The NYS Department of Labor (DOL) issued an order dated January 14, 2021, that significantly modifies the administration of unemployment insurance charges to employer accounts. The order is intended to address increased costs for employers due to the unprecedented number of unemployment claims as a result of the COVID-19 pandemic.
The order sets forth that the DOL will not charge employer accounts for unemployment benefit claims incurred since NYS Governor Cuomo declared a state disaster emergency on March 7, 2020. The order also cancels all unemployment charges that have already been applied to employer accounts. As a result, the order prevents potentially dramatic increases to employer experience ratings for 2021 due to the heightened number of unemployment claims filed in 2020. Eligible individuals will continue to receive unemployment benefits, but such benefits will be charged to the state’s general account. The parameters of the order apply to all charges accrued since the benefit week starting March 9, 2020, for employers who make regular contributions to unemployment insurance as well as self-insured employers.
The impact of the order is particularly significant for self-insured employers, such as not-for-profit organizations and government entities, that reimburse the unemployment insurance fund on a dollar-for-dollar basis for benefits paid to their former employees instead of making regular contributions to the unemployment insurance fund.
In November 2020, the DOL advised that pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, self-insured employers were responsible for only 50 percent of their unemployment charges, and the federal government would cover the cost of the remaining charges. The order states that self-insured employers will no longer be responsible for paying the remaining 50 percent of charges. In other words, self-insured employers will no longer be responsible for paying any portion of their unemployment charges.
Further, while the order does not explicitly state that self-insured employers will receive reimbursement for payments made during the pandemic, the DOL has advised that self-insured employers will receive a refund of payments made for charges incurred after March 9, 2020. At this juncture, it is unclear as to when self-insured employers will receive any reimbursement for prior payments or the exact form the reimbursement will take, such as a credit on their unemployment account for future use.
If you have any questions regarding this alert, please contact Ben Wilkinson, counsel, at bwilkinson@barclaydamon.com, or another member of the firm’s Labor & Employment Practice Area.