Employers Should Consider the EDD’s Work Share Program As an Alternative to Layoffs

Employment Law  

March 25, 2020

Downey Brand COVID-19 News and Updates

As employers navigate the economic impacts of COVID-19, they may consider participating in the Employment Development Department’s (“EDD”) Work Sharing Unemployment Insurance Program (“WSP”) as an alternative to employee layoffs.

For example, an employer that would otherwise be required to lay off 20% of its workforce could file a WSP application with the EDD to reduce its employees’ hours and payroll by 20%. The employees would be eligible to receive 20% of their weekly Unemployment Insurance benefits. This approach also helps employers by reducing the need to recruit, hire, and retrain employees (who would have otherwise been terminated) once business improves.

The WSP is flexible. Employers may determine which employees will participate, which weeks will have wage and hour reductions, and whether employees will rotate so that different employees have reduced hours and wages each week.

To participate, the employer must have experienced a reduction in production, services, or other conditions that cause it to seek an alternative to layoffs. It must also satisfy certain requirements, including but not limited to:

  • A minimum of 2 employees, comprising at least 10% of the regular workforce or a unit of the workforce, must be affected by a reduction in wages and hours worked.
  • The reduction in weekly wages and hours worked must be at least 10%, not to exceed 60%.
  • The employer must maintain employee health and retirement benefits under the same terms and conditions as prior to the reduction in hours and wages or to the same extent as for employees not participating in the WSP.
  • Employers must identify the affected work unit(s) to be covered by WSP and identify each participating employee by their full name and Social Security number.
  • Employers must notify employees in advance of the intent to participate in WSP.
  • Employers must identify how many layoffs will be avoided by participating in WSP.
  • Employers must provide the EDD with any necessary reports or documents relating to the proper conduct of WSP.

Note that there is a potential increase in a participating employer’s Unemployment Insurance tax rate. However, layoffs would have the same result if laid-off employees seek unemployment insurance. Employers should consider what makes the most economic sense for their business.

Downey Brand employment law attorneys continue to track COVID-19 issues impacting the workplace, and will be available to assist as you find solutions in this new environment. Please feel free to reach out to the Downey Brand attorney you regularly work with, or to any of the attorneys throughout our Firm.