Understanding How The Pandemic Unemployment Assistance (“PUA”) Program Affects Employee and Independent Contractor Eligibility For Unemployment Benefits Under The CARES Act

CATEGORY: Special Bulletins
CLIENT TYPE: Nonprofit
AUTHOR: Casey Williams
PUBLICATION: LCW Special Bulletin
DATE: Apr 30, 2020

Note: This is the third Special Bulletin published by LCW in a series concerning federal unemployment assistance. You may access the first bulletin regarding the Federal Pandemic Unemployment Compensation (“FPUC”) program here, and the second bulletin regarding the Pandemic Emergency Unemployment Compensation (“PEUC”) program 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 two bulletins, we discussed the FPUC and PEUC programs, which respectively supplement the amount of unemployment compensation and the duration of unemployment assistance provided under state unemployment programs. The purpose of this bulletin is to explain the third major component of the CARES Act, the Pandemic Unemployment Assistance (“PUA”) program. The PUA program is intended to provide federal unemployment benefits to certain classes of workers who are not eligible for state unemployment compensation. PUA benefits will be provided to eligible individuals at a level comparable to that which workers would otherwise receive if they were eligible for state unemployment compensation, in addition to benefits from the FPUC program.

This bulletin may serve as a guide to assist employers understand the benefits to which eligible and qualified individuals are entitled under the program. While news coverage of the PUA program focuses on “gig workers,” this bulletin will provide important information for employers that use independent contractors and employers who may have offered employment to an individual who was unable to start in their position due to certain specified COVID-19-related reasons. This bulletin is also important to employers that are not covered by the state unemployment insurance program, such as religious schools and some nonprofits.

Pandemic Unemployment Assistance

Section 2102 of the CARES Act creates the PUA program. The program expands the scope of eligibility for federal unemployment benefits to “covered individuals” that would otherwise not qualify for unemployment compensation under state or Federal law. Under the program, eligible and qualified individuals may receive up to 39 weeks of federal unemployment compensation.

On April 5, 2020, the Department of Labor (“DOL”) published a program letter providing guidance for operation of the program.  On April 27, 2020, DOL published additional guidance for the PUA program.  While the additional guidance primarily provides direction to states in administering the program, it also presents information in a helpful question and answer format on topics such as PUA eligibility and benefit amounts. The program letter and additional guidance are essential reading for employers that wish to understand which employees and/or independent contractors with whom they work will be eligible for the program.

Ineligible Individuals

At the outset of this analysis, it is important to note which individuals the program does not cover. Section 2102 of the CARES Act and the DOL guidance expressly state that PUA is generally not payable to individuals who have the ability to telework with pay, or who are receiving paid sick leave or other paid benefits, unless there has been a reduction in their customary hours.

Furthermore, because the purpose of the program is to provide unemployment benefits to individuals who are otherwise ineligible for unemployment assistance, the State Employment Development Department (“EDD”) must, as a threshold determination regarding PUA eligibility, verify that none of the “covered” individuals discussed below are entitled to regular unemployment insurance from the state.

Who is a “Covered Individual?”

Under the PUA program, a covered individual means any one of the following types of individuals:

(1)   Self-employed individuals, including independent contractors;

(2)   Individuals seeking part-time employment;

(3)   Individuals lacking sufficient work history; and

(4)   Individuals otherwise not qualified for regular unemployment compensation under state or federal law, or PEUC.

The phrase “Self-employed individuals” is defined as an individual whose primary reliance for income is on the performance of services to the individual’s own business or farm.  These individuals include independent contractors and workers for certain religious entities.

For purposes of PUA coverage, an individual “lacking sufficient work history” means an individual who satisfies each of the following conditions: (1) the individual has a recent attachment to the labor force; (2) the individual does not have sufficient wages in covered employment during the last 18 months to establish a claim under regular unemployment compensation; and (3) the individual became unemployed or partially unemployed because of a qualifying COVID-19-related reason.

