COVID-19 and Texas Unemployment Insurance Benefits — Key Issues and Critical Updates  

March 20, 2020

For workers and employers in the state of Texas who are dealing with layoffs, furloughs, or reduced work schedules as a result of the coronavirus/COVID-19 pandemic, the following provides a simple, updated guide to the rapidly changing unemployment insurance benefits policies and procedures promulgated by the Texas Workforce Commission (TWC).

Updates

The TWC will ordinarily withhold benefits payments for the first week of an unemployed workers’ claim — also known as the waiting week — until they return to full-time work or they exhaust their benefits (at which time the TWC would then pay the amount of the first week’s benefits), and claimants are ordinarily required to look for a new job in order to continue to collect benefits. However, as of March 19, 2020, the TWC announced that it will be waiving work search requirements for all claimants and the waiting week for those claimants affected by COVID-19. As a result, eligible workers may apply for benefits as soon as they are separated from employment or put on a sufficiently reduced schedule, and, if approved by the TWC, collect those benefits beginning with the date of application.

TWC has also issued guidance to employers who are concerned about an influx of chargebacks to their unemployment tax account. According to the TWC:

If a business shuts down due to a closure order from a governmental entity, Section 204.022(a)(1-2) of the Texas Labor Code may allow an employer to ask for chargeback protection. If that were to happen, you should include a copy of the shutdown order with your response to the unemployment claim and argue that the closure was mandated by a local or state order.

In a separate guidance document recently released by the TWC, the commission states, “[o]n Friday, March 13, 2020, Governor Greg Abbott declared a disaster relating to the pandemic. Therefore, employer tax accounts may be protected from chargeback.” These releases signal possible relief for employers. These and other coronavirus-specific guidance documents can be accessed on the TWC’s dedicated COVID-19 employer resources website.

Additionally, the recently enacted federal Families First Coronavirus Response Act has allocated $2 billion to state unemployment insurance programs, including the Texas Unemployment Compensation Fund. This capital will help the TWC meet the demands placed on the fund caused by the recent massive influx of unemployment claims brought in the wake of the coronavirus pandemic. However, even with this capital infusion, the unprecedented number of unemployment claims and uncertain duration of the pandemic is likely to strain Texas’s and other states’ unemployment compensation funds.

Unemployment Benefits for Laid-off and Reduced Hour Workers

Unemployment benefits provide temporary, partial income replacement for qualified individuals who are totally or partially unemployed (working part-time or on reduced hours) through no fault of their own and are generally only available to those who are looking for a new job (but see discussion of recent waiver of this requirement, above).

Important Terms

Base period: the first four of the last five completed calendar quarters before the effective date of the initial claim. The effective date is the Sunday of the week in which the person applies for unemployment benefits. The worker must have earned wages in at least two of the four calendar quarters that make up the base period. The TWC provides this chart to help workers determine their base period:

https://twc.texas.gov/files/jobseekers/eligibility-benefit-amounts.gif

Weekly Benefit Amount (WBA): the amount the unemployed person will receive for weeks they are eligible for benefits. The WBA will be between $69 and $521 (i.e. the minimum and maximum weekly benefit amounts in Texas) depending on past wages.

To calculate the WBA, the TWC divides the employee’s base period quarter with the highest wages by 25 and rounds to the nearest dollar.

Maximum Benefit Amount (MBA): 26 times the individual’s weekly benefit amount or 27 percent of all the individual’s wages in the base period, whichever is less.

Who is eligible to apply for unemployment benefits?

The TWC evaluates an unemployment benefits claim based on: (1) past wages; (2) the nature of the job separation; and (3) whether the employee is meeting their ongoing eligibility requirements.

Past Wages

To have a payable claim, the individual must meet all of the following requirements:

  • They have wages in more than one of the four base period calendar quarters.
  • Their total base period wages are at least 37 times their weekly benefit amount.
  • If the individual qualified for benefits on a prior claim, they must have earned six times their new weekly benefit amount since that time.

