’ve answered more than 10,000 credit questions (directly and through the news media) over the past two decades. I am education director for Nav, which gives small business owners free business and personal credit scores, and matches them to financing options. My most recent book is Finance Your Own Business: Get on the Financing Fast Track and my book Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights is available as a free Kindle ebook. I love to answer credit questions, so feel free to ask!