Guide to Understanding the Pandemic Emergency Unemployment Compensation (“PEUC”) Program Under the CARES Act for Non-Profit Employers

CATEGORY: Special Bulletins
CLIENT TYPE: Nonprofit
AUTHOR: Casey Williams
PUBLICATION: LCW Special Bulletin
DATE: Apr 21, 2020

Note: This is the second of a two-part series concerning federal unemployment assistance. You may access the first bulletin here.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. Under that Act, the federal government established several programs to expand unemployment assistance to workers who lose their jobs or work hours due to the COVID-19 pandemic.

In the first bulletin, we discussed the Federal Pandemic Unemployment Compensation (“FPUC”) program, which provides eligible individuals with $600 per week in federal unemployment compensation to supplement state unemployment compensation. The purpose of this bulletin is to explain a related program, the Pandemic Emergency Unemployment Compensation (“PEUC”) program, which provides temporary federal unemployment compensation to individuals after they exhaust their entitlement to state unemployment compensation.

In this bulletin, we examine the interplay between the PEUC and FPUC programs as well as the interaction between state unemployment compensation and state extended unemployment compensation and PEUC. This bulletin is particularly important for employers that are or may be considering layoffs or reduced work hours for their workforces because it can be used to provide important information to employees on unemployment benefits and conditions for such benefits.

Pandemic Emergency Unemployment Compensation

Section 2107 of the CARES Act creates the PEUC program. The program is a new federal entitlement that provides eligible individuals up to 13 weeks of federally funded unemployment compensation once they have received and exhausted the 26 weeks of unemployment compensation provided by the state.

For eligible and qualified individuals, the PEUC will be equal to the amount of unemployment compensation that the state would otherwise provide, but for the fact that the individual exhausted their entitlement to such compensation. Therefore, an eligible qualified individual will receive between $1 and $450 per week based on whether they are fully or partially unemployed in a given week and based on their income in the preceding year.

The PEUC program expires December 31, 2020, and so no payments will be made after that date.

DOL Guidance Regarding PEUC  

On April 10, the Department of Labor (“DOL”) issued a program letter providing guidance concerning operation of the PEUC program, including eligibility criteria and specific information on how the program interacts with existing state and federal unemployment programs.

Eligibility Criteria and PEUC Interaction with Regular Unemployment Compensation

The DOL guidance provides that in order to be eligible to receive PEUC funds, an individual must satisfy each of the following conditions:

  1. The individual has exhausted all rights to regular unemployment compensation under state law with respect to a benefit year that ended on or after July 1, 2019;
  2. The individual has no rights to regular unemployment compensation with respect to a week under any other state unemployment compensation law, or to compensation under any other federal law; and
  3. The individual is able to work, available to work, and is actively seeking work.

In other words, in order to qualify for PEUC funds, an individual must have received 26 weeks of regular unemployment compensation under California law on or after July 1, 2019, not be entitled to any regular state unemployment compensation from any other state or federal government, and be able and available to work and be actively seeking work. For example, if an individual was laid off on October 19, 2019 and started receiving state unemployment compensation the next day, that individual would have exhausted all rights to regular state unemployment compensation by April 20, 2020 such that the individual would qualify for PEUC for the following 13 weeks.

The DOL guidance makes clear that the individual need only exhaust regular unemployment compensation, not any extended unemployment compensation to which the individual may be entitled. This is important for the order of operations concerning which unemployment benefits an individual may be entitled at a given time. Based on the DOL guidance, after an individual exhausts 26 weeks of unemployment compensation provided by the state, the individual may receive PEUC for the ensuing 13 weeks, so long as the individual remains qualified.

PEUC Interaction with Extended Unemployment Compensation

In California, “[d]uring prolonged periods of cyclical and technological unemployment,” an individual who exhausts their entitlement to regular unemployment compensation may be entitled to extended unemployment compensation. The State Unemployment Insurance Code refers to this compensation as an “extended duration award.”