Nature of Job Separation

Unemployment benefits are generally only available to those who were laid off or working reduced hours (i.e. are partially employed) through no fault of their own, and in narrow circumstances where the individual quit or was fired for certain legitimate reasons unrelated to misconduct (e.g. wrongful or constructive discharge in violation of the employee’s rights).

Ongoing Eligibility Requirements

To continue to be eligible for unemployment benefits, a claimant must be totally or partially unemployed (working part time) and meet all of the requirements listed below:

  • Meet all work search requirements, unless exempted [Temporarily Waived]
    • Register for work in the state where they reside [Temporarily Waived]
    • Search for work [Temporarily Waived]
    • Document their work search activities [Temporarily Waived]
    • Apply for and accept suitable full-time work [Temporarily Waived]
  • Request payment for weeks of unemployment, when scheduled
  • Be physically and mentally able to work
  • Be available for full-time work
  • Participate in reemployment activities as required
  • Respond to requests from TWC or a Workforce Solutions office as instructed

A claimant who at any point fails to meet one or more of those requirements will be held ineligible to receive benefits as long as the failure exists, even if otherwise qualified to receive benefits.

Are independent contractors eligible?

Since employers only pay unemployment taxes for employees, only those who are truly employees are eligible to collect unemployment benefits. The law creates a presumption that an individual performing services in exchange for wages is an employee (and therefore eligible to apply for and collect unemployment) unless the employer can show that the individual's performance of the service has been and will continue to be free from the employer’s control or direction — i.e. that the individual is an independent contractor. The TWC applies a 20-factor test to determine whether someone is or is not a true independent contractor. In making that decision the TWC does not pay attention to whether the parties call the individual an independent contractor. The TWC evaluates the underlying nature of the work relationship on a case-by-case basis and does not need to give any weight to labels.

How to determine the amount of employment benefits.

The dollar amount to which an individual is entitled to receive in unemployment benefits hinges on the nature of their unemployment — i.e. whether they are totally or partially unemployed (working reduced hours or receiving reduced pay):

Totally unemployed: someone who is earning 25 percent or less of the weekly benefit amount.

Partially unemployed: someone who is earning more than 25 percent, but less than 125 percent, of their weekly benefit amount.

In plain terms, a totally unemployed person is someone who is no longer working for pay, and a partially unemployed person is someone whose pay, due to a reduction in work time, is below 125 percent of the weekly benefit amount to which he or she would be entitled if totally unemployed.

A totally unemployed person is entitled to their weekly benefit amount up to the maximum benefit amount (see above).

A partially unemployed claimant is entitled to unemployment benefits in the amount of the difference between their reduced earnings and 125 percent of their weekly benefit amount. The reduced earnings that the claimant continues to collect from their employer act as an offset against the unemployment benefits.

Example: an employee whose prior earnings entitle her to a weekly benefit amount of $240 per week experiences a drop in earnings due to a reduction in hours through no fault of her own (not as a disciplinary measure and not at the employee's own request), and the earnings fall below $300 (i.e. 125 percent of $240) per week, the employee can file a valid partial unemployment claim and draw the difference between the lower weekly earnings and $300 per week. A paycheck of $280 would thus result in payment of $20 in unemployment insurance benefits.

The reason that the law provides for partial unemployment insurance benefits is to encourage employees whose hours are reduced to stay with the job and work the available hours, thus promoting employment, rather than quitting altogether and going on total unemployment; those who stay with the job and collect partial UI benefits end up with 125 percent of their weekly benefit amount, instead of only 100 percent.

The TWC is working around the clock to address the sudden influx of unemployment benefits claims, and is constantly updating its website to reflect the commission’s revised policies and procedures. As the situation develops, further revision and refinement is expected, and interested employers and workers are encouraged to check the TWC website frequently and register for automatic email updates. Of course, we will be monitoring the situation closely and will provide updates and analysis as developments occur.

 

 


Authors

Adam C. Gutmann

Associate

agutmann@cozen.com

(832) 214-3919

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