Many businesses are grappling with labor issues amid a stay-home order issued by Michigan Gov. Gretchen Whitmer to help curb the spread of COVID-19.
As non-essential businesses shut down for at least three weeks, some employers have chosen to lay off employees so they can collect unemployment benefits, while other businesses are coming up with various different solutions.
“Three weeks is a long time to sustain that type of payroll for businesses, and they don’t want to delay people from getting their benefits either,” said Lisa Sabourin, president of Muskegon-based Employers Association of West Michigan.
Unemployment claims in Michigan initially spiked following the widespread closure of food and entertainment businesses. The week after Whitmer issued the order closing those businesses, claims grew by 1,500 percent, according to the Michigan Department of Labor and Economic Opportunity. The department saw 55,000 claims within three days.
Michigan mirrors national trends with a surge in unemployment claims during the pandemic. The U.S. Department of Labor’s most recent statistics released March 26 show the number of claims skyrocketed by nearly 3.3 million nationwide the week of March 16, shattering historic records.
Whitmer signed another executive order on March 16 that expands eligibility for unemployment benefits until April 14. The benefits are increased from 20 to 26 weeks, and the application eligibility period has increased from 14 to 28 days. The order provides benefits to workers who have unanticipated family care responsibilities, for workers who are sick or quarantined, and for first responders who are sick or quarantined.
As well, Whitmer issued another executive order on March 25 to give a six-week extension to workers who already had an active unemployment claim and to expand cost-sharing with employers. Unemployment benefits paid to laid off workers or people placed on a leave of absence will be assumed by the Nonchargeable Benefits Component, not the employer’s accounts.
Michigan has one of the “healthiest” general funds for unemployment claims in the country, said Darryl Hunter, the Michigan Unemployment Insurance Agency’s director of tax and employer services. The fund had close to $4.5 billion set aside for claims before the pandemic began. About 225,000 employers pay into the fund.
The department is looking into what effect the spike in claims will have on the fund, but it is difficult to determine given the uncertainty of how long the pandemic will last, Hunter said.
“I think we’re going to be OK,” Hunter said. “It’s certainly not going to run out of money. Everyone who applied for benefits, we’ll pay out — so far.”
The Employers Association surveyed its members after Whitmer’s stay-home order and found that most of the responding companies were exempt from closure because they are considered essential businesses.
Responding companies approached labor issues in a variety of ways. Some have laid off a portion of their staff, while another has put employees on furlough and will be paying 70 percent of their wages. Many employees are working from home, while some companies have opted to stagger shifts to allow for social distancing and cleaning.
“(We) will be reducing hours and allowing any staff that wants to stay home to do so,” one company responded. “If this continues for any length of time, we will need to shut down due to lack of suppliers available to continue production.”
Only one business responded that it was ordered to close, and it has reduced the hours of salaried employees and laid off hourly employees.
The Department of Labor and Economic Opportunity (LEO) issued guidance March 22 to Michigan employers on how to avoid layoffs related to COVID-19. LEO Director Jeff Donofrio urged job providers facing work shortages to place employees on leave and advise them that they expect to have work available within 120 days, as opposed to terminating them, so they can remain eligible for potential federal assistance.
That sentiment was echoed by Keith Eastland, a member of Grand Rapids-based law firm Miller, Johnson, Snell & Cummisky PLC in the employment and labor law section.
For employers considering their options with staffing, Eastland said it’s important to consider the federal Families First Coronavirus Response Act and how it applies to workers permanently laid off or on temporary leave. The distinction between those is important for employers to make, Eastland said. He also advised employers to pay attention to the stimulus package by the federal government to make sure employees get the maximum benefits they can.
“Consult with legal counsel or advisers so you can figure out how the laws fit together so you can map out your strategy, so you can come out of this healthy and taking care of your people,” Eastland said.
The other policies to keep in mind are internal benefits and the company’s insurance plan to see if it makes a difference whether the employee is on leave or laid off. For larger employers, they also need to assess whether they have obligations under the Worker Adjustment and Retraining Notification (WARN) Act, Eastland said.
Sabourin advised that above all, getting timely and accurate information to employees is critical. The Employers Association offers a resource page on its website for companies. Sabourin said there is no blanket solution for businesses.
“There is no one size fits all,” she said.