Arizona program allows employers to avoid coronavirus layoffs

When the state ordered retail shops closed in mid-March amid the COVID-19 pandemic, Gayl Van Natter was hoping to avoid layoffs at the Golden Goose Thrift Store, a nonprofit in Catalina.

She found a way in the Arizona Shared Work program, a longtime state program that allows employers to spread reduced hours across two or more workers kept on the payroll — and lets workers collect unemployment benefits for their lost hours.

Van Natter, president of the Golden Goose since 2018, was able to spread work-hour reductions across the nonprofit’s six full-time employees.

“To me, it’s an excellent program,” she said. “It allows us to keep all of our people working and whole, where we probably would have had to lay some of them off and keep the other ones whole, or at the very least cut back everyone’s pay with no supplement.”

Keeping the workers on board also has helped the Golden Goose move forward with plans to reopen on June 2, with extensive safety precautions including mandatory masks and a cap of 35 shoppers in the store.

The Golden Goose is one of about 400 employers statewide who have been approved for the Shared Work program since March 1, under special rules affording more flexibility to employers during the coronavirus emergency, a DES spokesman said.

Volunteer Dick Werling repairs an electrical connection in a vacuum and brings it back to life at the Golden Goose Thrift Shop in Catalina, Arizona.
Rick Wiley / Arizona Daily Star

HOW IT WORKS

The Shared Work program provides an alternative to layoffs by allowing businesses to divide available work or hours among affected employees.

The program also allows the employees to receive a portion of unemployment insurance benefits while working reduced hours.

DES has adopted some special rules to help employers and workers during the COVID-19 pandemic:

The agency has temporarily increased the maximum reduction of hours for the Shared Work program from 40% to 60%. That means employers can reduce workers’ hours up to 60% and still qualify for the Shared Work program, as long as they continue to provide health and retirement benefits to participating employees.
During the emergency, employers won’t get charged with layoffs that normally could affect their unemployment insurance rating and increase their future costs.
Shared Work employees also qualify for federal pandemic unemployment compensation, which provides an additional $600 per week for eligible weekly claims from March 29 to July 25. That extra benefit is particularly important to workers in Arizona, whose maximum weekly unemployment benefit is second-lowest among the states at $240.

There are some caveats on the Shared Work program for employers who also qualify for other federal aid programs.

For example, Van Natter said, the Golden Goose also received a $63,000 loan through the federal Paycheck Protection Program, or PPP, that can be used to pay employees over an eight-week period, with the loan amount forgiven in proportion to the number of workers they retain.

But under its Shared Work plan, the nonprofit is limited to reducing work hours a maximum 25% or it could affect its PPP loan forgiveness, she said.

FLEXIBLE BUT TRICKY

Tucson attorney Tim Medcoff, who worked with the Golden Goose on its Shared Work plan, said the caveat is because under the rules for forgiving PPP loans, employers can’t reduce wages below 75% of a worker’s normal pay.

The Shared Work program has some built-in flexibility, allowing employers to share work over up to two groups of employees while still allowing them to lay others off.

“That’s a huge plus, the flexibility that it provides, and obviously it avoids laying people off,” said Medcoff, a managing partner at Farhang & Medcoff and chairman of the Tucson Metro Chamber.

“In general, employers don’t want to lose people, especially if they’ve spent a lot of time and money to get them trained, and then they have to hire someone else down the road,” Medcoff said.

Employers taking advantage of the state program ideally have groups of workers who do the same or similar tasks, so they can cover for each other during reduced hours, Medcoff said.

But Shared Work may not work for some smaller companies where each employee handles very different jobs, he noted.

SIGN UPS SURGE

DES, which has promoted the program in a newsletter to more than 230,000 employers and through partner agencies, has seen a surge in employer participation, department spokesman Brett Bezio said.

Statewide since March 1, about 400 employer Shared Work applications have been approved, representing 6,700 employees, Bezio said.

That’s a big jump from 2019, when there were about 27 employers and 500 employees participating in the program in any given month, he noted.

“We continue to promote this program among employers to encourage further participation,” Bezio said.

Arizona launched its Shared Work program in 1982 and is one of 26 states with operational Shared Work programs, also known as short-term compensation programs, according to the U.S. Department of Labor.