Defying what economists had predicted due to the coronavirus’ impact on business, unemployment suddenly fell in May with 2.5M jobs added as the economy began to reopen. Then in June, another 4.8M jobs were added, and in July, another 1.8 million jobs, dropping the national unemployment rate to 10.2% (from 14.7% in April 2020). Locally, the Kansas unemployment rate was 7.2% in July and Missouri was 6.9%.
In response to the jobs report, economists at Glassdoor explained, “One powerful revelation from today’s jobs report is how swiftly U.S. job growth can bounce back once officials give employers the green light on reopening.” While businesses across the country are bouncing back into action, what about furloughed employees? Are they as eager to get back to work as business owners are to regain operations?
Not necessarily. In fact, some furloughed employees are refusing to go back to the workplace — at least for now. According to a COVID-19 Employer Flash Survey, only 32% of employers in “recall mode” are seeing considerable employee cooperation — others are being met with resistance. Of the employers in “recall mode” who have experienced resistance, 28% cited employees didn’t want to return to work because they would rather continue to receive their unemployment compensation and 26% said it was due to fear of the coronavirus.
Why Additional Federal Unemployment Benefits Are Causing Problems for Employers
As part of the CARES Act, the Federal Pandemic Unemployment Compensation (FPUC) provided individuals who qualified for regular unemployment compensation an additional $600 per week for up to four months through July 31, 2020. This compensation was on top of their regular weekly state unemployment benefit amount. While these additional funds helped many unemployed Americans stay afloat, the expanded unemployment benefits resulted in many individuals earning more money collecting unemployment compensation than they would be returning to work. This phenomenon was seen in more than 50% of the states, including Kansas and Missouri.
With millions of workers receiving expanded unemployment compensation, some business owners have said the additional $600 per week benefit has created hurdles in their reopening, citing an inability to hire workers who were earing more through unemployment benefits.
Fast forward to the end of July, when a stalemate between Republicans and Democrats resulted in the termination of additional compensation for unemployed workers. With negotiations far from a point of agreement, President Trump issued an executive order for an additional $400 per week in compensation for unemployed workers. To receive the additional federal benefit amount through the Lost Wages Assistance program, states must apply through FEMA for 75% of the total additional weekly benefit amount of $300 per week. Then states can opt to kick in the remaining 25% or $100 per week in additional aid.
States have until September 10 to apply and benefits are retroactive to August 1, 2020. For unemployed individuals to qualify for the additional benefit, they must earn a minimum of $100 per week in regular state unemployment benefits, a new caveat to receive the additional unemployment benefits under Trump's executive order.
Has the reduction in benefits resulted in fewer workers declining job offers and more individuals seeking work? It is likely too soon to tell. The August jobs report is due to be released any day. That said, the House and Senate are still in negotiations for the next stimulus plan. The House continues to push for the renewal of the additional $600 per week in federal unemployment compensation and the Senate seeks to reduce additional federal unemployment compensation to $200 per week.
If you're an employer who feels the additional unemployment compensation has negatively impacted your ability to hire and rehire workers, here's what you can do about it:
Can Workers Quit or Refuse Work and Still Keep Unemployment Benefits?
Typically, when workers quit or refuse a job offer without “good cause”, they lose their unemployment benefits. However, under the CARES Act, “good cause” has been expanded to cover COVID-19 situations (i.e., the worker or a member of the worker’s household has been diagnosed with COVID-19, the worker is in COVID-19 quarantine, the worker has a pre-existing medical condition that makes him vulnerable, or the worker must care for family members/children). Additionally, a worker can also refuse to return to work and continue to collect unemployment benefits if the employer is not in compliance with reopening guidelines and the workplace is considered unsafe. However, general fear of the coronavirus is not an acceptable reason to refuse work and continue to collect unemployment benefits.
What Can Employers Do to Incentivize Workers to Return to Work?
Having experienced resistance when calling employees back to work, employers are wondering what they can do to motivate workers to leave their unemployment benefits behind and return to work. While monetary incentives would likely work, there are other ways that may get the job done in a more cost-effective manner.
Be Open About the Consequences of Unemployment Benefits Fraud. As stated above, the CARES Act has expanded “good cause” reasons for declining a job offer, but for unemployed workers who lie, the penalty can be steep. Not only would the individual become ineligible to receive unemployment benefits, but penalties could include repayment of overpaid benefits, disqualification of unemployment compensation for a year, and civil and criminal penalties. Educating workers on the consequences of unemployment fraud may be all the motivation that’s needed to get some workers back into the workplace.
Reduce Hours/Pay to Allow Workers to Continue to Collect Unemployment Compensation. Some organizations have found by reducing pay or hours, they have been able to get employees to come back to work because they would still qualify for FPUC. Under the CARES Act, individuals who made a weekly unemployment benefits claim who qualified to receive at least one dollar of state benefits for the week being claimed received the full $600 FPUC. Under Trump's executive order, claimants must qualify for at least $100 per week in state benefits to receive the additional federal unemployment compensation.
Offer Great Benefits. While furloughed workers are likely still receiving their health benefits, for other individuals, the cost of health insurance could be significant. A job with great benefits including health, dental, vision, 401(k) and child care reimbursement would likely offset unemployment benefits.
The Opportunity May Not Always Exist. Remind the individual that right now they have a great job opportunity, but it will become more difficult to get the job they want as time passes by and more workers are rehired. With the July 31 expiration of the additional $600 per week, more workers are likely seeking jobs. Being the last one left to return to work is not a good strategy.
In the end, some employees may need a financial incentive to return to work such as hazard pay or a return-to-work bonus.
Continued Refusal to Return to Work
In some cases, workers will continue to refuse to come back to work without “good cause”. In these cases, employers should:
Document the refusal to return to work in writing;
Provide documentation to the individual detailing the penalties associated with unemployment benefit fraud;
Advise the individual your obligation to report available individuals’ refusal to work to the unemployment office;
Accept the individual’s refusal to return to work as a voluntary resignation and terminate the employment relationship.
In the case of Paycheck Protection Program loan recipients, employees who refuse to return to work must be documented in writing or the business may risk loan forgiveness.