If my business has to lay off employees, will they be able to get unemployment compensation payments? How will such payments affect my business’ unemployment insurance tax rate?
After the promulgation of shelter-in-place orders by state and local governments that require many businesses to close for weeks, some businesses may be forced to lay off workers in order to manage cash flow and survive.
If a laid-off employee has accumulated paid time off, and that paid time off is available to the employee under the employer’s plan, then the employee is still considered to be receiving pay for the time period to which the paid time off applies, and the employee would not be eligible for unemployment compensation during that period.
After a lay-off, and if no paid time off is available, laid-off employees may be eligible to apply for unemployment compensation payments. Also, if an employer keeps the business open, but reduces working hours, affected employees may be eligible for partial unemployment.
Generally, workers are eligible for unemployment compensation if they have worked a sufficient period, become unemployed (or have hours reduced) through no fault of their own, are able and available for work, and actively search for work. Many states, including Texas, have also imposed a seven-day waiting period after a lay-off before unemployment compensation payments are available. However, the Texas Workforce Commission has stated that it will be waiving work search requirements for all claimants and the waiting week for those claimants affected by COVID-19. Other states have done the same. Moreover, the recently enacted CARES Act provides federal funding for payment of unemployment for the first week of unemployment benefits and further provides an additional $600 per week payment to each recipient of unemployment insurance for up to four months.
As to the recent shelter-in-place orders, if a business closes because of a closure order from a governmental entity and faces unemployment compensation claims, Texas employers can argue that the Texas Labor Code allows the employer to ask for chargeback protection against the employer’s Texas Workforce Commission unemployment compensation account. Because unemployment compensation systems are run by each state, different rules may apply in other states.
Last updated April 9
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