California’s Work Sharing Program: An Option for Employers in Trying Economic Times

It is no secret that many employers in California are experiencing trying times. As the economy dips further downward, many employers will contemplate layoffs as a way to stay afloat. While layoffs have a devastating effect on the employees let go, as well as on morale at a company, often a layoff is the only option to minimize financial hardship. Yet California employers should be aware that there is an alternative to layoffs – namely California’s Work Sharing or “Partial Unemployment” Program.

The goal of the Work Sharing program is to help both employee and employer. The employee is spared the difficult period of total unemployment. The employer can avoid the high costs of hiring and retraining new employees once the economy improves. Here is how the program works, according to the Employment Development Department (EDD):

In many other states if a business with 100 employees faces a temporary setback and must reduce its work force by 20%, the employer has no choice but to layoff 20 employees. Under California’s Work Sharing program, an employer facing the same situation could file a Work Sharing plan with EDD reducing the work week of all employees from five days to four days (a 20% reduction). The employees would be eligible to receive 20% of their weekly unemployment insurance benefits. Under this plan everyone benefits. The employer is able to keep a trained work force intact during a temporary setback and no employees lose their jobs.

In essence, the program gives an employer the option to, instead of firing the employees, allow employees to work a reduced schedule and collect the percentage of their weekly unemployment insurance benefit amount equal to the percentage of their wage reduction for that week.

To be eligible, an employer must show that: (1) a minimum of 10% of the regular permanent workforce requires a reduction in wages and hours worked, and (2) at least two employees, but not less than 10% of the regular permanent workforce, will participate in the program. Employers with employees subject to collective bargaining agreements must obtain written approval from the bargaining agent. Finally, employers are required to submit their plan for approval to the EDD using form DE 8686 (available at http://www.edd.ca.gov/pdf_pub_ctr/de8686.pdf).

It is becoming more apparent that the economy will not turn around in the near future. Thus, many employers will be placed in the difficult situation of having to avoid financial adversity on the one hand, while wanting to protect their employees on the other. California’s Work Sharing Program gives employers the opportunity to do both.