Christina Garten temporarily shut down her house cleaning business on April 3, laying off nearly all of her 35 employees.
But after recently receiving a loan through the U.S. Small Business Administration’s Paycheck Protection Program, she started trying to rehire her staff, which is mostly part time.
But she ran into a problem. Most have been earning more on unemployment benefits than they would returning to work at Christina’s Complete Clean.
With the extra $600 in federal unemployment benefits made possible through the Coronavirus Aid, Relief and Economic Security Act, the average unemployment benefit in Indiana is $873 per week.
Garten said her part-time employees typically earned only $300 per week and her full-time employees earned $600 to $650. So, she doubled the pay to lure them back.
“Basically trying to put out there an offer they couldn’t refuse,” Garten said.
Her situation isn’t uncommon.
As Indiana Gov. Eric Holcomb and Indianapolis Mayor Joe Hogsett allow businesses like restaurants, retailers and service providers to resume in-person operations, some employers are eager to get started.
But employees are not as excited to return to work and give up their unemployment benefits. Plus, workers have concerns about health and safety precautions and many need child care.
“It’s still very clear that working in a crowded place is not safe,” said Fran Quigley, law professor at the Indiana University McKinney School of Law Health and Human Rights Clinic. “If your workplace is not safe for you, you do not need to return to it.”
Business leaders say they are empathetic to the concerns of employees, but they need staff on board to resume work as normal. And employers like Garten need to have staff on the payroll to qualify for PPP loan forgiveness.
Garten said she only had one employee officially decline her offer. “I think they had to think through, ‘OK, unemployment isn’t going to last forever.’”
Before the pandemic, unemployed workers could claim benefits for 26 weeks; the CARES Act extended that by 13 weeks, for a total of 39 weeks of eligibility.
The law also added a $600 payment on top of what states already pay. That add-on is set to expire at the end of July. But Democrats in Congress are pushing to extend it through the end of the year and included it in the latest relief package that passed the U.S. House. The Republican-controlled U.S. Senate does not support the bill and has not proposed an extension.
The goal of the extra payment is to provide 100% wage replacement for the average worker. But in some service industry jobs, such as waiters or waitresses, the benefits often exceed the wages the worker had been receiving.
The minimum wage in Indiana is $7.25 per hour, which equals $290 for a full-time, 40-hour workweek. That’s less than half the extra federal unemployment benefit of $600 per week, plus the individual would receive some state unemployment benefits.
“The federal money is creating unbelievable hurdles to get people to come back to work,” said Patrick Tamm, president and CEO of the Indiana Restaurant and Lodging Association. “It’s a serious problem. … We’ve always had labor issues; now we have a new wrinkle.”
Restaurants in most of the state were allowed to resume in-person dining at 50% capacity May 11. In Marion County, they were allowed to offer in-person dining outdoors starting May 22.
Upland Brewing Co. President David Bower said, for many jobs at his restaurants, he can’t compete with the current unemployment benefits. Bloomington-based Upland, which has three locations in the Indianapolis area, had to lay off 83% of its workforce due to virus-related closures.
He said he’s heard from laid-off employees concerned about the health risks of coming back to work. But the bigger sticking point for many is the prospect of losing unemployment benefits that are higher than their wages. Bower said that’s made it difficult to rehire staff.
Bower said he didn’t want to pressure anyone to come back who felt unsafe, and his team tried to address every situation individually.
“We will have filled our roster by the time we reopen each store,” Bower said. “But sometimes, it’s been more down to the wire than we had anticipated.”
Tamm said if customers return, that will significantly help with restaurant recruiting because customers give tips, which boost wages.
Mark Fisher, chief policy officer for the Indy Chamber, said some employers have offered their employees higher wages, bonuses, overtime pay or hazard pay not just to lure people back but also to keep people on staff during the pandemic.
“Retaining good workers is much more cost-effective than continuously trying to hire new people,” Fisher said.
