Work-Share Programs – A Viable Option For Employers Reducing Employee Hours Due to COVID-19

By: Daniel Finerty and Laurie Petersen

A Work‐Share Program (“program” or “plan”) is a benefit plan for which Wisconsin businesses can apply to the Unemployment Insurance Division of the Department of Workforce Development (“UI Division” or “DWD”). The program is designed to help both Wisconsin businesses and their employees by allowing businesses to tap the funds in their unemployment insurance reserve to offset wage reductions and keep employees working.

Instead of laying off workers, a qualified employer, after approval of its program application, can plan to reduce work hours across a work unit. After approval, work hour reductions can be implemented when the program becomes effective. The plan’s effective date is the Sunday of the 2nd week after approval or any Sunday after that day specified in the plan, whichever is later, and generally last for a 6-month period. Workers whose hours are uniformly reduced under the plan can receive unemployment benefits that are pro‐rated for the partial work reduction from the employer’s unemployment insurance account. As a result, a plan, once approved, can help employers avoid layoffs, mitigate the unemployment insurance reserve account impact of more dramatic workforce reductions, allow workers to remain employed and ensure employers can retain trained staff during these times of reduced business activity caused by COVID-19.

More relevant for employers may be the fact that employees working under an approved plan may be eligible to receive the $600/week recently included in the CARES Act. Even if the plan includes more than 32 hours of work or more than $500 in wages per week (both facts that would normally make an employee ineligible for unemployment insurance benefits), the employees may still be entitled to unemployment insurance benefits through an approved program. Workers eligible for at least $1 in unemployment benefits as a result of participation in an approved program, or otherwise, will likely also be eligible for the $600/week federal payment. Just this week, the Department of Workforce Development revealed that it has entered into an agreement to receive this funding from the U.S. Department of Labor. DWD expects its system modifications to be in place and able to accept the CARES Act claims by April 21, 2020, and expects to have the first checks issued around April 28, 2020. These dates are subject to change based on circumstances that arise.

A program requires an employer to apply to the UI Division, as outlined in Wis. Stat. § 108.062. To do so, the employer must certify the following conditions to meet the required elements of a work-share program, or plan. The applicant employer must:

  • Specify the work unit in which the plan will be implemented, including the affected positions, and the names of the employees filling those positions on the date of submittal. “Work unit” is defined as an operational unit of employees designated by an employer for purposes of a work-share program, which may include more than one work site.
  • Provide for inclusion of at least 10 percent of the employees in the affected work unit on the date of submittal and for initial coverage under the plan of at least 20 positions that are filled on the effective date of the work-share program. In this regard, the plan must include the greater of 20 positions or 10% of the employees in a work unit. Here are some examples:
  • If there are 20 employees in a work unit, the plan must include all 20 employees in unit;
  • If 100 employees in a work unit; the plan must include at least 20 employees in unit; and,
  • If 1000 employees in a work unit; the plan must include at least 100 employees in unit (10%).
  • Specify the period or periods when the plan will be in effect, which may not exceed a total of 6 months in any 5-year period within the same work unit.
  • Provide for apportionment of reduced working hours equitably among employees in the work-share program.
  • Exclude participation by employees who are employed on a seasonal, temporary, or intermittent basis.
  • Apply only to employees who have been engaged in employment with the employer for a period of at least 3 months on the effective date of the work-share program and who are regularly employed by the employer in that employment. A work-share program becomes effective on the later of the Sunday of the second week beginning after approval of a work-share plan or any Sunday after the effective date specified in the plan.
  • Specify the normal average hours per week worked by each employee in the work unit and the percentage reduction in the average hours of work per week worked by that employee, exclusive of overtime hours, which shall be applied in a uniform manner and which shall be at least 10% but not more than 50% of the normal hours per week of that employee.
  • Describe the manner in which requirements for maximum federal financial participation in the plan will be implemented, including a plan for giving notice, where feasible, to participating employees of changes in work schedules.
  • Provide an estimate of the number of layoffs that would occur without implementation of the plan.
  • Specify the effect on any fringe benefits provided by the employer to the employees who are included in the work-share program other than fringe benefits required by law. Generally, the employer must maintain coverage under any defined benefit or defined contribution retirement plan for employees who receive work-share benefits under the same terms and conditions as if the employees were not included in the program. In addition, the employer must maintain any health insurance coverage in place under the same terms and conditions as if the employees were not included in the program.
  • Include a statement affirming that the plan is in compliance with all employer obligations under applicable federal and state laws.
  • Indicate whether the plan includes employer-sponsored training to enhance job skills and acknowledge that the employees in the work unit may participate in training funded under the federal Workforce Innovation and Opportunity Act, 29 USC 3101 to 3361, or another federal law that enhances job skills without affecting availability for work, subject to department approval.

Generally, work-share programs that contain all the required elements must be approved by the UI Division and can be modified during that period to account for changes in business conditions. While current employer experience indicates that work-share program approval takes about a week, it is possible that additional delays may occur due to the generally increased workload being handled by the UI Division. Also, the DWD is advocating some potential statutory changes that may broaden coverage to include more significant hour reductions, perhaps, up to 60%; however, that change would require an amendment by the Legislature and approval by the Governor.

Once approved, the business’s unemployment insurance reserve account will be charged for the payments to employees for the weeks specified in the approved program, similar to unemployed workers who receive unemployment benefits. However, by contrast to laying off employees that will collect unemployment, the business keeps these employees working, realizes the economic benefit of that work, ensures that economic challenges tie the employees to the employer’s workforce and ensures an adequate cushion for employees whose hours are subject to reduction.

Notably, while an employer’s work-share program can be in effect for a total of six months in any five-year period within the same work unit, that same employer is not prohibited from and can, in fact, have multiple plans for different work units.

If approved, it is critical for employers to explain the impact of the work-share plan upon the impacted employees to ensure an understanding of what will happen. In general, the employees will receive an amount equal to the employee’s regular benefit amount multiplied by the employee’s proportionate reduction in hours worked for that week as a result of the Work-Share Program.

Employees under an approved plan do not need to register for work or conduct a work search while in the plan; thus, these employees will be further tied into the employer’s workforce by the plan. However, employees must be available for work with the employer participating in the plan, should the employer need extra hours beyond what is anticipated.

An employer is not restricted by the plan from either terminating an employee or accepting an employee’s resignation. The employee’s eligibility for UI benefits after termination or resignation will be subject to the normal analysis.

More information on Work-Share Programs can be found on the Unemployment Insurance Division website. Interested employers can complete the Work-Share Plan Application and send or fax it to the UI Division:

Address:

DWD-Unemployment Insurance
Employer Service Team
P.O. Box 7942
Madison, WI 53707

Fax:   (608) 267-1400

For more information about the benefits of Work-Share Plans, please contact your Lindner & Marsack, S.C. attorney at (414) 273-3910.

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