Unemployment, Furlough and other Benefit FAQs for Colorado Workers Displaced by COVID-19

Most workers displaced by closures or reduced hours due to COVID-19 precautions are eligible for unemployment benefits, which are funded by employer unemployment insurance (UI) premiums and wage reporting. While the following information and links may be specific to Colorado, the process and requirements are similar among most states per federal guidelines.


Table of Contents:

Unemployment

  • Should I tell my employees to file for unemployment if we have to close or reduce hours due to COVID-19?
  • If we reduce our employees' work hours, will they still be eligible for unemployment insurance? 
  • How do employees know if they qualify for unemployment benefits?
  • Are s-corp officers, contractors & self-employed eligible for unemployment benefits?
  • Are seasonal employees eligible for unemployment benefits?
  • How long does it take for employees to receive unemployment payments?
  • If we pay-out vacation time, severance, etc, can employees still file for unemployment?
  • Are there alternatives to laying off employees?
  • As an employer, what is my role in the unemployment claims process?
  • If status in employment changes after unemployment has been filed, what actions do I need to take as an employer?
  • What happens if an employee refuses to return back to work and wants to stay on unemployment?
  • How do unemployment claims impact UI rate? 
  • What should we tell employees who say they would rather be laid off so they can collect unemployment, and then rehired later rather than furloughed? 

Health Insurance and 401k contributions

  • Can employees stay on the health insurance plan during a furlough? 
  • If employees are furloughed and on reduced pay, are employers still expected to provide 401(k) matching? 
  • Can Benefit Coverage be changed midyear due to COVID? 

COBRA Coverage

  • Are employees eligible for COBRA and other benefits while laid-off? 
  • Can an employer pay for a former or current employee's COBRA coverage? 

Other Questions

  • If exempt employees' hours were cut and they are only working a few days a week, do they have to be paid their full weekly salary?
  • Can we terminate employees and then contract with them as independent contractors? 
  • We are looking for ways to save without having to lay off employees. Any suggestions? 

Notice Templates

  • Sample Notice of Temporary Layoff Due to Coronavirus
  • Sample Notice of Reduction in Force Due to Coronavirus

Should I tell my employees to file for unemployment if we have to close or reduce hours due to COVID-19?

You can. Most employees who are laid off or have reduced hours due to COVID-19 are eligible for state unemployment benefits.

How or if an employer wishes to communicate to employee's is up to each employer of course, it isn't a legal requirement. 


If we reduce our employees' work hours, will they still be eligible for unemployment insurance?

It depends on the amount of the reduction (each state law is somewhat different). Generally, a reduction of 20 percent or more in hours in most states would be sufficient to demonstrate that the individual is unemployed and would not be disqualified from establishing a benefit year and claiming weeks of unemployment compensation, provided that with the reduction he or she earns less than the state's definition of "partial unemployment."  

Typically, if an individual is paid the equivalent of his or her full UI weekly benefit amount for a week, he or she would be deemed not to be unemployed for the week, although some states have a higher threshold for defining partial unemployment. Each state UI law should be reviewed.


How do employees know if they qualify for unemployment benefits?

In order to qualify for unemployment benefits, employees must:

  • Be unemployed through no fault of their own
  • Be able, available, and actively seeking work*
  • Have earned $2,500 during their base period
    • Base period is the first four of the last five completed calendar quarters before the start date of the claim. The is an alternate base period calculation if the employee did not earn at least $2,500.

*If an employee indicates "job attached” status, the work-search requirement is waived if the employee is expected to return to the same job within 16 weeks of their last day of work.


Are s-corp officers, contractors & self- employed eligible for unemployment benefits?

Corporate officers (s-corp and c-corp) are viewed as statutory employees. So long as they have been reporting their earnings, they are eligible to apply for benefits. That said, the CO Department of Labor & Employment cannot guarantee that any employee will receive unemployment benefits; each claim is adjudicated on a case-by-case basis.

Independent contractors & self-employed workers don’t pay into the UI fund and thus would not be eligible for benefits. 


Are seasonal employees eligible for unemployment benefits?

Yes, seasonal employees, such as ski industry workers, may be eligible for unemployment benefits if they were laid off during the season.

Temporary and seasonal employees may qualify for unemployment benefits at the conclusion of assignment.

