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Davis Brown Employment and Labor Law Blog



Options for COVID-19 Reduced Work - March 23, 2020

Employers are facing unexpected layoffs and uncertainty as a result of COVID-19. As businesses evaluate the options available, one consideration can be Iowa’s Voluntary Shared Work Program (VSW). 


VSW is intended as an alternative to layoffs and can help individuals and businesses cope with a decline in business activity. Under VSW, work reductions are shared by reducing employees’ work hours and then unemployment benefits (UB) partially replace the employee’s lost earnings. VSW is mutually beneficial. By avoiding layoffs, employers maintain their skilled workforce, hoping circumstances improve, and employees benefit from staying connected to their employer.


 Mutually Beneficial

 Employer

Employee

 
  • Keep experienced personnel and avoid the burdens associated with turnover which help maintain productivity 

  • Maintain employment
  • Helps with future employment opportunities with the current employer because the employer must affirm that it will not hire full-time employees for the affected work throughout the VSW
  • Attractive with prospective employers because it helps avoid a gap in tenure

  • Avoids layoffs and positions the employer for quick growth when conditions improve

  • Financially beneficial because the employee can earn more than through UB alone


  • Fosters teamwork and the understanding that the company is in the hardship together

  • Employee can keep health insurance and retirement benefits which are not available through UB (and the employer must affirm that these fringe benefits will not be affected)

Currently, laid off employees can receive UB for up to 26 weeks at a maximum of $548 per week. The employer elects the duration of the plan (with agency approval), along with the percent of the full weekly UB payment the employee receives. With the VSW program, employees receive a fraction of regular UB equal to the percent of their work hour reduction. For example, if there is a 30% reduction in work hours, the affected employee would receive 30% of the weekly UB payment they would receive if they were laid off for a full week.

ELIGIBILITY

Employer

Employee

  • The VSW plan must affect at least 5 employees in a specified plant, department, shift, or other definable unit

  • Qualify for UB
  • The employer’s quarterly UB reports must be current and UB taxes paid in full

  • Not have an existing UB claim in another state
  • Must submit a 

    Voluntary Shared Work Plan Application

     that:
    • provides an estimate of the number of layoffs that would occur without VSW 
    • lists the % of reduction in affected employees’ work hours (must be between 20-50% and be the same for all affected employees) 
    • certifies that the reduction in hours is in lieu of layoffs 
    • If a collective bargaining representative is involved, the employer must also include written approval from the affected employees
  • Be able and available to work their regular hours of work for their VSW employer

  • Not be used for seasonal work reductions

  • Must certify that the VSW will meet federal and state laws


Notably, an employee does not have to use paid time off before qualifying for VSW. At the discretion of the employer, any approved paid time off from work (e.g., paid vacation, paid sick leave, paid funeral leave) may be considered as hours worked for determining the VSW benefit. Also, VSW is available for part-time employees as well. 


Employer and Employee Paperwork

If Iowa Workforce Development approves the VSW, the employer must complete paperwork to enroll the employees into the program. Most of the information needed to accomplish this is from payroll records. Additionally, employers need to provide two forms of identity to IWD for each employee participating in the VSW. Employees must also complete paperwork including the VSW Data Collection form and Tax Withholding Agreement form. These forms are used to determine the employee’s number of dependents and desired tax withholding. 


Reporting 

Once the VSW is in operation, each week, the employer must submit employee hours for weeks that run from Sunday through Saturday regardless of the employer’s pay period. Claims are submitted each week following the week of reduced hours. 


Schedule Flexibility 

The work schedule can change so long as it is consistent within the affected work and the reduction in hours remains 20-50%. Also, an employee can report 32 hours one week and collect VSW benefits and 40 hours the week next week, such that no VSW benefits are collected. 


Other Options 

Keep in mind that when an employer is either not eligible for VSW, or VSW is not a financial reality, there are other options. Not only may the employer consider a temporary layoff, but an employer has the option, in order to keep employees working, to reduce employees’ hours beyond a 50% reduction (ineligible for VSW). Iowa Workforce Development has provided specific guidance clarifying that when an employer reduces employee hours due to COVID-19, affected employees will be eligible for unemployment benefits. 


Benefits 

Do not forget the impact that a reduction in hours may have on health insurance and other employee benefits, such as retirement benefits. Make sure to check with your insurers or plan providers before continuing to provide benefits during a period of reduced employee hours.


IWD Fee Waivers 

Given the state of emergency concerning COVID-19, Iowa Workforce Development has waived all charges to employers related to participation in the VSW program and/or unemployment benefits granted as a result of reducing employee hours. 

For more information consult with an employment attorney or visit www.iowaworkforcedevelopment.gov/voluntary-shared-work-frequently-asked-questions and/or https://www.iowaworkforcedevelopment.gov/updates-and-resources-about-covid-19.



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