Since the onset of the COVID-19 public health emergency and the enactment of the CARES Act, questions continue to arise about eligibility for unemployment insurance benefits, especially as it relates to Paycheck Protection Program (PPP) loans. While there is virtually no precedent under the New York unemployment insurance law for the unique circumstances of COVID-19, the existing statute, regulations, and case law provide some guidance.
PPP Loan Forgiveness
To be eligible for PPP loan forgiveness, employers must maintain (or restore) staff and payroll for the 8-week period following disbursement of the loan. Accordingly, many employers who are receiving PPP loans are now demanding that employees who were laid off or furloughed indefinitely return to work. Some are threatening that an employee’s failure to return to work will cause them to be ineligible for unemployment insurance benefits and requiring employees who do not return to work to submit resignation letters.
Employers are incentivized to get their employees to return to work both for PPP loan forgiveness and because employers’ experience-rating accounts continue to be charged for regular benefits (but not PUC, PEUC, or PUA). But there are multiple reasons for employers not to be overzealous. First, according to the PPP guidance, employees who reject “a good faith, written offer of rehire” will not count against employers in calculating the amount of loan forgiveness. Second, only the Department of Labor (or, on appeal, the Unemployment Insurance Appeal Board or the court) has the right to determine a claimant’s eligibility for benefits (which cannot be denied by the employer or waived by the claimant). Finally, it is unlawful for an employer to discharge, threaten, penalize, or in any other manner discriminate or retaliate against an employee for engaging in protected activity under the Labor Law, which arguably includes applying for unemployment insurance benefits.
PPP Loans and Total Unemployment
Recipients of PPP Loans
Recipients of PPP loans—especially sole proprietors and independent contractors without employees—may be claiming unemployment insurance benefits. There is not yet any official guidance on the relationship between PPP loans and unemployment insurance. Unlike wages that are paid to employees from the proceeds of PPP loans, the PPP loans themselves are not remuneration because they are not compensation for employment. Nonetheless, a claimant who stands to gain financially from the continued operation of a business is not totally unemployed, even on days on which they perform no services or receive no compensation. (For starting up/winding down businesses, spouse/family businesses, and part-time/sideline businesses, a claimant’s ineligibility may be limited to days on which they actually perform services.) Notably, the PPP application requires certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,” and “[t]he funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments.” Thus, an application for a PPP loan could be treated as work, and receipt of a PPP loan could be treated as financial gain from the continued operation of a business. Some independent contractors, freelancers, and gig workers may be self-employed for the purpose of PPP loans but not actually in business for themselves for the purpose of unemployment insurance.
Return of Employees to Work
An employee who returns to work (or continues to work) after their employer receives a PPP loan is subject to the normal rules of total unemployment under the New York unemployment insurance law. A claimant who works 4 or more days in a week, regardless of how much they earn, is not eligible for benefits for that week. A claimant who earns more than the maximum weekly benefit rate (currently $504) for a week, regardless of how many days they worked, is not eligible for benefits for that week. A claimant who works fewer than 4 days and earns less than the maximum weekly benefit rate may be eligible for partial benefits. A claimant is either totally unemployed or not totally unemployed on a day, as defined in the statute; the amount of any reduction in the claimant’s wages and/or hours is not relevant. A claimant who becomes unemployed again after returning to work for a nondisqualifying reason—e.g., the claimant is laid off after the 8-week period covered by a PPP loan—can resume claiming benefits, assuming they are otherwise eligible.
Restoration of Employees to Payroll
The outcome for an employee who is restored to payroll after being laid off or furloughed indefinitely but does not perform any services is less clear. On one hand an employee who remains on payroll and continues to receive their salary and benefits, even if they do not perform any services, is not totally unemployed because an employment relationship exists. On the other hand, an employee who does not perform any services may be totally unemployed despite receiving compensation from the employer. A claimant who does not perform any services can truthfully certify that they worked zero days. Nonetheless, those who claim benefits while receiving compensation from their (former) employers do so at their own risk, especially given that the compensation will presumably be treated as remuneration on paper.
Offers to Return (or Continue) to Work
Disqualification for Voluntary Leaving or Refusal of Employment
A claimant who voluntarily leaves employment without good cause or refuses employment without good cause is disqualified from receiving regular benefits and/or PEUC and must earn at least 10 times their weekly benefit rate in subsequent covered employment to break the disqualification. An employee’s rejection of an offer to return to work after being laid off or furloughed indefinitely would probably be treated as a refusal of employment, rather than a voluntary leaving of employment. A voluntary leaving of employment presumes that there is continuing work available; an employee who has been laid off or furloughed indefinitely cannot voluntarily leave employment that they do not have. Conversely, an employee who is laid off or furloughed with a definite date to return to work has continuing work available, and the employment relationship continues.
