Question: I run a large warehouse with over 300 employees and business has been steadily decreasing for the last five months. I need to reduce my overhead, but I don’t want to lay off my staff because most of them are loyal, long-term employees. I have talked to my accountant, and they recommend I reduce my workforce by thirty percent immediately. Do I have another option?
Answer: Yes. An employer who do not want to lay off several employees may consider and apply for the Employment Development Department’s (“EDD”) Work Sharing Program. This program is an alternative to a mass layoff. In general, an employer may cut hours and wages while the EDD pays employees partial unemployment benefits.
The EDD Work Sharing Program was established in 1978 as the first of its kind in the nation. The program enables employers to cut business costs while retaining their trained workforce for when their business rebounds. This means that employees maintain their jobs and health insurance. The drawbacks of the program include increased unemployment insurance tax rates for employers and income reduction for employees. However, layoffs could produce the same tax implications for employers, and the program prevents complete job loss for employees. Mass layoffs could also require an employer to comply with the federal Worker Adjustment and Retraining Notification (“WARN”) Act, and its California equivalent.
If an employer is interested in the program, the first step is to determine eligibility. To be eligible, an employer must: be a legally registered business in California; have at least ten percent of the employer’s regular workforce or a unit of the workforce be affected by a reduction in hours and wages; reduce the hours and wages by at least ten percent but not exceed sixty percent; provide the same health and retirement benefits as before, or meet the same standards as other employees who are not participating in work sharing; identify each participating employee in the application; and notify employees in advance of the intent to participate in the work sharing program. Other eligibility criteria can be found on the program’s website.
Second, the employer must apply for the program online or by mail. Once approved, the EDD requires that employers and employees “certify” eligibility with the EDD on a weekly basis online or by mail for continued partial unemployment payments. Certifying on a weekly basis provides the EDD with information on the hours worked and wages earned by the participant employees each week.
The work sharing plans are active for one year but can be renewed if the business is still eligible for the program. Payments by the EDD for partial unemployment benefits will end when employees are back to their regular work schedule or when employees have received all benefits available to them.
If an employer chooses layoffs instead of the work sharing program, the employer may be subject to the federal and California WARN Acts. These laws apply to covered employers who engage in a mass layoffs. Under these laws, covered employers must provide 60 days’ notice prior to the layoffs, and the notices must be provided to several individuals, including affected employees, the Local Workforce Development Board, and the chief elected official of each city and county governing where the layoffs occur.
Employers considering either the work sharing program or mass layoffs may wish to consult with their labor counsel to determine eligibility or compliance with the legal requirements.