State unemployment insurance laws generally do not disqualify an individual based on his or her classification as a temporary or seasonal worker. Eligibility for unemployment compensation is based on a number of factors, including the duration of employment, the employee's earnings in his or her base period, and the circumstances that led to the separation from employment or reduction in hours. If an employee loses work through no fault of his or her own and there is simply no more work for the employee, this worker may be eligible for benefits, and the employer may or may not be chargeable.

If you are unsure if your employees are true seasonal employee check out our Seasonal Employer Status article. 


How long does it take for employees to receive unemployment payments?

Normally, it takes 4-6 weeks for an unemployment claim to be processed. Due to the unprecedented increase in claims, state agencies are working hard to expand systems and capabilities in order to issue payments as early as 2 weeks after filing. We anticipate that states will adopt emergency orders and ramp up services to accommodate the influx of claims and get money into workers’ pockets more quickly.

In the meantime, community resources are available to workers while they wait for unemployment benefits. Also, banks, utility companies and other services may waive payments and late fees for displaced workers if requested.


If we pay-out vacation time, severance, etc, can employees still file for unemployment?

Yes, an unemployment claim can still be filed, but benefits may be reduced or delayed. Employees are required to report any income they receive and the pay-out or severance is income. 


Are there alternatives to laying off employees?

Yes, effective April 1, 2020 your employees may qualify for the Families First Coronavirus Response Act for paid leave. There are also payroll assistance options for small businesses under the CARES Act.

The Work-Share Program provides an alternative to laying off employees by allowing them to keep working, but with fewer hours. While an employee is working fewer hours, he or she may be eligible to collect part of his or her regular unemployment benefits. To participate, employers must meet the following requirements:

  • Reduced normal weekly work hours by at least 10%, but by no more than 40%; and
  • The reduction must affect at least two out of all employees; and
  • Paid as much in premiums as agency paid your former employees in unemployment insurance benefits (see rate notice mailed to you in November)

Submit an application for the Work-Share Program >>

Other alternatives to laying off workers and ways to provide support:

  • Cut other unnecessary costs; ask banks, services, etc if they are able to waive payments and late fees during this time
    • Some localities may defer sales tax payments; we'll post more information as it becomes available
  • Furlough vs laying off employees
    • Furlough requires employees to work fewer hours or take unpaid time off
      • Be careful when furloughing exempt salaried employees – they still need to meet the minimum salary exemption or risk losing exempt status under FLSA
      • Furloughed employees must be completely relieved of all duties; they cannot check emails or any work-related tasks while on furlough
      • Employees with reduced hours may qualify for unemployment benefits
    • Layoff is a temporary separation from payroll. The employee is able to collect unemployment benefits and the employer may maintain benefit coverage.
  • Implement a remote workforce if possible
  • Keep watch for temporary work in high-demand jobs, such as logistics, delivery, and healthcare so you can refer workers to opportunities

As an employer, what is my role in the unemployment claims process?

Only workers can apply for unemployment; you cannot file on their behalf. But, you can direct them to resources and information on filing a claim:  

After a claim is filed, the state will send you notification and request job-separation documentation to confirm wages, length of employment, if claimant is job-attached, etc. The most efficient way to receive and respond to these requests is by signing up for online access via SIDES E-Response. If you are an ASAP client, we can assist you with verifying employee information.

Employers participating via SIDES E- Response will be able to:

  • Respond to Request for Facts About a Former Employee's Employment, Form UIB-290, in an easy and efficient online format.
  • Receive a date stamped confirmation, avoiding time and cost of unnecessary hearings.
  • Attach additional documentation to job-separation responses.
  • Eliminate delays related to mail delivery.
  • Provide speedy and efficient resolution of separation and related issues.
  • Keep premium rates and business costs low due to reduction of state- and employer-related administrative costs and by reducing improper payments through streamlined fact-finding processes.

If you think an employer or unemployed worker is committing unemployment insurance fraud, then complete a Fraud Report.


If status in employment changes after unemployment has been filed, what actions do I need to take as an employer?

It is understandable that situations will change over the next couple of months. Employment status can be changed with the unemployment agency as circumstances change. It is important for employees to keep the agency updated with changes and any additional income they may receive. Not updating the agency can potentially cause an employee to lose their benefit. 

