Employer Considerations When Forced to Reduce Employees’ Hours Due to COVID-19

April 8, 2020

Employer Considerations When Forced to Reduce Employees’ Hours Due to COVID-19

With the COVID-19 pandemic imposing significant financial burdens on Illinois businesses, many employers must make difficult decisions to reduce costs in order to remain in business. Although many employers are doing everything in their power to keep their employees employed, with the closure or partial closure of businesses, and a general reduction in work, many employers are unable to keep all their employees fully employed.  Therefore, it is important for employers to understand how their decisions to reduce their employees’ hours will affect their employees’ total compensation and unemployment eligibility.

Illinois Unemployment Benefits for Reduced Hours

Although the Illinois Unemployment Insurance Act (“Act”) provides benefits for employees who become unemployed through no fault of their own, the Act also provides employees whose hours have been reduced the ability to receive compensation for the reduced hours. Currently, individuals who are unemployed are provided with a weekly benefit amount (“WBA”) of 47% of their average weekly wages capped at $484 per week. Furthermore, employees whose hours have been reduced are also entitled to compensation so long as the employee’s hours are reduced to an amount that results in less than 47% of their regular wages in a particular week.

Expanded Unemployment Benefits Under CARES Act

The Pandemic Unemployment Compensation program under the CARES Act provides an additional $600 in weekly unemployment compensation to those employees receiving unemployment compensation on top of their weekly Illinois unemployment benefits. Furthermore, it appears that the $600 benefit is provided even if the recipient was not making that much at the time the employee became unemployed. Therefore, it appears from the language of the CARES Act that so long as an employee is receiving even a dollar in unemployment benefits during a benefit week, that employee qualifies for the $600 unemployment compensation under the CARES Act. Here are a few examples of how Illinois unemployment compensation combined with the Pandemic Unemployment Compensation is calculated:

  • An employee who earns on average $1,000 per week would have a WBA of $470 ($1,000 x 47%) in a week which no work is performed. If an employer cuts an employee’s hours and the employee only earns $400 per week, the employee will receive $70 in Illinois unemployment benefits, plus an additional $600 under the CARES Act for a total weekly benefit of $670, or $1,340 for two weeks.
  • If that same employee is scheduled to work one week on and one week off, that employee will receive $1,070 ($470 Illinois unemployment benefits + $600 under the CARES Act) in total unemployment benefits for the week, and will receive $1,000 in regular wages for the week worked for a total two week earnings of $2,070.
  • If that same employee has hours reduced by 50% for two weeks, the employee would earn $500 each week which is more than the WBA, and, therefore, that employee would not be eligible for Illinois unemployment benefits, or the $600 payment under the CARES Act, and would receive a total two week earnings of $1,000.

Therefore, the way in which an employer reduces its employees’ hours can greatly affect the amount its employees earn for the same amount of work. In both the second and third example above, the employee’s hours were cut by 50% over a two-week period, but the employee received $2,070 in total compensation in the second example, and only $1,000 in the third example.

The experienced attorneys at Rock Fusco & Connelly, LLC are here to help you through these trying times, so if you are in a position where you need to temporarily reduce your employees hours do not hesitate to contact us if you have questions or would like guidance. We can be reached via email at infor@rfclaw.com, or by telephone at (312) 494-1000.