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COVID-19: Workforce Solutions Available Through the Unemployment Insurance System and the CARES Act

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains provisions aimed at shoring up unemployment benefits for employees who have been affected by COVID-19.

 This article provides a general summary of the following:

  • The CARES Act's impact on Arizona's unemployment insurance (UI) benefits system.

  • The availability of the "Shared Work Program" as a workforce solution available to employers through Arizona's administration of its UI system.

  • The CARES Act's provisions allowing employers to defer paying certain 2020 payroll taxes for 1-2 years.

Employers facing layoff, furlough, and other workforce reduction decisions should review the information below and consult with their attorneys regarding the applicability of the options covered herein.

1. UI Benefits Summary

There is no requirement to lay off employees in order for employees to receive UI Benefits.

Arizona allows UI benefits to laid off employees and employees who have had their hours reduced. Arizona's UI benefits statute states that "[a]n individual shall be deemed 'unemployed' with respect to any week during which the individual performs no services and with respect to which no wages are payable to the individual, or with respect to any week of less than full-time work without any fault on the individual's part if the wages payable to the individual with respect to the week are less than the individual's weekly benefit amount."[1]

The weekly benefit amount.

Currently, Arizona's maximum weekly benefit amount is $240. The CARES Act provides an additional $600 per week payment to each recipient of unemployment insurance during the time they are eligible to receive state-unemployment benefits. This would raise the maximum weekly benefit amount to $840 per person in Arizona. The CARES Act also provides an additional 13 weeks of federally-funded benefits through December 31, 2020, to help those who remain unemployed after exhausting their state UI benefits.

Beginning date for expanded UI benefits.

The assistance shall be available to an individual beginning on or after January 27, 2020, through December 31, 2020.

Qualifying reasons for UI.

  • To receive UI benefits in Arizona, the Arizona Unemployment Code establishes certain bases for qualification. These bases include that an individual (1) is able to work; (2) has engaged in a systematic and sustained effort to obtain work; (3) is making job contacts; and (4) has been unemployed for waiting period of one week.[2](See the definition of "unemployed" set forth above.)

  • The qualifying reasons for UI were further expanded March 20, 2020, by Governor Ducey's Executive Order 2020-11. Specifically, the expanded qualifying reasons for UI now include (1) individuals whose employer has permanently ceased or dramatically reduced operations due to COVID-19; (2) individuals who cannot work due to a quarantine; (3) individuals that leave employment due to a risk of exposure or to care for a family member infected with COVID-19; and (4) individuals separated from work for reasons related to COVID-19.

  • The CARES Act further expands the number of qualifying reasons for unemployment providing assistance to individuals who may not be eligible for assistance under state law. Through the provision of the Act identified as the Pandemic Unemployment Assistance Program, the CARES Act provides additional COVID-19 related qualifying reasons. This expansion also includes qualification of UI-benefits for the self-employed as long as certain conditions are met.

Employers charge accounts will not be charged for COVID-19-related UI claims.

Governor Ducey's Executive Order 2020-11 provides that employers receiving UI clams due to COVID-19 reasons will not have their charge account increased. In order for this to apply, the stated reason for an employee's UI application must be due to a COVID-19 related reason (e.g., office closure due to COVID-19).

Waiver of one-week waiting period to receive benefits.

Governor Ducey's Executive Order 2020-11 waived the one week waiting period requirement existing under Arizona law to receive UI benefits.

2. Arizona's "Shared Work Program" as an Employer Resource

Employers facing a reduction in business, rather than a complete shutdown of business, may benefit from use of Arizona's unemployment "shared work program." This program allows an employer to divide the available work or hours of work among a specified group of affected employees in lieu of a layoff, and it allows the employees to receive a portion of their lost income due to the reduction from the State in the form of UI benefits. Both employers and employees win through the use of this program because it allows for continuity of operation while supplementing wages received by employees. To participate in a plan, an employer must fill out an application and become an approved shared work employer by the Arizona Department of Economic Security. The processing time for the application may take up to 15 days or longer. Therefore, employers considering this program should consult with their attorneys and advisors now and submit the application as soon as possible.

The CARES Act expressly provides funding to support existing state "short-time compensation" programs, such as Arizona's shared work program, by authorizing an additional $600 per week to be added to the existing state weekly benefit amount.

3. Payroll Tax Deferment

The CARES Act allows deferment of payroll taxes owed for 2020. Employers and self-employed individuals may defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.

Additionally, the FFCRA provides tax credits and refunds for benefits paid in accordance with the permissible reasons for leave pursuant to the FFCRA.

We encourage employers to reach out to their accountants and attorneys regarding the tax aspects of the FFCRA and CARES Act.

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[1] A.R.S. 23-621(A)
[2] A.R.S. 23-771