COVID-19, Employee Benefits Compliance

COVID-19 is Affecting Business – Are Employee Layoffs My Only Option?

COVID-19

The Leavitt Group cares about what is happening to each of you, your employees and their families and your business.  In the wake of recent government-mandated closures, multiple business owners have been reaching for support.

Throughout the coming days and weeks, we hope to offer a calm voice of reason, help respond to common questions, and outline options and solutions to help you during this challenging time.

This installment is designed to help you navigate and balance your understandable concern for your business, compliance with benefits and employment laws, and your desire to limit any negative impact on your employees.

Frequently Asked Question – Are immediate employee layoffs my only option?   

The short answer is no. There are options to business owners that can at the same time:

  1. help protect employees
  2. safeguard cash
  3. reduce exposure to legal risk, and
  4. protect operations

Protecting Employees – Layoffs, Furloughs, Unemployment and PTO…oh my!

Laying off employees may seem like the obvious solution to protect the company, and there may be exceptions, but generally a layoff could be a poor decision for a variety of reasons and could negatively impact both short-term and long-term success.

A layoff not only lowers employee morale, it also impacts employee benefits and limits the ability a company must provide assistance. Under a layoff, impacted employees lose benefits either immediately or by the end of the month.

Consider a furlough instead of layoffs.

A furlough is a temporary unpaid leave of absence for reasons such as budget issues, a slow-down in business, or other non-discipline related issues. It can be voluntary or mandated. With a furlough, employees continue to hold/maintain their job, as though the time away were days off without pay. In this context, the word furlough could be used interchangeably with the phrase “unpaid leave”

Leave without pay allows employers to continue to provide benefits. And, in many cases, may be a better long-term solution for employers.

For more information and answers to questions about furloughs, please refer to the U.S. Department of Labor (DOL) recent FAQs found here or view the PDF.

Steps

First—If considering a furlough, first review the DOL FAQ to become familiar with common questions to make sure you are not running afoul of the rules.

Second—Review your carrier contracts and their current leave policies, benefit eligibility policies, and plan documents checking to see if amendments to any of these documents should be made. As part of your communication with the carriers, consider discussing options to manage the expense of premiums. Potential options are listed here but remember that changes to premium structure should be adopted uniformly for all furloughed employees including executives.

  1. Keep the same pay structure percentages for premiums employer/employee. Typically, the carrier agreement will allow this for at least 60 days under the written contract.
  2. Require employees to pay the full premium (employer and employee side) following the current month.
  3. Elect to cover 100% of the premium for employees on furlough.
  4. Allow employees to pay double premiums when they return to work and when payroll deductions resume.
  5. Make an offer of continuation of coverage under COBRA event based on reduction of hours and initiate the COBRA on the first day of the following month.

Third—Remember that because a furlough is like “unpaid leave” all rules relating to unpaid leave come into play. Those of you who have completed the GBS Benefits ACA 4 Step process should already have a written policy that addresses, in detail, how to respond to unpaid leave under employer shared responsibility rules. Make sure to refer to that policy and continue to follow it. For more information on this, please see the attached quick summary (Ross article we can brand)

Fourth—Don’t forget about COBRA and FMLA. The rules are the same with some potential changes on the horizon for leave policies should one of the bills being considered by Congress pass into law.

Fifth—We are hearing from many of you. Consider some of the ideas that they are implementing. Make sure to consult with your legal counsel if you have any questions or concerns about the rules and what is the best fit for you.

Balanced Furloughs  

While some companies are implementing furloughs to all employees, other companies are “balancing” furloughs among their employees to continue some work operations and share hours among employees.   

  • One plan requires one week of time off for each four weeks of duration in this healthcare challenge.  
  • With another company, employees have been allowed to work together and balance the time off. Employees who can afford to stay out longer may opt-in to a longer furlough. 

Unemployment (UE)  

Many states allow furloughed employees to qualify for unemployment.  Some employers have jumped quickly to lay off employees in order to trigger an unemployment event. We do not recommend this.  It is vital to understand that employees on furlough in most states also have the option to apply for UE benefits immediately. Please check your state laws because the final decision to approve or deny UE benefits is determined by the state.  For more information on sate unemployment, see the National Conference of state Legislatures 

Recent Federal bills have included policies to allow unemployment benefits for loss of hours due to reductions resulting from Covid-19. While none are yet law, this could offer significant relief. Be on the lookout for more information from GBS Benefits as soon as a new bill is signed into law. Until then, bills change content so much that detailing it here would be conjecture. 

PTO Donation Programs/Policies  

The Leavitt Group has published an article covering such programs 

Safeguarding Cash 

Benefits Premiums – Employees on furlough can be given the option to continue benefits through the plan (typically 60 days) while on unpaid leave. The company can require the employee to cover 100% of the premium during this time to protect cash.  

Bonuses, Retirement and Cash Incentive Programs – The company can quickly tailor these cash-driven plans to align with the global economic impact and the organizational need to guard cash.  

Balanced Furloughs – See the details above (in the Protecting Employees section) and consider an immediate plan to implement furloughs to all employees to reduce the entire payroll by 25% or more.  

Creative Operations – A restaurant client yesterday was hit by a localized shutdown. They already have plans in place for curbside delivery, Uber/Door Dash deliveries, frozen-food options and localized marketing.  

Reducing Legal Risk 

The WARN Act – Employers over 100 are regulated by the Worker Adjustment and Retraining Notification Act impacting plant closures or mass layoffs. WARN requires employers to submit to strict notice, retraining and benefits requirements when laying off, furloughing or terminating manufacturing plants. View more information on this act. 

However, there is an exception to this rule where there is an extraordinary business circumstance or natural disaster.  Legal advisors have commented that the COVID-19 virus could fall under either category. If so, the WARN Act would not apply.  

The furlough process carries much less legal risk and reduces the chance of alienating and upsetting employees. Discrimination and retaliation claims are on the rise. The risk of these claims can be reduced through a furlough program.  

Protecting Operations 

Adaptation – We have seen companies respond quickly to the COVID-19 outbreak through generosity and common sense.  Many companies quickly implemented policies to allow hardware, computers, monitors and even chairs to be taken to the homes of employees to set up impromptu office space and remote working arrangements.   

These laws are complex and can include a variety of options. Navigating all of this can be challenging. There are several bills at the federal level that have been introduced that could alleviate some concerns as well as provide relief in this unusual time.   

 

This is not intended or provided as legal or tax advice. Consult you legal professional to ensure compliance with all applicable date in this ever-changing environment.