With the shutdowns of all Pennsylvania bars and restaurants and restricting them only to take-out food and beverage sales because of the coronavirus (COVID-19), some licensees are faced with the decision whether to close or remain open in a restricted manner. In the event that you are considering closing your business, the livelihood of your employees can weigh heavily on your mind. Although it may sound counter-intuitive, laying off valued employees may be in their best interest.

Unemployment Eligibility Due to COVID-19 Shutdowns

Layed-off employees will benefit from claiming unemployment benefits from the state. In fact, the Pennsylvania Department of Labor and Industry recently stated that this is the best option for employers to offer employees paid time off. In an effort to assist eligible employees impacted by the COVID-19 shutdowns, the Department of Labor and Industry has now waived the “waiting week” requirement for eligible claimants and also the requirement that all claimants prove that they have applied or searched for a new job to maintain their benefits. These waivers will assist in immediately putting money in employees’ pockets who were swiftly left without a job after the Governor Wolf’s Monday announcement.

Provided that the employee is also financially eligible, an employee may be eligible for unemployment benefits if:

• The employer temporarily closes or goes out of business due to COVID-19;

• The employer reduces their hours because of COVID-19;

• The employee has been told by his/her employer not to work because your employer feels you might be or spread COVID-19; and

• The employee has been told to quarantine or self-isolate if you live/work in a county under government-recommended mitigation efforts.

If an employee meets any of these eligibility factors they should submit an unemployment claim online for faster processing.

Employer Unemployment Insurance Concerns

What is still unknown is the effect on the individual employer/licensee for the flood of employees who claim those benefits during the COVID-19 shutdowns. The unemployment benefits paid out to an eligible employee come from a general unemployment insurance fund managed by the state. It is funded by both the employer and employee who pay into the fund in every paycheck. While the employee’s rate is consistent, it varies for each employer. For “new employers” which are employers who have been paying employees for less than two years, the rate is set at 3.689% for non-construction employers and 10.2238% for construction employers. For employers that have paid wages for two years, that employer pays a computed (experience-based) rate. The computed rate for 2020 ranged from 1.2905% to 9.9333%. In determining the rate which an employer pays is based on an evaluation of the following components:

• Reserve Ratio Factor;

• Benefit Ratio Factor;

• State Adjustment Factor;

• Surcharge Adjustment;

• Additional Contributions Factor; and

• Interest Factor.

Both the Surcharge and Additional Contributions Factor are directly affected by the number of employees the employer has had claim benefits and the total amount of benefits paid out to those employees. Thus, a significant change in either of those factors in a calendar year may affect the employer’s yearly computed rate. It is currently unclear what steps, if any, the Department of Labor and Industry will take to mitigate the possible effects to the employer’s computed rate from the potential flood of unemployment claims.

This remains a fluid situation subject to further governmental order and we will continue to keep you updated as we hear more.