Question:

What the heck is California’s work sharing program? How does it work?

Answer: 

This is actually a pretty cool program! California’s work sharing program was the first program of its kind in the nation, but now tons of states (okay, maybe not “tons,” but at least 20+) have similar programs.

The first thing you should know is that this program was created to provide an alternative to layoffs.

This helps employers keep trained employees and reduce turnover costs, while also ensuring that employees have the peace of mind of you know, like, a job and health benefits and other essential things like that!

But how does it work? A little something like this: rather than laying off employees, an employer reduces the amount of hours that employees work (in other words, the employer “furloughs” the employees). For example, if an employee normally works five (5) days a week, the employer might reduce them to only four (4) days a week.

And this is where the EDD comes in. The EDD will then pay these employees partial unemployment benefits, proportional to the hours reduced. So in our example above, the EDD would pay benefits equal to one (1) day of work. The idea here is that this is a short term solution, and when business picks up again, the employer will bring the employees back to their normal schedule.

So what are the eligibility requirements for this program?

Per the EDD, these are the eleven (11) general eligibility requirements for the program, and in order to participate in the program, employers must meet all of these requirements:

1. The business must be a legally registered business in California.

2. The business must have an active California State Employer Account Number through the EDD.

3. At least 10 percent (10%) of the employer’s regular workforce or a unit of the workforce, and a minimum of two employees, must be affected by a reduction in hours and wages.

4. Hours and wages must be reduced by at least 10 percent (10%) and not exceed 60 percent (60%).

5. Health benefits must remain the same as before, or they must meet the same standards as other employees who are not participating in the program.

6. Retirement benefits must meet the same terms and conditions as before, or they must meet the same as other employees not participating in the program.

7. The collective bargaining agent of employees in a bargaining unit must agree to voluntarily participate and sign the application for the program.

8 .The business must identify the affected work units to be covered by the work sharing plan and identify each participating employee by their full name and Social Security number.

9. The business must notify employees in advance of the intent to participate in the program.

10. The business must identify how many layoffs will be avoided by participating in the program.

11. The business must provide the EDD with any necessary reports or documents relating to the work sharing plan.

That was a lot. Let’s break some of these down a bit more, shall we?

We’re going to skip through the requirements that are pretty self-explanatory (but of course, if you have questions, you can always email bertie@inbetterwetrust.com!)

Skipping to requirement #3: “at least 10 percent (10%) of the employer’s regular workforce, and a minimum of two employees, must be affected by a reduction in hours and wages.” Pausing here because, although this program allows for partial unemployment benefits through the EDD, this requirement differs from the standard unemployment program, which doesn’t look to how many people in the workforce are affected!

Then there’s requirement #4: “Hours and wages must be reduced by at least 10 percent (10%) and not exceed 60 percent (60%).” This is important! This means that the employer can’t cut an employee’s hours so drastically that they are essentially laid off. Let’s revisit our example above. If an employee normally works five (5) days per week and is reduced to four (4) days, that’s a twenty percent (20%) reduction, which means it falls into the allowable range. But if an employee that works five (5) days per week is reduced to one (1) day, that’s an eighty-percent (80%) reduction, and that ain’t gonna fly.

Moving on to requirement #5: “Health benefits and retirement benefits must remain the same as before, or they must meet the same standards as other employees who are not participating in the program.” This is important because it mean you, as an employer, generally, you have to offer these benefits if you did previously, before financial difficulties hit. Requirement #6 is similar: “Retirement benefits must meet the same terms and conditions as before, or they must meet the same as other employees not participating in the program.” In general, if you offered retirement benefits, they can’t change under the program.

Requirement #7 is one that won’t apply to everyone, but when it does apply, it’s pretty important. So don’t sleep on this one! If you’re subject to a collective bargaining agreement, “the collective bargaining agent of employees in a bargaining unit must agree to voluntarily participate and sign the application for the program.” Because of this, if you’re an employer creating a plan under this program, you’ll want to make sure it’s easily understood and agreeable to employees.

In addition to the eligibility requirements, there are also restrictions.

There are three (3) restrictions you should be aware of:

1. Leased, intermittent, seasonal, or temporary service employees cannot participate in the program.

2. Corporate officers or major stock holders with investment in the company cannot participate in the program.

3. The program cannot be used as a transition to a layoff.

Let’s talk about that last point. Remember when we said earlier that this should be a temporary measure? This point supports that. This program is intended to help a business get back on its feet. If a business is definitely not going to make it, this is not the right program to take part in.

One more thing employers should understand: how partial unemployment benefits are paid out under this program.

Partial unemployment benefits paid out to employees under this plan will be charged to the employer’s EDD account, in the same manner as for regular unemployment insurance benefits. What this means is that utilization of this program may lead to future increases in the employer’s payroll tax rate. But here’s the thing: if a business lays off employees, those employees will be able to collect unemployment benefits (assuming they meet eligibility requirements) anyway! So if there’s a bright side here, it’s that (a) the benefit amount paid out will be partial and not total; and (b) you get to keep your employees in the long run and they get to keep their jobs!

If an employer meets these eligibility requirements and the restrictions don’t apply to their situation, they may apply through the EDD’s Work Sharing Unemployment Insurance Plan Application. 

Currently, the application is five (5) fun pages of checkboxes and fill-in-the-blanks and must be mailed the old fashion way. The application asks about everything we’ve already discussed, and other things relating to the business’ current economic situation, so set aside an appropriate amount of time to complete the application accurately.

If approved, your work sharing plan will be approved for one (1) year, and can be renewed if necessary. The EDD’s Special Claims Office will sends you (the employer) a letter of approval, one mail claim packet for each participating employee, and a ten (10)- week supply of certification forms for each employee. This last part is especially important, because employers should know that, unlike traditional unemployment, which requires bi-weekly certification, this program requires weekly certification. So a little bit more paperwork, but hopefully worth it!

To wrap up….

California’s work sharing program won’t be an option for all businesses that stumble across it, but for those who do fit neatly in the eligibility requirements and don’t run afoul of the restrictions, it should be considered! Of course, like anything else in business, you should speak to a professional about the pros and cons of this program for you specifically, so please feel free to send an email to bertie@inbetterwetrust.com if you’d like to take advantage of our free consultations and chat about the program!