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The North Carolina Division of Employment Security (DES) updated its website to show additional information on the employer state unemployment insurance (SUI) tax credit to be applied to the second-quarter 2020 (due July 31, 2020). According to the website, employers do not need to do anything to receive this credit other than to file their first-quarter 2020 SUI tax return. Any payments made for the first-quarter 2020 will automatically be applied to SUI contributions due for the second-quarter 2020.

The information posted to the DES website also states that any outstanding employer SUI tax payments for the first quarter of 2020 are no longer due and will be cancelled. It is unclear if this means that employers that have not yet paid their first-quarter 2020 SUI taxes will be credited with the amount due rather than given a second-quarter 2020 credit. Note, however, that in order to receive the credit at all, employers must file their first-quarter 2020 return, even if they did not pay the associated tax due.

As we reported, legislation provides North Carolina employers with a SUI tax credit equal to their first-quarter 2020 SUI contributions (due on or before April 30, 2020). The amount of the credit is equal to the amount of the first-quarter 2020 contributions paid by the employer and is applicable to the second-quarter 2020 SUI contributions due on or before July 31, 2020. (SB 704, signed into law on May 4, 2020; governor's news release; EY Payroll Newsflash Vol. 21, #228, 5-15-2020.)

If the tax credit exceeds the amount of SUI contributions due on the second-quarter 2020 return, the amount of the credit that exceeds the second-quarter contributions will be refunded to the employer in accordance with state UI law. (N.C.G.S. 96-9.15(b).)

Proposed rule provides for circumstances under which workers who refuse to return to work may continue to collect UI benefits

The DES issued a proposed temporary rule that would provide the circumstances where a worker separated from employment due to COVID-19 may refuse to return to work and continue to collect UI benefits.

Under the proposed rule, a claimant who has refused suitable work for one of the following COVID-19-related reasons will be deemed to have a legally sufficient reason for the refusal, and may continue to be eligible for unemployment benefits (04 NCAC 24G .0104.):

(1) The claimant has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and has been advised by a medical professional to not attend work.

(2) A member of the claimant's household has been diagnosed with COVID-19 or the claimant is providing care for a family member who has been diagnosed with COVID-19.

(3) The claimant is high risk of severe illness from COVID-19. The Centers for Disease Control and Prevention (CDC) defines a high-risk individual as a person 65 years of age or older, or a person of any age, who has serious underlying medical conditions including being immunocompromised, or has chronic lung disease, moderate-to-severe asthma, serious heart conditions, severe obesity, diabetes, chronic kidney disease and undergoing dialysis, or liver disease.

(4) The claimant is the primary caregiver of a child or person in the claimant's household who is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency, and the school or facility is required for the claimant to work.

(5) The claimant is unable to report to the claimant's place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency or the claimant has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.

(6) In order to comply with any governmental order regarding travel, business operations and mass gatherings, the claimant must refuse an offer of suitable work.

(7) The claimant reasonably believes there is a valid degree of risk to the claimant's health and safety due to a significant risk of exposure or infection to COVID-19 at the employer's place of business due to the employer's failure to comply with guidelines as set out by the CDC, other governmental authorities or industry groups as may be found in CDC guidance, the Governor's Executive Orders, or other binding authority; or due to objective reasons that the employer's facility is not safe for the claimant. (Authority G.S. 96-2; 96-4; 96-15(a); 150B-21.1A; 166A-19.30; Families First Coronavirus Response Act. Pub. L. No. 116-27; Division D, 1402 (2020); E.O. 118, Governor Roy Cooper, 2020; E.O. 121, Governor Roy Cooper, 2020.)

Other states have released similar guidance for circumstances under which a refusal to return to work would be considered good cause and would not cause a worker to be disqualified for UI benefits.

Proposed rule requires notice to employee

As is the case in other states, under the proposed temporary rule, employers are required to provide employees with notice of the availability of unemployment compensation at the time of separation from employment.

The notice must inform employees that:

(1) Unemployment insurance benefits are available to workers who are unemployed and who meet the state's eligibility requirements.

(2) Employees may file a claim in the first week that employment stops, or work hours are reduced.

(3) Employees may file claims online or by telephone to +1 888 737 0259.

(4) Employees must provide DES with the following information to enable DES to process the claim: (a) full legal name; (b) Social Security number; and (c) authorization to work (if the employee is not a U.S. citizen or resident).

Ernst & Young LLP insights

It may be that employers will have lower than usual second-quarter 2020 SUI contributions as a result of business shutdowns and slowdowns due to COVID-19. Second-quarter SUI contribution payments are, in general, usually lower than those paid for the first quarter, due to employee wages reaching the wage limit early in the year.

Employers that have not filed their first quarter 2020 returns should do so as soon as possible.

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