‘A complicated question’
Individuals who refuse to return to work could be denied unemployment benefits going forward, but the Indiana Department of Workforce Development is considering these claims on a case-by-case basis.
That’s because the question of whether someone still qualifies for unemployment benefits after receiving a job offer is not easy to answer.
Josh Richardson, chief of staff for DWD, said it’s not OK for employees to refuse work simply because they are nervous about it or because they’re making more money on unemployment than they would working.
However, if someone has received a job offer, but has been ordered to quarantine, the worker could keep receiving benefits.
“I would say that, sort of anywhere between those two lines, things start to become a little bit more fact-sensitive,” Richardson said.
The CARES Act specifically addressed some situations, essentially broadening eligibility beyond normal parameters.
For example, the law allows someone living with an individual who has tested positive for COVID-19 to receive unemployment. But it does not allow someone living with an individual who is in a high-risk category, but is not sick, to continue receiving the benefits if suitable work is available.
The federal law also addressed child care. If school or day care services are unavailable, a parent could refuse to return to work and continue receiving unemployment benefits.
Quigley said the primary question is whether the job offered to an individual is considered “suitable.” If it’s not, the person could still receive unemployment benefits.
“In terms of health and safety, that’s a complicated question,” he said.
Jeff Macey, employment law attorney for Macey Swanson LLP, said it’s “tricky” to say whether someone can keep receiving benefits after turning down work, because “there’s not a lot of guidance.”
He said it can depend on what information an employer gives DWD and how someone with the agency evaluates the claim. Those who are denied benefits can also appeal.
Indiana Chamber of Commerce President Kevin Brinegar said, aside from the exceptions allowed in state and federal law, workers are no longer eligible for unemployment if they’re asked to come back to work and refuse.
“At that point, the employee has a pretty strong motivation to come back to work,” Brinegar said.
Richardson said DWD wants to see a “heavy level of communication between the individual and their employer” when evaluating why someone turned down a job.
For example, someone can’t simply not show up to work one day without warning the employer, then file for unemployment benefits and be approved, even if that person had a qualifying reason for not working, he said.
Brett Voorhies, president of Indiana State AFL-CIO, said that’s not what most workers are doing. He’s heard from workers who are ready to go back on the job but have concerns about safety and whether companies will provide them with personal protective equipment.
“They’re afraid,” Voorhies said. “When I say afraid, they might have diabetes, heart conditions, be a high-risk person, or they’ve got somebody in the household who is high risk.”
Quigley said the Holcomb administration needs to do a better job communicating that individuals who do not feel comfortable returning to work or are uncertain whether they qualify should still apply for benefits.
“I think the messaging has been reckless,” he said. “It could very well be taken by people that they don’t have a choice, and that’s not true.”
But if an employee chooses not to return to work, the employer can hire someone else, eliminating the option for the worker. And filling open positions might not be difficult with such high unemployment.
As of May 2, nearly 295,000 people were receiving unemployment benefits in Indiana.
“If you wait too long to reenter the workforce, you may be out of work longer,” Fisher said.
Brinegar said the state has missed an opportunity to pursue a program called work share during the pandemic, which could have helped reduce the number of employees laid off.
Under that system, instead of laying off five employees, for example, an employer could reduce the hours of the entire staff. All the employees would then be eligible to seek unemployment benefits to fill the gap caused by the reduced hours.
More than two dozen other states have a work share program in place. And Indiana lawmakers have considered creating one, but it has never passed.
Under the CARES Act, the federal government is covering the cost of the partial unemployment benefit through the end of the year for states that had work share programs.
“We believe that would translate into tens, if not hundreds, of millions of dollars,” Brinegar said. “But unfortunately we don’t get to participate in that program.”
The CARES Act also offered funding to cover some of the expense of a work share program for states that didn’t already have one—and offered money to help those states implement the technology to administer a program.
Indiana did not opt in, though. Holcomb said the decision was made based on the need to upgrade the system and get legislative support for it.
“Down the road, it very well might be something we take a look at,” he said.•