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Coronavirus Unemployment Benefits: Tips for Small Businesses

Young female entrepreneur using a laptop and writing down notes while working from home at her dining tableEmergency legislation has made unemployment benefits an important financial lever for small businesses faced with closing the margin between expenses and revenues. Labor costs often make up more than half of gross sales for service businesses, so payroll is one of the first places many owners are looking to be able to manage through the COVID-19 crisis. In previous articles, we discussed how to furlough employees, how to seek payroll loans and tax credits under the CARES Act, and specific business relief programs in the DC-Maryland-Virginia region for working capital and layoff aversion

Normally, many small employers take a hands-off approach to unemployment benefits, which in Maryland is officially called “Unemployment Insurance”. Usually, unemployment benefits are available if the employee is unemployed “through no fault of their own” but rather for a reason attributable to the employer, has a recent work history, and is actively seeking work. 

Expanded Unemployment Benefits 

In the current environment, employers should be aware of important changes arising out of the CARES Act and state laws. These temporary changes can ease the pain for your valued staff until your business is back up to speed.

There are three categories of employees who are now eligible for unemployment benefits if work is not available due to COVID-19 reasons:

  • Employees who are permanently laid off for lack of work
  • Employees who are temporarily “furloughed” but are expected to return to work in the future
  • Employees whose hours of work or “FTE” are decreased, whether permanently or temporarily, because the employer does not have work for the employee to perform

The key to eligibility is that the employer does not have sufficient work for the employee to perform. In general, employees who receive a salary cut or rate of pay cut without a corresponding decrease in hours are not eligible for unemployment benefits. Similarly, unemployment benefits are not available to employees who choose not to work when work is available, whether on-site or remotely, unless the employee has “good cause”.

Key Points for Employers

Key points for employers to know now are:

  • Part-time employees are eligible for pro-rated benefits. 
  • There is no “double-dipping” for periods during which the employee is working remotely, receiving paid sick leave or receiving paid family leave.
  • Self-employed business owners are now eligible for unemployment benefits, as are independent contractors and gig workers.
  • The number of weeks paid tops out at 39 weeks and the amount of the weekly payments have increased for many claimants based on their individual circumstances. 
  • Special rules apply if a Maryland business lays off more than 25 or 50 employees.
  • No employer will see an increase in their tax rate for 2020 due to the coronavirus, COVID-19.

We recommend employers making cuts give employees links to the initial claim portal, official Coronavirus FAQs for employers and employees and official CARES Act FAQs but refrain from advising employees specifically as the complexity is far greater now than ever. Many pages on the DOL website have not yet been updated with accurate coronavirus information. 

Key Points for Employees

Key points for employees to know are:

  • File your unemployment claim on the Maryland Department of Labor initial claim portal as soon as possible and be prepared to wait several weeks for the claim to be processed. While applying by phone should be possible, the lines are busy.
  • The eligibility and payment rules are changing frequently as new laws are passed – the only sure way to find out whether you qualify and for how much is to file promptly.
  • The amount of benefits will be based on your work history for the past 18 months; include all employers and self-employment in your claim. 
  • Unemployment benefits may be available if you are out of work because your child’s school or daycare closed and you are the primary caregiver, you are advised by a health care provider to self-quarantine, and other reasons related to the COVID-19 crisis.

As always, we are here to help you navigate the challenges you face and ensure that you do not inadvertently expose your business to liability. Contact the attorneys at McMillan Metro Faerber at (301) 251-1180 for more information..