Alternatives To Layoffs: How the EDD May Help Your Business Reduce Costs and Retain Your Workforce

Second Quarter 2010Newsletters California Update Employment Law

If your company is considering layoffs or a reduction in employee hours, your business should assess two options offered by the California Employment Development Department (EDD).

Work Sharing Program

First, California's Work Sharing Program provides payment of unemployment insurance benefits to eligible individuals if their wages and hours have been reduced. Employers may consider this program as an alternative to layoffs. For example, if an employer with 50 employees decides, due to lack of work and economic factors, that it needs to lay off 10 employees, the employer could instead choose to retain all of its employees and participate in the Work Sharing program. All 50 employees would remain on the payroll, but their workweek would be reduced from five days to four days, resulting in a 20 percent reduction in work hours and pay. All 50 employees would continue to earn their wages for four days, and they may be eligible to collect Work Sharing benefits for the fifth (nonworking) day from the EDD.

According to the EDD, any employer who has a reduction in production, services or other conditions that cause the employer to seek an alternative to layoffs may participate in the Work Sharing Program. Some of the specific requirements are:

  • A minimum of two employees, comprising at least 10 percent of the employer's regular work force or a unit of the work force, must be affected by a reduction in wages and hours worked.
  • The reduction in wages and hours worked also must be at least 10 percent.

Unfortunately, most employers will find that the Work Sharing Program is administratively demanding. Employers that wish to participate in the program must first apply, then certify each week that affected employees are working reduced hours. This administrative burden may not be significant if only a few employees are participating, but can be burdensome if many employees are involved. Also, an employer must reapply to continue to participate beyond six months. The advantages to using the Work Sharing Program, however, are obvious: employees do not lose their jobs. Employers retain all their employees and simultaneously achieve the cost reduction they need to survive the economic downturn. Then, when business improves, employees can resume their regular work schedule.

To obtain more information or participate in the Work Sharing Program, visit http://www.edd.ca.gov/Unemployment/Work_Sharing_Claims.htm.

Partial Unemployment Insurance Benefits

A second alternative is a claim for partial unemployment insurance benefits through the EDD. Partial unemployment claims are for employees whose earnings and hours are reduced, but the employees are not laid off. The employer provides a Notice of Reduced Earnings to the employee, and the employee files a claim for partial benefits. An employee may be eligible for partial unemployment insurance benefits if:

  • The employee works less than their normal full time hours because of lack of work;
  • The employee experiences a reduction in wages due to the decrease in work; and
  • The employee's gross earnings, after deducting the first $25 or 25 percent of the total earnings (whichever is greater), are less than the employee's weekly unemployment insurance benefit amount.

For more information on partial unemployment insurance benefits, visit http://www.edd.ca.gov/Unemployment/FAQ_-_Partial_Claims.htm.