On March 27, 2020, President Trump signed the historic CARES Act to provide relief to Americans reeling from job and income loss caused by COVID-19. This included $260 billion for expanded unemployment insurance.
For more than two months, unemployed Americans have received an additional $600 per week in compensation thanks to the CARES Act. Such a generous increase in unemployment compensation has created confusion, controversy, and uncertainty. Many people laid off or furloughed as a result of the coronavirus have reported that they make more money on unemployment than they did in the workplace.
As Senator John Cornyn of Texas said in a statement, “We’ve heard from worried hotels, restaurants, and barbershops in Texas unable to rehire their workers and now at risk of losing their P.P.P loans they need to survive.”
What exactly happens when unemployment pays more than employment, and how are American businesses responding?
Some Companies Give 72 Hours to Return to Work- or Risk Being Fired
Des Plaines, Illinois-based suit maker Hart Schaffner & Marx was forced to furlough nearly 250 factory employees in the midst of the coronavirus shutdown, but recently called all 250 workers back. However, not all employees were eager to return. Unlike the normal Illinois unemployment benefits that pay only 47% of a person’s regular wages, the bonus $600 a week provided by the CARES Act allowed furloughed employees to make more than ever more.
In fact, 75% of Hart Schaffner & Marx factory workers were concerned about waiving their unemployment benefits when they returned to work. This gave the suit maker no choice but to give workers a 72-hour window to return. Any workers who failed to return after three days would be fired, and in turn, become disqualified for unemployment benefits– unless they had a legitimate reason to stay home, such as child care issues.
“I hated having to convey that message,” explained Ken Ragland, COO at W Diamond Group, “[But] them not coming back to work would have meant that the company would have been in much worse shape.”
Sky Marietta, who opened a coffee shop last year in Harlan, Kentucky, faced the same problem: “We basically have this situation where it would be a logical choice for a lot of people to be unemployed,” Marietta explained. “The very people we hired have now asked us to be laid off. Not because they did not like their jobs or because they did not want to work, but because it would cost them literally hundreds of dollars per week to be employed.”
Unlike the Illinois suit-maker, however, Marietta was forced to close her coffee shop due to the unsustainable working conditions it faced.
The CARES Act Doesn’t Reduce Employers’ Authority to Rehire
Hart Schaffner & Marx, the Illinois suit-maker, was able to fire employees who failed to return after 72-hours based on its power as an employee to rehire furloughed workers. Under the CARES Act, an employer can ask a previously laid off employee to return to work. If that employee refuses to return, they immediately lose their eligibility to collect unemployment insurance benefits unless they meet specific criteria.
In the case of COVID-19, many employees qualify for these specific criteria since children are out of school until September, at the earliest. Without childcare, or the ability to afford childcare, many parents have no way to juggle the demands of work and parenthood.
At this time, the extra $600 a week provided for COVID-19 is set to end in July. Though the House of Representatives recently passed a bill that includes expanding unemployment bonuses through January, the Senate is expected to heavily debate the issue.