Also, you can note any status changes for individuals when you respond to unemployment notifications.


What happens if an employee refuses to return back to work and wants to stay on unemployment?

One of the eligibility requirements for unemployment benefits is "be available to begin work immediately if a job is offered." If an employee refuses your bona fide offer, then you need to complete the job separation process to remove them as an employee, and update the unemployment agency that employee refused offer. As an employer it is your right and obligation to report updates to prevent abuse and fraud on this benefit >> Report Refusal

If you are trying to place them back on the payroll for the PPP Loan and they refuse, the same process applies -- complete job separation process and update the unemployment agency. If you have been approved for a PPP Loan, you are not required to have the same individuals on payroll to qualify for Loan forgiveness, so go ahead and replace them with a new hire.

However, an individual may be unavailable for work due to COVID-19. The individual may be caring for a child whose school or caregiving place is closed or still be caring for someone diagnosed with COVID-19. Additionally, he or she could have some reason to feel unsafe at the workplace due to the pandemic, which might be deemed allowable. Therefore, if the individual does not accept the recall notice, he or she will have to continue to certify with the unemployment agency as to why he or she cannot work due to COVID-19, or for another qualifying reason.

If an employer has any reason to believe an employee might refuse a recall for unlawful reasons, it may wish to educate him or her on the consequences of unemployment fraud. These could include not only reimbursing the state for benefits paid but also civil and criminal penalties, including incarceration.  

Additionally, through the end of July 2020, unemployment recipients will receive an additional $600 per week on top of their regular unemployment insurance entitlement through provisions under the CARES Act. In many cases, this will provide more money than the employee normally made when working, and these employees may feel less inclined to return to work before August, and therefore, refuse the recall. Employers may advise these employees that the offer of work has been reported to the state, and unemployment benefits will stop as of the intended start date. Any dishonest statements made by the employee to the unemployment agency would be considered fraud and may be subject to the penalties mentioned above.


How do unemployment claims impact UI rates?

UI rates are calculated annually based on wages and claims.

Unemployment insurance programs are funded by state (SUTA) and federal (FUTA) taxes paid by employers. If an employer has a high level of terminations where employees file for, and receive, unemployment compensation, the results can be higher SUTA tax rates for the employer in future calendar years.

Generally speaking, state unemployment taxes are calculated based on an employer's size, the amount the organization has paid in wages and the unemployment insurance benefits collected by former employees. These factors contribute to what is commonly referred to as the employer's experience rating. This rating will set an employer's SUTA tax rate for the next quarter, or longer, based upon state practices.

When examining their financial information to determine the business's costs associated with unemployment claims and contributions, employers would compare the number of claims in a given period with the amount of increase or decrease to their SUTA rates derived from that period. Of course, lowering the number of successful unemployment claims will lower the SUTA rates.


What should we tell employees who say they would rather be laid off so they can collect unemployment and then be rehired later rather than be furloughed?

Overall, it is better to continue working for a variety of reasons, including assuring that the employee may continue to be covered under the company health care plan, pension plan, if any, and continuing to accumulate wage payments to qualify for Medicare, future unemployment compensation and Social Security. The UI cash payment is only a temporary partial replacement.

Of course, there are also the non-monetary benefits of working (e.g., socializing, developing skills and experience, greater likelihood of promotion and earning bonus payments).


Can employees stay on the health insurance plan during a furlough?

An employer may continue to keep employees on its health insurance during a furlough and either require the employee to pay the employee portion, or may choose to pay for both the employer and employee portion, which may require a plan amendment.

Alternatively, depending on the wording of the plan, the furlough may trigger COBRA, and the individual may qualify to make payments for continuation under COBRA, or the individual may seek insurance through the private market that may be subsidized under the Affordable Care Act.


If employees are furloughed and on reduced pay, are employers still expected to provide 401(k) matching?

As long as the 401(k) plan continues to be in effect, payments that are required under the plan for the employer continue to be the employer's obligation. It is possible to amend plans or suspend these types of obligations, however. The terms of each plan should be reviewed.


Can Benefit Coverage be changed mid-year? 

Possibly, employees may be permitted to make changes to their coverage if they have a qualifying life event. If their employment status has changed this could be a qualifying life event. 


Are employees eligible for COBRA and other benefits while laid-off?

