On March 13, 2020, and effective retroactively to March 1, 2020, President Trump declared a major disaster due to the widespread occurrence of COVID-19 in the US urging all states to make emergency declarations.

Disaster unemployment assistance is not technically available under the Stafford Act

Typically, when the President declares a major disaster that is eligible for public and private assistance, it is usually in response to a request by a state's governor because a major disaster occurred within the state. When this occurs, disaster unemployment assistance (DUI), provided under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Public Law 93-288, as amended, becomes available to affected workers within the state who are ineligible to collect state unemployment insurance (UI) benefits through the normal state UI benefit process.

According to the federal government's benefits.gov website, to qualify for DUA, a worker's employment or self-employment must have been lost or interrupted as a direct result of a major disaster declared by the President of the United States. The worker must have been determined not otherwise eligible for regular state UI benefits under any state or federal law.

DUA payments are made to an unemployed worker who as a direct result of a presidentially declared major disaster:

• No longer has a job
• Is unable to reach their place of work
• Cannot work due to damage to the place of work
• Becomes the head of the household and is seeking work because former head of household died because of the disaster
• Cannot work because of a disaster-incurred injury

DUA is not clearly appropriate for the COVID-19 health emergency because the President's declaration does not meet the definition of a "major disaster" under the Stafford Act, as follows:

"Major disaster" means any natural catastrophe (including any hurricane, tornado, storm, high water, wind driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this Act to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby." (United States Code, Title 42. The Public Health and Welfare, Chapter 68. Disaster Relief, Section 102(2).)

The Stafford Act shows the following requirements for DUA to go into effect:

Benefit Assistance — The President is authorized to provide to any individual unemployed as a result of a major disaster such benefit assistance as he deems appropriate while such individual is unemployed for the weeks of such unemployment with respect to which the individual is not entitled to any other unemployment compensation (as that term is defined in [the Internal Revenue Code of 1986, 26 U.S.C. Section 85(b)]) or a waiting period credit. Such assistance as the President shall provide shall be available to an individual if the individual's unemployment caused by the major disaster continues or until the individual is reemployed in a suitable position, but no longer than 26 weeks after the major disaster is declared. Such assistance for a week of unemployment shall not exceed the maximum weekly amount authorized under the unemployment compensation law of the State in which the disaster occurred. The President is directed to provide such assistance through agreements with States which, in his judgment, have an adequate system for administering such assistance through existing State agencies. (United States Code, Title 42. The Public Health and Welfare, Chapter 68. Disaster Relief, Section 401(a).)

However, per an official at the US Department of Labor, Employment & Training Administration, although the current national emergency/disaster does not fit the requirement exactly for the issuance of DUA, it is the Department's intent to activate DUA. Agency officials are now meeting to determine how DUA could still be activated and plan to provide notice of their plan on the Department's website in the next several days.

The DOL official acknowledged that the purpose of the Department's guidance (see below) provided to the states regarding how to provide flexibility in their UI benefit requirements was to allow workers to collect regular state UI benefits under the unique circumstances caused by COVID-19. Likewise, it is the intent of the Emergency Unemployment Insurance Stabilization and Access Act of 2020 (under HR 6201, theFamilies First Coronavirus Response Act, signed into law by President Trump on March 18, 2020) to provide grants to states that ease their UI benefit requirements to allow workers to collect UI benefits. These special state benefits funded by federal grants under HR 6201 provides a work around to the DUA program.

After passage of HR 6201, the Senate issued a letter to the state governors and head of workforce development agencies urging them to implement the changes to state UI law, regulations and procedures provided for under the Act to allow workers not typically eligible for state UI benefits to collect UI benefits during the COVID-19 crisis. The letter also urged Congress to pass pending legislation, the Pandemic Unemployment Assistance Act that would allow independent contractors and other "gig" workers to receive DUA benefits. According to the letter:

We are also especially concerned about the hardships facing workers who do not meet the eligibility requirements for unemployment benefits, including so-called "gig workers" or other non-traditional workers that generally receive 1099 income as either a primary or secondary source of earnings. Many of these workers are not eligible for unemployment insurance, paid leave, sick leave, and other benefits that traditional, full-time workers typically receive from their employers, as well as workers who earn a large share of their incomes from tips. We continue to push for passage of Senator Wyden and Senator Peters' Pandemic Unemployment Assistance Act, which is modeled on the Disaster Unemployment Assistance (DUA) program and would ensure that gig workers and contractors are covered. However, given the severity of the crisis, we ask you to do whatever is possible to extend support to workers who do not fit into the usual framework of unemployment compensation. It is critical that there be no delay in using your existing authorities to support these workers to the greatest extent possible.

