Many businesses that received Paycheck Protection Program (PPP) funds under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have struggled. Delays in obtaining the funds even led some companies to cut compensation and furlough their employees. Once the PPP funds came through, companies were required to make good-faith attempts to bring back furloughed employees and restore compensation to at least 75% of the payroll amounts they submitted in their PPP applications. Lots of questions related to unemployment insurance arose as a result. Here are answers to the top five we received:
- What can I do if my employees are making more money on unemployment than I can pay if they return to work?
Unemployment is a safety net meant to protect individuals who become unemployed through no fault of their own. That is the standard that should legally be applied. However, the overloaded system might keep individuals on unemployment even when they could return to work. To best protect your business, make sure that the offer to return to work is in writing and that the employee’s refusal to return is also in writing. The combined writings can be used to demonstrate your business’s good-faith attempt to bring all employees back to work. In the offer to return to work, clearly state that a refusal to return could impact the employee’s eligibility to continue receiving unemployment. Make sure your company is registered to use SIDES, the Illinois Department of Employment Security’s (IDES) tool for employers to track and respond to unemployment claims. Using the tool, you can report the refusal to return to work to help minimize your unemployment insurance rate increase.
- My business had to cut wages to stay afloat during the pandemic. Some of the affected employees are receiving unemployment. How will that affect my PPP loan forgiveness?
Illinois law allows individuals who have lost compensation to obtain unemployment benefits, but that should not impact your PPP forgiveness so long as your payroll is 75% or more of the payroll noted in your PPP application. If the pay cuts constitute more than 25% of overall payroll, you should restore your employees to a pay rate that is 75% or more of their prior rate. You may want to fully restore pay to get the greatest level of PPP loan forgiveness. You should still use the SIDES tool to record your decision.
If you decide to return employees to full pay, be mindful that the increase in payroll might not be sustainable. Be sure to notify your employees that the company is doing everything possible to support employees but might need to reinstate pay cuts or make other tough decisions if business losses continue.
- If an employee is on paid leave under the Families First Coronavirus Response Act (FFCRA) and receiving two-thirds pay, is that employee eligible for unemployment benefits? If so, are those benefits chargeable to the employer?
Because Illinois law allows individuals to receive unemployment in connection with a compensation reduction, the employee might be eligible for unemployment, in which case your company will be the chargeable employer. Because it is still unclear whether the employee’s access to benefits will affect your future unemployment tax rate, you should use the SIDES tool to contest benefits and state the basis for the reduced pay.
- Is an employee who resigns because of medical reasons still eligible for unemployment benefits? If so, are those benefits chargeable to the employer?
The employee more than likely will be eligible for benefits under Illinois law. As the chargeable employer, you should file your objection using the SIDES tool and state that the employee’s separation was due to a medical-related resignation. There is a chance that the federal government might offset any applicable unemployment tax increase.
- If employees have filed for unemployment benefits and, because of COVID-19, the company has no objection, should we respond to the Notice of Benefits Claim from IDES?
Technically, you are not required to file anything if you have no objection to the employee receiving benefits. However, filing a statement that confirms the employment separation was related to COVID-19, and thus was not simply a decision of the company, could be beneficial in terms of obtaining future government benefits.
If you have more questions about your business’s obligations in relation to the PPP and unemployment benefits, contact one of our experienced Chicago business attorneys today.