In general, employees who are previously actively enrolled in health insurance coverage for at least one day, but lost it due to a change from full-time to part-time employment or termination (both voluntary and involuntary). 

The law generally applies to all group health plans maintained by private-sector employers with 20 or more employees, or by state or local governments. The law does not apply to plans sponsored by the Federal Government or by churches and certain church-related organizations. In addition, many states have laws similar to COBRA, including those that apply to health insurers of employers with less than 20 employees (sometimes called mini-COBRA). Check with your state insurance commissioner's office to see if such coverage is available to you.


Can employer pay for a former or current employee's COBRA coverage? 

Yes, an employer can pay all or part of a former or current employee's COBRA premiums. Employers may do so as a means to assist an employee during a merger, acquisition, layoff, termination, temporary or permanent disability, retirement, or as part of a recruitment strategy.


If exempt employees' hours were cut and they are only working a few days a week, do they have to be paid their full weekly salary?

It is true that exempt employees in general should not experience variation in weekly pay even though their hours may vary, but it is possible to put in place either a formal salary reduction, or to put in place a partial week furlough. Provided that it is relatively sustained (like for two or three months) and does not fluctuate based on business volume. Exempt employees' salaries, with or wothout a schedule reduction, should not be cut below the salary level needed to establish the exemption under the FLSA. 


Can we terminate employees and then contract with them as independent contractors?

Potentially, although a change in classification while providing the same or similar duties, especially on an exclusive basis, would be unlikely to survive challenge. Employers need to be careful that the new independent contractor terms and conditions are consistent with an independent contractor relationship. Auditors reviewing payroll typically review payment history and may assume that individuals who continue to be paid in regular intervals or who were treated as payroll employees should continue to be treated as employees.


We are looking for ways to save without having to lay off employees. Any suggestions?

We also see employers providing sabbaticals, furloughs and other ways to maintain an employment relationship while reducing payroll costs. Employers should also look to cost items other than legally required wages and compensation, such as cutting discretionary payments like vacation pay and employer pension contributions that are not required, eliminating merit increases, suspending bonus programs, findings savings with health insurance, or eliminating parking benefits and discretionary travel expense reimbursement. Collectively bargained agreement provisions may limit cuts that may be made without negotiating changes in the terms of the agreement.


Sample Notice of Temporary Layoff Due to Coronavirus

Dear [Employee name],

Due to the economic impact of COVID-19 (coronavirus), [Company name] is implementing measures to ensure the financial stability of the company. The current pandemic situation has impacted our business significantly, and as a result, we find that we must make some difficult personnel decisions.

Effective [date], [Company name] is implementing a temporary layoff of certain positions. This notice is to inform you that your position is included in this layoff, effective beginning [date]. We will reassess the circumstances regularly and will recall laid-off employees as business needs warrant based first on job function and then by seniority.

[Company name] will communicate with you regularly during this period. If your personal phone number, e-mail or mailing address has changed recently, please provide your current contact information to human resources immediately. Please feel free to contact human resources at [contact information] with any questions. 

If you find alternate employment during this period and do not intend to return to work at [Company name], please notify human resources immediately of your voluntary resignation.


Sample Notice of Reduction in Force Due to Coronavirus

Dear [Employee name],

Due to the economic impact of COVID-19 (coronavirus), [Company name] is implementing measures to ensure the financial stability of the company. The current pandemic situation has impacted our business significantly, and as a result, we find that we must make some difficult personnel decisions. 

We have explored many options, including [describe options]. Unfortunately, these efforts have been unsuccessful, and we find that we must reduce our workforce at this time.

We have concluded that we must eliminate approximately [number] positions. It is with deepest regret that I inform you that your position is one that will be eliminated effective [date].

We will meet with you today to answer your questions and to discuss available separation benefits, including the services of an outplacement firm to provide counseling and assistance in finding another job.

Please accept our appreciation for your contributions during your employment with [Company name].


Disclaimer: This information is provided as a self-help tool and does not constitute legal or financial advice. Laws, regulations and lending products are changing daily and decisions as to whether or how to use this information and/or what actions to take in response to the COVID19 Pandemic are solely those of the employer. The providers of this information disclaim any and all responsibility and liability for its accuracy, completeness or fitness for your particular business purposes.

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