What the “CARES Act” Expansion of Unemployment Insurance (RWACA) means for Small Business
Note: The following is the Permanent Equity Legal Team’s analysis of the Relief For Workers Affected By Coronavirus Act (RWACA) contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is not legal advice. Consult your own legal resources before making decisions for your business.
The Relief For Workers Affected By Coronavirus Act (the RWACA) is one of the more material provisions contained in the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) signed into law on March 27, 2020. While seemingly positive on the surface, the dramatic expansion to Unemployment Insurance created by the RWACA leads to some potential perverse incentives for current employees to resign and former employees to not return. Here’s the Permanent Equity legal team’s analysis of the RWACA, set forth in Title II, Subtitle A of the CARES Act.
What Does It Do?
This RWACA seeks to expand unemployment benefit assistance for people whose employment has been impacted by COVID-19 by (i) expanding the definition of individuals eligible for assistance; (ii) increasing the amount of assistance being offered; and (iii) materially extending the amount of time that assistance can be collected.
Who Is Covered?
In addition to providing assistance to individuals who would traditionally be covered by unemployment benefits, the RWACA expands the class of “covered individuals” to include the self-employed, independent contractors, gig workers, part-time employment seekers, those who lack sufficient work history, and people who have already exhausted their unemployment benefits (i.e. individuals who are generally not eligible for unemployment insurance and benefits). In order to qualify to receive unemployment benefits under the RWACA, covered individuals must self-certify to the following:
They are “otherwise able to work” and “available for work” (within the meaning of applicable State law), but they are currently unemployed, partially unemployed, or unable to work because:
They have been diagnosed with COVID-19 or are experiencing symptoms and seeking medical diagnosis
A member of their household has been diagnosed with COVID-19
They are caring for a family member or member of their household diagnosed with COVID-19
Their child or other person such individual is responsible for is unable to attend school or other facility that is closed as a result of COVID-19 and such individual is now responsible for watching them
They are unable to reach place of employment due to quarantine as a result of COVID-19
They are under self-quarantine as advised by health care provider
They were scheduled to commence employment and do not have a job or are unable to reach the job as a direct result of COVID-19
They have to quit their job as a direct result of COVID-19
Their place of employment is closed as a direct result of the COVID–19 public health emergency; or
They meet additional criteria established by the Secretary of the Treasury.
[DOES PROVIDE BENEFITS FOR SELF-EMPLOYED]
The only exclusions from the above criteria are people who have the ability to telework with pay, or who are receiving paid sick leave or other paid leave benefits, regardless of whether that person meets any of the qualifications above.
Amount of Assistance
The assistance provided to a covered individual under the RWACA is equal to the weekly benefit amount authorized under the unemployment compensation law of the State where the covered individual was employed (subject to the Federal minimum computed under 20 CFR 625.6), PLUS an additional $600 per week for each week of unemployment ending on or before July 31, 2020.
There are 18 weeks between Monday, March 30 and Friday, July 31. That adds up to an incremental $10,800 on top of standard unemployment if a person claims to be covered.
Duration of Assistance
This expanded assistance will be available for covered individuals for weeks of unemployment caused by COVID-19 between January 27, 2020 – December 31, 2020. The total number of weeks are not to exceed 39 weeks (this number shall include any week for which the individual received regular compensation or extended benefits under any Federal or State law). Note that most State unemployment maxes out at 26 weeks. This expanded benefit would provide covered individuals with an additional 13 weeks. The Secretary of the Treasury will be providing guidance on how to receive coverage for periods of unemployment occurring after January 27, 2020 but before enactment of RWACA.
Protections Against Fraud and Overpayment
If a person knowingly makes a false statement or fails to disclose a material fact (or causes a third party to do so) in order to receive assistance to which they were not entitled, then they:
will not be eligible to receive any additional unemployment benefits under this program;
will be subject to criminal prosecution; and
may be required by his/her State to repay any amounts improperly received.
Conclusion
The RWACA is certain to help many Americans weather the economic storm being caused by COVID-19. Unfortunately, by qualifying individuals for reasons as vague as they “quit their job as a direct result of COVID-19”, its construction creates unintended incentives not only to remain unemployed for longer than necessary, but could also incent people to quit their current job in order to collect what amounts to a decent sum of money.
According to the Center on Budget and Policy Priorities, in January of 2020, the average unemployment benefits resulted in payments of $385 per week. Under the RWACA, that payment would increase to $985 per week until July 31, 2020. It is true that unemployment benefits represent only a percentage of a recipient's prior wages, but with the increase under the RWACA, it is not inconceivable that a person could now receive more with unemployment than their prior full wage. Our hope is that as the Departments of Labor and Treasury iron out how this law will be executed, they will clarify the language to ensure that only those individuals truly impacted by COVID-19 are eligible to receive benefits.
To be clear, we are in full support of offering the aid and assistance needed by so many hard-working Amercians right now. Our support also extends to those small businesses who are desperately trying to keep their doors open and could be negatively impacted by the unintended consequences of this legislation.
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