If you’re like most employers, you’re facing some tough choices in this economic downturn. You need to cut costs, so layoffs are in the planning stages. But once the economy bounces back, you know you’ll be scrambling to find, hire, and train qualified new workers.
You might want to consider an alternative offered by the California Employment Development Department (EDD) that can help you meet your cost-cutting needs, retain valued employees, and avoid the mad hiring dash later. It’s the Work Sharing Unemployment Insurance program, which allows certain employers to reduce employee hours while the employees collect partial unemployment insurance benefits to fill in the gap.
You can, for example, reduce the workweek for 100 employees to 4 days from 5—a 20 percent reduction in hours. The employees would be eligible to receive 20 percent of their weekly unemployment insurance benefits—and are spared the hardship of full unemployment. We’ll explain the nuts and bolts of the program.
Are You Eligible?
An employer is eligible to participate in the Work Sharing program if they have a reduction in production, services, or other conditions that causes the employer to seek an alternative to layoffs. At least two employees must participate in the plan, with a minimum reduction of 10 percent of the regular permanent work force or work unit(s), and a minimum reduction of 10 percent of the wages earned and hours worked of participating employees.
The Work Sharing Plan
The employer must submit a Work Sharing plan to the EDD for approval, using EDD form 8686, which can be obtained from the agency’s Special Claims Office or online at www.edd.ca.gov/pdf_pub_ctr/de8686.pdf. If there is a collective bargaining agreement covering the affected work unit, the plan must include the written concurrence of the union. Note that the program doesn’t extend to leased or temporary service employees.
An employer, even one that has multiple locations, can only have one Work Sharing plan. However, units at the same or different locations may be included in the Work Sharing plan. What’s more, the employer can add additional locations or units, with the EDD’s approval, to an existing Work Sharing plan.
Employers should note that all Work Sharing plans begin on a Sunday, and the earliest a plan may begin is the Sunday prior to the employer’s first contact date with the EDD. If the Work Sharing Plan Application is submitted timely—that is, within 28 days of the employer’s first contact date with the EDD—the employer chooses the effective date.
Work Sharing plans are approved for a 6-month period, and an employer that desires to continue once the original plan expires can submit a subsequent plan.
Which Employees Qualify?
To qualify for benefits under a Work Sharing program, an employee must meet these requirements for each Work Sharing week:
- The employee is regularly employed by the Work Sharing employer.
- The employee completes a normal workweek (with no hour or wage reductions) prior to participating in the Work Sharing program.
- The employee has qualifying wages in the base quarters used to establish a regular California unemployment insurance claim.
- The employee’s hours and wages have been reduced by at least 10 percent.
- The employee is available for all work offered by the employer.
- The employee accepts any work offered by the employer.
After the employer’s Work Sharing Plan Application is approved, the EDD will send the employer a supply of Work Sharing Certification forms. The employer must complete a Work Sharing Certification form for each week an employee qualifies to participate and then issue the certification to the employee. To “issue” the certificate, it must be hand-delivered, mailed, or made available to the employee at a familiar pick-up point.
Holidays and Other Rules
Here are some other parameters for the Work Sharing program:
- Holidays can’t be used as a Work Sharing day, unless the participating employee(s) in the same position performed compensated services as part of the employee(s) normal weekly hours of work on that holiday during the 12-month period prior to the employer’s participation in the Work Sharing program.
- Work Sharing can’t be used for total layoffs during holiday periods. The EDD takes the position that this would conflict with an unemployment insurance law provision which limits participation in the program to those employers who plan to reduce employees’ hours of work, in lieu of layoff, to stabilize their workforce by a sharing of the remaining work.
- Work Sharing participants must serve a one-week unpaid waiting period just like regular unemployment insurance claimants. During that week, though, all the eligibility requirements for the program must still be met.
- Work Sharing is flexible, and employees can be rotated so that different employees have reduced hours and wages each week. This flexibility allows the employer to decide which employees will participate in Work Sharing and to determine which weeks will have wage and hour reductions.
Your EDD Account
Finally, it’s important to understand how a Work Sharing plan impacts your unemployment reserve account. Work Sharing benefits are charged to the reserve account of those employers who are in the employee’s base period, in the same manner as any other unemployment insurance benefit. Charges to a reserve account tend to adversely affect the reserve account balance, which in turn increases the likelihood that the employer will have a higher unemployment insurance tax rate in future years.
To learn more about Work Sharing, go to the EDD’s website at www.edd.ca.gov, or consult the agency’s Guide for Work Sharing Employers.