US DOL flexibility in UI law guidance

The US Department of Labor announced that federal law has the flexibility to allow states to pass legislation or amend regulations that would allow workers affected by the COVID-19 to collect state unemployment insurance (UI) benefits under certain circumstances.

The announcement specifies that federal law allows states to pay UI benefits where: (1) An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; (2) An individual is quarantined with the expectation of returning to work after the quarantine is over; and (3) An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit to receive UI benefits due to the impact of COVID-19.

The announcement notes, however, that a worker receiving paid sick leave or paid family leave would not be eligible for UI benefits because the worker is still receiving pay and is not considered to be unemployed.

"President Trump has made the safety, security, and health of the American people his top priority. The Administration is using all available tools to decrease the risk of coronavirus in the United States and to assist workers who may be affected," stated Secretary of Labor Eugene Scalia. "Under the guidance issued today, states have greater assurance about the circumstances in which they are authorized to extend unemployment insurance benefits to Americans whose employment has been disrupted by coronavirus."

The Department issued Unemployment Insurance Program Letter No. 10-20 to assist state workforce agencies in implementing UI benefit law and regulation changes due to COVID-19.

UI provisions under HR 6201

The Emergency Unemployment Insurance Stabilization and Access Act of 2020 (under HR 6201, theFamilies First Coronavirus Response Act, signed into law by President Trump on March 18, 2020) to provide grants to states that ease their UI benefit requirements to allow workers not eligible for regular state UI benefits to collect UI benefits during the COVID-crisis.

The Act provides as much as $1 billion for emergency transfers to states in fiscal 2020 to process and pay UI benefits. Individuals in states with rising unemployment can qualify for an additional 13 weeks (20 in some states) for unemployment benefits. States must meet certain stringent criteria to be eligible for federal grants under this provision, including the requirement that the benefits not be chargeable to employer accounts. These funds do not constitute Disaster Unemployment Assistance that is funded directly by the federal government (and also not charged to employer accounts) in the event of a qualifying major disaster declaration.

Under the Act, to be eligible for the grant states must change their UI law and/or regulations to provide the following:

• Employers must be required to provide notification of the availability of UI benefits to employees at the time of separation from employment. Such notification may be based on model notification language issued by the US Department of Labor.
• The state must ensure that applications for UI benefits, and assistance with the application process, are accessible in at least two of the following: in-person, by phone, or online.
• Applicants must be notified when an UI benefit application is received and is being processed, and in any case in which an application is unable to be processed, provide information about steps the applicant can take to ensure the successful processing of the application.
• The state must demonstrate steps it has taken or will take to ease eligibility requirements and access to UI benefits for claimants, including waiving work search requirements and the waiting week, and non-charge employers directly impacted by COVID-19 due to an illness in the workplace or direction from a public health official to isolate or quarantine workers.
• The state must express its commitment to maintain and strengthen access to the unemployment compensation system, including through initial and continued claims.

Ernst & Young LLP insights

The availability of federal grants for state unemployment insurance benefits creates a mechanism for states to address job loss due to COVID-19; however, not all states will adopt the provisions necessary for the federal grants, a fact that will create inconsistency in how states will administer unemployment claims in connection with COVID-19 related claims.

Some states (i.e., Illinois and Washington) have already issued emergency rules (or plan to) that allow workers affected by COVID-19 to collect UI benefits.

This issue of inconsistency could be resolved if the DOL through regulation, or Congress, through legislation, clarify that DUA is available for the COVID-19 health emergency.

On a positive note, employers are not charged for UI benefits, whether they are paid through the special federal grant program or under DUA, rather, the issue will be more of how workers will collect their benefits, when benefits will be available, and how employers are required to report their COVID-19 unemployment activity.

We are monitoring state developments closely and will compile details of each state's program to assist employers with employee communication and compliance.

———————————————

———————————————
ATTACHMENT

EY Payroll News Flash