An Offer He Can't Refuse: How Employers Can Navigate Unemployment Woes
While Memorial Day usually marks the "unofficial start of summer," this year the sentiment was quite different as we faced the lingering effect of stay-at-home orders. Instead of backyard barbecues or a holiday weekend trip "down the shore," the long weekend was spent semi-isolated, and if you are a small business owner, it was likely spent thinking about how to manage the next month of COVID-19 related business closures and restrictions.
In April, many small business owners saw the Paycheck Protection Program (or "PPP") loans as the answer to their COVID-19 worries. However, May demonstrated that the PPP (like most government programs) presented more questions than it answered. Out of these questions, the most frustrating for small business owners is this: "How do I protect my employees' paychecks if my employees don't want to come back to work?"
This question arose because many employees who lost their jobs due to the effects of COVID-19 actually make more money on unemployment than if they went back to work with the current restrictions and limitations in place. Some employers are also feeling guilt and regret over asking employees to come back to work, knowing they may make substantially less. As employers attempt to weather this phase and make decisions about what is best for their business, consider the following:
In Pennsylvania, the Unemployment system is set out in a statute (See 43 Pa. Stat. Ann. §§ 751-919), and contains numerous provisions. Most relevant are a set of provisions that address when an individual is eligible to receive unemployment benefits, or more specifically, when someone who is receiving benefits becomes ineligible.
One situation where an eligible individual might become ineligible to receive benefits is when the person is offered "suitable work," but rejects the offer "without good cause." (See 43 Pa. Stat. Ann. § 802). "Suitable work" is given a very broad meaning, and will generally cover situations where the previous employer is offering the employee their job back at the same or a similar rate of pay (See Big Mountain Imaging v. Unemployment Comp. Bd. of Review). While "good cause" for rejecting the offer of employment is normally a little harder to define, to address today's circumstances, the Pennsylvania government advised that "[d]uring the current COVID-19 pandemic, examples of good cause may include: an employer violates the Governor's and Secretary of Health's business closure orders and opens their business prematurely, or the person is at high risk of complications from the virus and their employer cannot make reasonable accommodations for them."
Therefore, pre-pandemic an employee had to accept an offer of employment or risk losing their unemployment benefits, but the rules are no longer as black-and-white as they once were. PPP's restrictions and limitations add further confusion. As a recipient of PPP funds, employers must use 75% of the funds received towards payroll for eight weeks in order for the entire loan to be forgiven. They must also report to the state unemployment office within 30 days any rejection by an employee of a good faith offer to return to work at the same pay and hours as before they were laid off or furloughed. If you are an employer and unsure about the proper course of action, you are not alone.
Employers should be offering their employees suitable and safe employment. The definition of suitable means different things depending on the industry, for example a suitable service position will look different than one in most other industries. While certain employees can work from home, others must "be in the building" interacting with the public in order to fulfill their job responsibilities. Before you re-open or offer employment to your employees, think through each of the positions, their respective job responsibilities, and ways you can make each of the employees in those positions safe.
It is also important to note that you must be offering true employment. Some employers have asked employees to return but not to actually work - paying each employee a lump sum weekly for eight weeks to satisfy the 75% payroll condition in order to keep the 25% remainder without having to pay back any of the funds received. If this behavior is ever scrutinized by a court or the federal government, it is likely that this could be considered to be fraud on the part of the employer. Accordingly, make sure your offers of employment are legitimate and not a means to skirt certain PPP conditions.
As much as feasibly possible, employers should make offers of employment formal and concrete, and explain to employees their business plan during times of restriction. Many employees are truly concerned about the business's ability to weather these times and the longevity of any potential offers of employment. Try to honestly address both when speaking to your employees. Even if you cannot make assurances past the eighth week, employees who see that their employers are earnestly concerned about them and have a well-thought out re-opening plan will be more likely to return - even if that means accepting less money in the interim.
Operating a business after restrictions are lifted means following relevant government (CDC, Pennsylvania, New Jersey) guidelines. Recall that one of Pennsylvania's cited reasons for "good cause" rejection of an offer is when the employer is not following government guidelines. To make sure you are following these guidelines, the best thing you can do is research and plan. Take some time and read through the relevant guidelines, and then take some more time to draft as comprehensive a plan as possible, which you could include in your offer to your employees. Doing so will demonstrate two things: (1) you are serious about getting your employees back to work; and (2) you care about your employees.
The next couple of months will be stressful and uncertain. Developing a game plan now by asking yourself some important questions will set yourself and your business up for success as we begin to re-open. Remember that an employee generally has to accept an offer of employment that is suitable, or risk losing unemployment benefits, unless the rejection is for good cause. Developing a detailed plan for reopening will help you craft employment offers that will be viewed as suitable and help you prevent rejection from being viewed as for good cause.
We are all hopeful that by Labor Day we will be back to barbeques and boardwalks. Until then, keep yourself, your business, and your employees safe and healthy.