Business owners who are forced to lay off, furlough, or otherwise terminate employees because of the COVID-19 pandemic may have questions about how unemployment benefits paid to their employees will affect their businesses. Two of the most-asked questions we are receiving from clients who own businesses are: (1) Will unemployment benefits paid to employees under state unemployment law or the CARES Act increase my state unemployment insurance tax rate; and (2) Are employees eligible for unemployment benefits if they have not been laid off, furloughed, or terminated from employment, but cannot work due to COVID-19 illness, quarantine, or concerns about exposure?
Will unemployment benefits paid to employees under state unemployment law or the CARES Act increase my state unemployment insurance tax rate? The answer depends on whether the employer is thinking about regular unemployment benefits under state law, or federal pandemic benefits under the CARES Act.
Regular unemployment benefits payable under Maryland’s unemployment insurance law are chargeable to employers, but will not be reflected in an adjustment to the employer’s state unemployment insurance tax rate for the 2020 tax year. Employers may see an increase in their 2021 state unemployment insurance tax rate because of benefits paid due to COVID-19. As in any year, state unemployment insurance tax rates are calculated based on benefits that have been charged to the employer’s account over the prior three years. Therefore, any state unemployment benefits paid due to COVID-19 from March to June 2020 will comprise four (4) months of the 36 months used to calculate the 2021 tax rate for employers. In contrast, the additional $600 payments paid to employees by Maryland’s Division of Unemployment Insurance as Federal Pandemic Unemployment Assistance under the CARES Act will be fully reimbursed to the state by the federal government and will not be chargeable to the employer, nor affect an employer’s state unemployment insurance tax rate See guidance from the Department of Labor for more information.
Are employees eligible for unemployment benefits if they have not been laid off, furloughed, or terminated from employment, but cannot work due to COVID-19 illness, quarantine, or concerns about exposure? The Division of Unemployment Insurance FAQ addresses many scenarios in which an employee is unable to work for COVID-19 reasons. The Division of Unemployment Insurance recommends that employees apply for unemployment if they (1) are subject to a quarantine order from a medical professional or governmental authority, the employer will not allow them back to work before the end of the quarantine order, and the employer does not offer telework; (2) are ill (but not subject to a quarantine order) and have exhausted accrued paid leave; or (3) have decided to leave work due to a reasonable risk of COVID-19 exposure or infection, or to care for a family member due to COVID-19. So, unlike an ordinary situation in which an employee who is too ill to work may not be entitled to unemployment benefits, now, if the employee is unable to work due to COVID-19 illness, they may be entitled to benefits.
After a claim is filed, the Division of Unemployment Insurance will determine whether the employee qualifies for unemployment insurance benefits. An individual receiving paid sick leave or paid family leave, however, is still receiving pay and would generally not be considered “unemployed” for purposes of collecting unemployment insurance benefits.
The answer to these, and other frequently asked questions, can be found on the Department of Labor’s website.
This has been prepared by Tydings for informational purposes only and does not constitute legal advice.