California’s EDD Work Sharing Program

Employers facing business challenges that affect its workforce due to the COVID-19 virus pandemic might consider California’s Employment Development Department (EDD) Work Sharing Unemployment Insurance Program. The program is, in the EDD’s words, a “practical alternative to layoffs.” It allows, for example, an employer to reduce payroll by 20%, instead of laying off 20% of its workforce, and Unemployment Insurance would pay part of the difference in wages to affected employees.

To qualify for the program, an employer must have experienced a reduction in production, services, or other conditions that cause it to seek an alternative to layoffs. Certain terms and conditions apply:

• A minimum of two employees, comprising at least 10% of the regular workforce or a unit of the workforce, must be affected by a reduction in wages and hours worked.
• The reduction in weekly wages and hours worked must be at least 10%, not to exceed 60%.
• The employer must maintain employee health and retirement benefits under the same terms and conditions as prior to the reduction in hours and wages or to the same extent as for employees not participating in the plan.
• Corporate officers and major stockholders may not participate.

For employees to qualify to participate in the program they must:
• Be a part of the employer’s permanent regular workforce and not a leased, intermittent, temporary, or seasonal employee.
• Have qualifying wages in the base quarters used to establish a regular California UI claim, calculated by one of two alternative methods: the Standard Base Period and the Alternative Base Period. The Standard Base Period is the first four of the last five calendar quarters prior to filing the claim. The Alternative Base Period is the most recently completed four calendar quarters prior to filing the claim. If the employee has earned at least $1,300 in one-quarter of either type of Base Period, or $900 in one-quarter of either type of Base Period and total base period earnings are 1.25 times the highest quarter’s earnings, then the employee would qualify.
• Have completed a normal workweek (with no hour or wage reductions) before participating in Work Sharing.

An employer seeking to participate in the program must fill out the Work Sharing Plan Application, DE 8686, and submit to the EDD. These instructions and the Form can be found online here: https://www.edd.ca.gov/pdf_pub_ctr/de8686.pdf
The EDD Special Claims Office will send a letter of approval, one mail claim packet for each participating employee, and a ten-week supply of weekly certifications for each employee. The employer needs to issue these certifications to affected employees each week for the duration of the program. These forms must be mailed in weekly.

Benefits will also be paid weekly, proportionate to the percentage of reduction in hours and wages. The EDD provides this example: An employee who normally works five days a week for $500 is reduced to four days a week for $400. The Work Sharing benefits for this employee would be 20% of the benefits the employee would receive if unemployed. If maximum UI benefits for this employee would be $300, the employee would qualify for $60 in Work Sharing Benefits, bringing their weekly pay to $460.

The employer will be charged for Work Sharing Unemployment Insurance in the same manner as for regular UI benefits.

There may be some disadvantages for employers who utilize the program. The program can be administratively burdensome, because of the application and weekly certifications. Employers must periodically re-apply. There is also a potential increase in the employer’s unemployment insurance tax rate, but layoffs would have the same result if the laid-off employees seek unemployment insurance.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.