Unlike regular unemployment compensation, which is available to eligible and qualified individuals at all times, extended duration awards are available to eligible and qualified individuals only when certain labor conditions are satisfied. State law provides that such extended benefits will only be available starting in the third week following a week in which “the insured unemployment rate equals or exceeds 6 percent” and will only be through the third week following a week in which the insured unemployment rate drops below 6 percent.

On April 17, California released its jobs report for March, which showed an unemployment rate of 5.3% and up from 3.9% in February. However, that report was based on information collected prior to March 12, and therefore does not reflect the hundreds of thousands of new jobless claims in the intervening month. As a result, labor conditions in California very likely satisfy the condition precedent for the commencement of the extended duration awards such that individuals who have exhausted regular unemployment compensation may soon be qualified to receive extended benefits under the state program.

However, the CARES Act and DOL guidance provide that “the payment of extended compensation for which an individual is otherwise eligible must be deferred until after the payment of any PEUC for which an individual is concurrently eligible.”  Therefore, once the labor conditions exist such that an individual who has exhausted regular state unemployment compensation would otherwise qualify for an extended duration award from the state, that individual would first receive the PEUC.

Again, this is important for the order of operations, which first provides that an eligible and qualified individual would receive regular state unemployment compensation, and then, once that compensation is exhausted, would receive PEUC, even if conditions are such that the individual would normally receive extended unemployment compensation from the state.

PEUC Interaction with Federal Pandemic Unemployment Compensation

The third piece of the puzzle is the interplay between PEUC and FPUC, which we addressed in the prior bulletin.

The interaction between these two programs is limited temporally because, while the PEUC program is operational through the end of 2020, the FPUC program expires on July 31, 2020. Therefore, the programs only overlap operationally through the end of July. The majority of individuals who are laid off as a result of the COVID-19 pandemic will not qualify to receive both PEUC and FPUC simultaneously because of the order of operations of unemployment compensation programs and the timing of the layoff. For example, an individual who was laid off on April 1, 2020 will not exhaust the 26 weeks of regular state unemployment compensation and become qualified to receive PEUC until the end of September by which point the FPUC program will  have expired.

However, an individual, like the one described earlier in the bulletin, who was laid off in October 2019, will exhaust all rights to regular state unemployment compensation by the end of April 2020 such that the individual would qualify for PEUC and FPUC for the 13 weeks until the PEUC was exhausted. Such an individual, in any week of unemployment after exhaustion of the regular state unemployment compensation and prior to July 31, 2020, the individual will be eligible and qualified to receive PEUC and also receive the $600 in supplemental assistance under the FPUC program.

FPUC Interaction with Extended Unemployment Compensation

The final question, and one not addressed in the previous bulletin, is whether an individual who is eligible and qualifies to receive an extended duration award from the state after the exhaustion of the PEUC will also be entitled to receive FPUC. The answer to that question is yes. Prior DOL guidance provides that “extended benefits” is one of the programs under which an individual would be entitled to receive FPUC.

Overview of Interactions between Unemployment Compensation Programs

The below chart is intended to provide an overview of which unemployment compensation programs are available, whether supplemental unemployment compensation is available for each week of unemployment, and any relevant qualifications to the receipt of such compensation.

Weeks of Unemployment Unemployment Compensation Program Supplemental Unemployment Compensation Qualifications to Compensation
1-26 Regular State Unemployment Compensation Yes, Federal Pandemic Unemployment Compensation (“FPUC”), but only through July 31, 2020
27-39 Pandemic Emergency  Unemployment Compensation (“PEUC”) Yes, FPUC, but only through July 31, 2020 PEUC only available through December 31, 2020
40-52 Extended State Unemployment Compensation (“Extended Duration Award”) Yes, FPUC, but only through July 31, 2020 Certain labor conditions must be satisfied for Extended Duration Awards

We recognize that the overlap of these laws is very important to understanding the precise benefits employees will receive if they need to access them. LCW attorneys can help you with questions about these important benefits.