Qualifying Reasons for Covered Individuals

In order for a covered individual to qualify for PUA, the individual must self-certify to EDD that they are otherwise able to work and available for work except that the individual is unemployed, partially unemployed, and unable to work or unavailable for work due to at least one of the qualifying reasons provided below. These qualifying reasons expand on similar qualifying reasons set forth under the Families First Coronavirus Response Act (“FFCRA”) which we discussed here.

The ten qualifying reasons for PUA are as follows:

  1. The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.
  2. A member of the individual’s household has been diagnosed with COVID-19.
  3. The individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID-19.
  4. A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 emergency and such school or facility is required for the individual to work.
  5. The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency.
  6. The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  7. The individual was scheduled to commence employment and now does not have a job, or is unable to reach the job, as a direct result of the COVID-19 public health emergency.
  8. The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19.
  9. The individual has to quit his or her job as a direct result of COVID-19.
  10. The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency.

The Secretary of Labor has also provided guidance for an eleventh reason:

11. An individual who works as an independent contractor with reportable income may also qualify for PUA benefits if he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities and has caused the individual to suspend such activities.

In its program letter, the DOL stressed that the qualifying reasons for receipt of PUA should be viewed narrowly in order to provide short term benefits to the qualified recipients:

States should bear in mind that many of the qualifying circumstances described in [the CARES Act section relating to PUA] are likely to be of short term duration. For example, an individual who has been advised to self-quarantine by a health care provider because of the individual’s exposure to a person who has tested positive for the coronavirus, and is therefore unable to reach his or her place of employment for purposes of [qualifying for PUA], may be able to return to his or her place of employment within two weeks of the exposure if he or she has not exhibited symptoms of COVID-19 or tested positive for the coronavirus. Similarly, a school is not closed as a direct result of the COVID-19 public health emergency, for purposes of [qualifying for PUA], after the date the school year was originally scheduled to end. As such, the expectation is that states will continue to apply their able, available, and actively seeking work standards as outlined in state law.

Effective Dates of the PUA Program 

EDD will be accepting online applications for this program beginning on April 28, 2020. Distributions will continue to be made under the PUA program until the program expires on December 31, 2020.

Interestingly, despite the start date for EDD accepting PUA applications, the PUA program covers qualified unemployment claims beginning on or after February 2, 2020. PUA claims may be backdated to cover such claims if the individual was otherwise eligible and qualified to receive program funds at that time and self-certifies the appropriate qualifying reason(s) for PUA.

Duration and Amount of Benefits

The PUA benefit amount is equal to the weekly benefit amount (“WBA”) to which the individual would otherwise be entitled under state unemployment insurance law if the individual was eligible for and qualified to receive such compensation. However, because the PUA compensation amount cannot be less than the minimum benefit under Disaster Unemployment Assistance (“DUA”), EDD determined that the minimum WBA to eligible and qualified individuals under PUA is $167, which exceeds the WBA under state unemployment insurance law.

EDD has also provided guidance as to how backdated payments will be administered for qualified individuals:

In order to provide benefits as quickly as possible, payments will be issued in phases. If you qualify for PUA, and depending on the effective date of your PUA claim, the initial payments you will receive are as follows:

Phase 1

$167 per week for each week you were unemployed from February 2, 2020 to March 28, 2020 due to a COVID-19 related reason.

Phase 2

$167 plus $600 [in FPUC assistance] per week for each week you were unemployed from March 29, 2020 to July 25, 2020, due to a COVID-19 related reason.

Phase 3

$167 per week, for each week from July 26, 2020 to December 26, 2020, that you are unemployed due to a COVID-19 related reason, up to a total of 39 weeks (minus any weeks of regular [Unemployment Insurance (“UI”)] and certain extended UI benefits that you have received).

Note: If you qualify for your claim to be backdated to an earlier PUA effective date based on your last day of work, you could receive payment for prior weeks you were unemployed due to COVID-19.

We recognize that employers facing difficult decisions about their operations are also concerned about the financial well-being of their employees and independent contractors. As employers make these difficult personnel decisions, we are here for you and available to answer your questions on these important issues.

LCW is closely monitoring legal developments related to the evolving COVID-19 situation and the firm provides regular updates on these matter to our clients For additional information, visit: https://www.lcwlegal.com/responding-to-COVID-19.