Legislation Extending Unemployment and Disability Insurance Benefits to Employees and its Impact on Employers

COVID-19 has already caused major disruptions in United States labor markets and its impact is expected to last for months. Federal and state governments are introducing and passing various forms of emergency legislation targeted at providing income support to workers, including by extending unemployment insurance benefits to temporarily displaced workers and, where applicable, making available disability insurance benefits to employees diagnosed with or exposed to COVID-19.

Unemployment insurance benefits provide partial wage replacement payments to workers who lose their jobs or have their hours reduced through no fault of their own. Many states, including (at the time of this writing) California, Illinois, New Mexico, Oregon, and Pennsylvania, have extended this protection to employees who have been required to take unpaid time off due to COVID-19, even if the time off is expected to be temporary. Colorado’s labor department is currently reviewing options to expand unemployment insurance benefit options under existing rules. What does this mean for employers? States tax employers for the unemployment insurance benefits attributed to their accounts and, thus, an awarded unemployment insurance claim can affect an employer’s unemployment insurance tax rates for future years. At this time, employers temporarily laying off employees or reducing work hours in response to COVID-19 should consider preparing for anticipated increases in related tax liabilities for unemployment insurance.

Disability insurance benefits, if available on either a private or state-sponsored basis, provide short-term payments to eligible workers who have a full or partial loss of wages due to a non-work-related illness, injury, or pregnancy. While most states do not currently require employers to offer private disability insurance, other states, including California, New Jersey, and New York, have varying requirements for making either private or state-sponsored disability insurance benefits available to employees. Additionally, many employers offer private disability insurance benefits as part of their overall benefits packages. Employers are encouraged to take proactive planning measures by speaking with brokers and carriers of disability insurance policies and consulting with an employment benefits attorney to review benefit plans and policies and confirm whether full or partial loss of wages due to COVID-19 would be covered. Where applicable, employees who will be or have been exposed to COVID-19, as certified by a medical professional, may be encouraged to file a disability insurance claim. Because of the anticipated increase in disability insurance payments being made due to COVID-19, the cost of such insurance is expected to rise in future years.

Despite any potential increase in business expenses, employers should ensure that their communications or actions with employees cannot be deemed to have interfered with employee rights or efforts to seek unemployment or disability insurance benefits.