Unemployment Insurance And COVID-19: What You Need To Know

A tsunami of layoffs is coming. Goldman Sachs estimates that the Labor Department weekly unemployment report due to be released on Thursday will show 2.3 million people filing new claims for unemployment insurance, up from the already elevated 281,000 in last week’s report. As the coronavirus pandemic continues to shut down businesses, millions of workers who have lost their jobs or had their hours slashed—or fear such cutbacks—are scrambling to figure out how they’ll manage financially. 

One huge question involves unemployment insurance, which is confusing even in normal times, with its eligibility rules, application processes and benefits varying dramatically from state to state; in January, weekly benefits averaged $213 in Mississippi and $546 in Massachusetts. 

Now the rules are not only bewildering, but also in flux, with an expansion of unemployment insurance likely to be part of a $1 trillion to $2 trillion stimulus package that is now being negotiated and could become law in the coming week. 

If you can’t work or have had your hours cut because of COVID-19, here’s what you need to know now. We’ll update this post as the situation develops and if the rules change. 

Sick pay and family leave, if available, should be used first

Vicki Shabo, senior fellow of paid leave policy and strategy at New America, says if individuals are eligible for any sick leave—including any sick leave normally offered by their employer—they should exhaust it first before turning to unemployment benefits.

Even if you’re not “sick” and don’t normally get sick pay at work, you might qualify for paid sick or family leave for two to 12 weeks under the Families First Coronavirus Response Act that President Trump signed into law on March 18. The law covers employees of businesses with fewer than 500 employees, which will be fully reimbursed by the federal government within three months through 100% tax credits. (According to the IRS, those credits can first be claimed against payroll taxes due, with any excess owed paid as a refundable credit.) 

Significantly, self-employed and gig workers paid as independent contractors are also eligible for equivalent tax credits if they are unable to perform services in their trade or business under similar circumstances related to coronavirus. 

There are two sets of benefits, one for sick leave and one for family leave.

Sick leave. Under the law, employees can get 80 hours of sick leave (with part-time workers getting a proportionate share) at full pay, capped at $511 per day, or an aggregate $5,110 per worker, if they are unable to work or telework because they are under medical quarantine or medical treatment for COVID-19, suspect they have COVID-19 or are ordered to quarantine at home by the government. If they are staying home to care for someone else who has COVID-19, or is suspected of having it, or for a child whose school or day care is closed, the two weeks of sick pay is at a rate of two thirds of pay and capped at $200 a day, or an aggregate $2,000 per worker. 

Family leave. Those covered by the act can get up to 12 weeks of family leave (with the first two weeks unpaid) if they must stay home with children whose schools and day care centers have closed because of the pandemic. When the pay kicks in, it’s at a rate of two thirds of pay, with a maximum payment of $200 per day, or an aggregate $10,000 per worker. In other words, it’s a maximum of $1,000 per week, far more than unemployment normally pays. 

While businesses with fewer than 50 employees also are covered, they may get exemptions if the provision causes too much hardship. Most businesses with more than 500 employees, which successfully pushed for exemption from the new law, already offer paid sick leave. Paid family leave is less widespread.

Shabo notes that the benefits under this law are more generous than what workers might get from their existing state’s unemployment insurance. (But remember, that too could change.) Shabo adds that individuals will likely see paid sick leave given out much quicker than unemployment benefits. After burning through any sick pay or family leave pay, individuals should then look to apply for unemployment benefits. 

States are starting to relax unemployment insurance eligibility requirements

Receiving unemployment assistance usually requires individuals to be involuntarily laid off from work, able to work, available to work and to be actively seeking work. But in a time where government officials are requiring people to shelter in place, and businesses are shutting down, these requirements make no sense.

The federal Department of Labor is already allowing states to adjust their rules to provide unemployment insurance benefits related to COVID-19. For example, the DOL says states can pay benefits if a closing relating to COVID-19 prevents employees from working or if a worker is quarantined. Federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19, the DOL notes. In addition, a March 12 DOL letter to the states reminds them they are free to waive a seven-day unpaid waiting period for benefits that many of them now impose. 

The states are moving. Ohio, for example, has declared that under Ohio unemployment insurance law, the nonworking individual won’t be actively required to seek work if they’re “requested by a medical professional, local health authority, or employer to be isolated or quarantined as a consequence of COVID-19 even if not actually diagnosed with COV-19,” except where the worker has “access to leave benefits from their employer(s).” New York is waiving its usual seven-day waiting period on applications from people who are out of work due to coronavirus closures or quarantines. 

To understand the requirements of eligibility for unemployment in your state, visit your state’s unemployment insurance website. You can find links to your state at this DOL site. 

Gig workers might be eligible for unemployment—but not yet

Gig workers and others who are self-employed might be feeling discouraged by their lack of inclusion in unemployment benefits. But Michele Evermore, senior researcher and policy analyst at National Employment Law Project, says that even though it’s difficult in many states for gig workers to get the insurance, they should try and apply anyway.

If gig workers are unable to obtain unemployment benefits, they shouldn’t see it as the end of their ropes. Evermore says there is the possibility of disaster unemployment insurance, which is funded through FEMA and mirrors state unemployment insurance systems, being an option. 

After President Trump proclaimed the COVID-19 a national emergency, FEMA described it as an emergency declaration “pursuant to” the Stafford Act. This act, however, doesn’t directly refer to a disease outbreak as a natural catastrophe. Evermore says, however, that Congress is working on language to implement it in this time of crisis.

“There’s a good chance DUI [disaster unemployment insurance] will kick in soon and [the self-employed and gig workers] then will apply,” Evermore says. 

She adds that the process of application is similar to applying for unemployment benefits: Individuals will apply through the same state workforce agency and likely receive the same state benefit level they would’ve gotten if they had qualified for unemployment assistance.

You might be able to apply if you’re technically still employed but have had your hours cut

The March 12 DOL letter to the states makes it clear that workers whose hours have been reduced significantly, but are technically still employed, can be eligible for partial unemployment insurance. Again, this is currently at the option of the states; for information about rules in your state, contact your state’s unemployment insurance program.

Unemployment application systems are overwhelmed—but keep trying

Unemployment centers are staffed according to last year’s unemployment rate, which was at record lows. This means there’s a shortage of staff available to help process the sudden uptick in applications, and the websites are easily overwhelmed.

Websites for unemployment insurance in Oregon, Washington, D.C. and New York have experienced crashes due to the high volume of web traffic. Some states are now staggering the days on which people can apply for unemployment benefits.

Evermore acknowledges how frustrating this can be for consumers feeling a desperate need to file for their benefits as quickly as possible. But she says individuals should remain persistent and keep trying, adding that sometimes logging on between normal working hours, 8 a.m.–5 p.m., can give them a better chance at success.

“If the online system doesn’t work—maybe try calling in,” Evermore says. “These systems are under an unprecedented crunch.”