In February, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012.  The law extended the payroll tax cut and federal Unemployment Insurance (UI) benefits that have helped sustain the economic recovery.  As important as that was, the law also included several components for the first major overhaul to the Unemployment Insurance program in decades, with the goal of improving the functionality of the UI system.  These key reforms are helping to turn the Unemployment system into a Re-employment system.

Together, these reforms will provide states with more flexibility to respond to changes in the economy, by providing employers tools to avoid layoffs, helping the unemployed get back into the workforce faster and even expanding opportunities for the unemployed to start their own businesses.

This week, the Labor Department announced the next step in this historic overhaul.  Through guidance issued by the department’s Employment and Training Administration, states can now use the UI benefits for short time compensation programs, or commonly referred to as “work sharing”.  Work sharing is a win-win for workers and employees alike. Employers with a work sharing plan can reduce the work hours for group of employees, rather than laying off an individual worker.  Workers affected by reduced hours can have their lost wages made up through a portion of their weekly unemployment compensation payments.   By avoiding layoffs, businesses can keep their skilled workforce and weather the effects of a poor business environment, while also maintaining the ability to quickly get back to full speed when the economy picks up again. 

This announcement clarifies the new federal definition of work sharing and provides guidance to states on how to adopt this new definition. In addition, states that already have an active work sharing program may now be eligible to begin receiving 100 percent federal reimbursement of working sharing payments.  The Labor Department will also issue additional information in the next couple of months to help enable states to implement or expand a work sharing program, through the availability of approximately $100 million in federal grants.

The Labor Department will continue to take the necessary steps to support President Obama’s mission to streamline and improve the workforce system.