'Shared work' bill designed to help firms keep employees it might have laid off
Michigan employers faced with having to lay off valued employees could have a new alternative to help keep those workers.
Under a bill moving through the Legislature, employers suffering a downturn and seeking to avoid layoffs could create "shared work" plans -- state-approved arrangements that would reduce workers' hours and allow them to receive limited unemployment benefits to help compensate for lost wages.
The arrangement can help employers retain skilled workers in whom they have invested -- and who might find other work in Michigan or out of state if they were laid off, said Steve Arwood, director of the Michigan Unemployment Insurance Agency and deputy director of the Michigan Department of Licensing and Regulatory Affairs.
"It comes across ... as a talent retention/skill retention program," Arwood said.
Such programs exist in 23 states, Arwood said. In his December legislative message on talent development, Gov. Rick Snyder called on the Legislature to adopt such a measure. Sweetening the idea: federal funding for the unemployment benefits that would be paid.
Provisions passed and signed into law in February as part of the federal Middle Class Tax Relief and Job Creation Act of 2012 provide for states to receive 100 percent federal funding of benefits paid under the plans, provided their work-share bills conform with federal requirements.
The benefits would not be charged to the employer's unemployment insurance account, so the employer's UI tax rate would be unaffected by the increased benefit payouts.
Arwood said the full federal funding is available through Aug. 22, 2015. He said he expects the Michigan legislation will conform with federal requirements and receive full funding.
The federal funding negates any potential impact on the Michigan Unemployment Insurance Trust Fund, through which the state collects employer UI taxes and pays benefits.
"We know that the net effect of these programs in most states is to increase benefit payout, and so that does have an effect on the trust fund," said Wendy Block, director of health policy and human resources for the Michigan Chamber of Commerce. "If the federal government is willing to pay for the program, it wouldn't have that same negative effect.
"Our members are somewhat mixed. On one hand, they're concerned about trust fund solvency. But on the other hand, if there is a real threat to permanent layoff, this could actually help with trust fund solvency."
Block said employers' key concerns have been addressed. Those include capping the duration of a shared-work plan at 52 weeks and allowing only "positive balance" employers -- those who have paid more in unemployment taxes than have had benefit claims charged against them -- to participate in the arrangement.
Employers would have to meet several criteria, including certifying that the plan would be in lieu of temporary layoffs affecting at least 15 percent of the employees in a unit and would result in a corresponding reduction in work hours.
Arwood said a unit might be an entire business, in the case of a small firm, or, with larger companies, might be a location, plant or operating division.
Among the requirements, employers must:
• Obtain approval from any applicable labor union.
• Have paid wages for three years before applying for the shared-work plan.
• Include in the plan an estimate of the number of layoffs that would be avoided.
• Have at least two employees in the affected unit participating in the plan.
• Reduce workers' hours no less than 15 percent and no more than 45 percent and apply the reduction to all participating employees equally.
The shared-work plan cannot affect any employee's fringe benefits, like health insurance, retirement benefits or paid time off.
Employers would apply to the UI agency before layoffs, and the agency would have 15 days to approve or deny applications.
Benefit payment amounts would be a percentage of the full weekly UI benefit the worker would have received had he or she been laid off. For example, if a worker receives a 25 percent reduction in hours, he or she would get 25 percent of the unemployment benefit that would have been paid if laid off.
The bill passed the Senate unanimously in May and is being discussed the House Commerce Committee, which on Tuesday adopted an amendment limiting the new state program's legislative authorization to three years. The legislation would take effect Jan. 1.