Refusal of Employment During First 10 Weeks of Benefits
During the first 10 weeks of benefits, a claimant generally must accept any employment “for which he or she is reasonably fitted by training and experience.” Nonetheless, a claimant has good cause to refuse employment where “the wages or compensation or hours or conditions offered are substantially less favorable to the claimant than those prevailing for similar work in the locality, or are such as tend to depress wages or working conditions,” which the Department of Labor interprets to mean less than 90% of the prevailing wage (the UI cutoff wage). If the offered wage is less than the UI cutoff wage, the claimant’s previous acceptance of the wage is irrelevant. Conversely, if the offered wage is greater than or equal to the UI cutoff wage, the fact that it is less than what the claimant previously earned is irrelevant. A claimant’s desire for permanent full-time employment does not constitute good cause to refuse temporary employment.
Refusal of Employment After First 10 Weeks of Benefits
After the first 10 weeks of benefits, a claimant generally must accept any employment that they are capable of performing, provided that the wage is at least 80% of the high calendar quarter wages in their base period. Notably, the 80% threshold does not apply to an offer of employment for which the claimant “is reasonably fitted by training and experience.”
Bona Fide Offer of Employment
Before a claimant can be disqualified for refusal of employment, there must be a bona fide offer of employment. A bona fide offer of employment includes, at a minimum, a start date, salary, location, and job duties. Salary, location, and job duties may be inferred from the claimant’s previous employment with the employer. A bona fide offer of employment must be definite and unconditional.
Good Cause to Voluntarily Leave Employment
Where there is continuing work available, a claimant may have good cause to voluntarily leave their employment for a “compelling family reason” or “if circumstances have developed in the course of such employment that would have justified the claimant in refusing such employment in the first instance,” as defined in section 593 of the Labor Law. A “substantial change in the terms and conditions of employment,” which includes a reduction in earnings of more than 10%, also constitutes good cause to voluntarily leave employment.
General Fear of COVID-19
A claimant who voluntarily leaves or refuses employment because they are advised to do so by a doctor generally does so with good cause. A claimant’s genuine and reasonable fear for their own safety or an OSHA violation may also constitute good cause to voluntarily leave or refuse employment. And claimants who are unable to work because of COVID-19 may be eligible for PUA. However, voluntarily leaving or refusing employment because of a general fear of COVID-19 without more—e.g., a doctor’s note advising the claimant not to work because of an underlying medical condition—is probably disqualifying.
Voluntary Leaving or Refusal of Employment to Receive Benefits
Because of COVID-19 and the additional $600 per week of PUC until July 31, 2020, some claimants would rather receive unemployment insurance benefits than continue to work or return to work. Generally, a preference to receive unemployment insurance benefits does not constitute good cause to voluntarily leave or refuse employment. And, to be eligible for benefits, a claimant must be ready, willing, and able to work and searching for work (even during COVID-19). However, financial hardship may constitute good cause to voluntarily leave or refuse part-time employment where the claimant’s earnings from the part-time employment plus their partial weekly benefit rate, if any, would be less than their full weekly benefit rate. (It is not clear whether the additional $600 per week of PUC would be included in this calculation.)
Voluntary Leaving or Refusal of Employment and PUA
An individual who is ineligible for regular benefits and whose “place of employment is closed as a direct result of the COVID-19 public health emergency” may be eligible for PUA. If the individual’s place of employment is open, they can not claim PUA for this reason. Accordingly, an individual who voluntarily leaves or refuses employment—even with good cause—is not eligible for PUA (unless they are unable to work for another covered reason). Reasons that constitute good cause under the New York unemployment insurance law—e.g., a wage below the UI cutoff wage, a “compelling family reason” unrelated to COVID-19, a substantial change in the terms and conditions of employment)—are not covered by PUA. A claimant who voluntarily leaves or refuses employment because of an underlying medical condition or fear for their own safety would need to be “advised by a health care provider to self-quarantine due to concerns related to COVID–19” to be eligible for PUA.
The federal PUA guidance confirms the following:
- “[A]n individual who refuses to return to work when called back by the employer because he or she wanted to receive unemployment benefits” is not eligible for PUA.
- “An individual who refuses an offer of work” is not eligible for PUA, “unless the individual is unable or unavailable to accept the offer of work because of a reason listed under section 2102(a)(3)(A)(ii)(I) of the CARES Act.”
- “Without having been advised by a health care provider to self-quarantine, an individual who does not go to work due to general concerns about exposure to COVID-19, and who does not meet any of the other COVID-related criteria for PUA, is not eligible for PUA.”
- “If the jurisdiction’s stay at home order due to the COVID-19 emergency is lifted and an employer has called his or her employees back to work, . . . an individual who refuses to return to work due to a general fear of exposure to the coronavirus . . . and who does not meet any of the other COVID-19 related criteria . . . is not eligible for PUA because general concerns about exposure to COVID-19 is not one of the reasons listed in section 2102(a)(3)(A)(ii)(I).”