As Michigan employers begin to think about how many employees to bring back to work, one option to consider is Michigan’s Work Share program, whereby total work hours are spread across a large group of employees as opposed to having fewer employees return to work on a full-time basis.
What Are the Mechanics of Work Share?
Michigan’s Work Share program, administered by the Unemployment Insurance Agency (“UIA”), allows an employer to reduce the hours of employees while allowing the affected employees to receive partial unemployment benefits. With expansions to the program ordered by Governor Whitmer, an employer may reduce an employee’s hours by between 10 and 60 percent, with a commensurate percent wage reduction. Employees with reduced hours must continue to receive the same fringe benefits they received before the reduction. When choosing employees to participate in the work share program, employers must choose an entire organizational unit (i.e. shift, department, location, etc.) containing at least two employees.
To participate, an employer must submit a work share plan to the UIA. If the UIA approves the employer’s plan, the affected employees will be entitled to unemployment benefits proportionate to the reduction in hours. For example, if hours were reduced by 20 percent, employees would receive 20 percent of their weekly benefit amount from the UIA. And significantly, through July 31, 2020, these employees would also receive an additional $600 from the federal government under the CARES Act’s supplemental benefit. Under Governor Whitmer’s current executive order, employers’ accounts are not being charged for unemployment claims—this includes any benefits paid out under a work share plan.
The work share program ends at the end of its specified terms (up to 52 consecutive weeks), on written notice from the employer to the UIA, or if the UIA terminates it due to it not being executed according to its terms.
What Are the Benefits of Work Share?
A work share plan allows an employer to maximize the number of active employees, thereby providing more flexibility to increase work hours as demand for its products or services increases. It also reduces, if not eliminates, the need to hire and train new employees at a later date, thus avoiding both hiring and training costs. A work share plan also benefits employees. For example, it increases the number of employees who will be able to retain company fringe benefits, and allows them to continue to receive both state and federal unemployment benefits. Normally, if an employee earns more than 1.5 times their weekly benefit amount, they cannot collect any unemployment benefits from the UIA, which also means they lose the extra $600 from the CARES Act. Under a work share program, there is no such cap. As long as the reduction in hours and wages fall within the required range (10-60 percent), the employee will receive benefits from the UIA and also the $600 from the CARES Act. For any employer who is struggling to convince employees to return to work, a work share program could be a good incentive.
Finally, if employees believe that their employer cares about them enough to take extra steps to keep them employed, they are more likely to feel loyalty towards their employer which may increase retention and productivity.
What Are the Drawbacks of Work Share?
While there are benefits to a work share program, there are also downsides. Giving up flexibility is the biggest drawback. In its application, the employer must commit to not layoff employees in the affected units. Also, once in place, a work share plan can only be modified with the permission of the UIA (even if the change is to decrease the reduction percentage and increase the hours employees are working). Employers must apply for permission to modify a work share program if conditions change. In that case, the UIA will reevaluate the modified plan to see if it meets the work share requirements and approve or deny the modifications. This process will prevent employers from making week-to-week, if not day-to-day, decisions based upon financial and business considerations.
Further, every employee in the organizational unit must have their hours reduced by the same percentage. Therefore employers who want to implement a work share program across multiple departments would have to fill out multiple applications. Doing so is not complicated, but it may be administratively difficult for some employers to manage multiple plans.
How Do Employers Set Up a Work Share Plan?
An employer must submit an application through its MiWAM account. The UIA has 15 days to approve or deny the application. Governor Whitmer’s recent executive order waived several requirements, but the application still requires the following:
- An assurance that the employer will provide reports to the UIA as requested;
- The employer’s assurance that it will not lay off employee’s in the affected unit;
- The employer’s assurance that it has attained approval from any collective bargaining unit, if required;
- The employer’s certification that the work share program is in lieu of layoffs as well as an estimate of the number of employees that would have been laid off;
- The number of hours each employee will work each week during the effective period of the work share program; and
- An explanation of how the employer will give advance notice, if feasible, to affected employees.
Many other states have similar work share programs and each state has its own requirements. Employers interested in work share programs in other states, or in implementing a work share program in Michigan, should contact one of the attorneys in Dykema’s Labor and Employment Law Group.
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