Monthly Archives: August 2011

COBRA Subsidy Comes to an End

Remember the COBRA subsidy? As originally passed (it was part of the American Recovery and Reinvestment Act of 2009, otherwise known as the stimulus package), it picked up 65% of the cost of COBRA premiums for those who lost their jobs from September 1, 2008, through December 31, 2009. Although the original subsidy lasted for nine months, Congress later increased it to 15 months. Congress also extended the subsidy several times, ultimately through the end of May, 2010. Those who lost their jobs and opted for COBRA coverage through May 31, 2010, were eligible for the subsidy; those who lost their jobs later were not.

Counting forward 15 months from May 31, 2010 puts us at the end August 2011 — just about a week from now. That’s when the last lucky recipients of the COBRA subsidy will start having to pay their full premiums, without a subsidy. In other words, their premiums will almost triple for their remaining months of COBRA coverage. And, while anything’s always possible, the current climate of cost cutting and deficit reduction certainly seems to rule out Congressional action to renew the subsidy program.

Adding Insult to Injury: States Cut Unemployment Benefits

 

In what seems to be a recurring theme these days, a number of states have decided that the best way to solve a financial crisis is to cut spending on those who need it the most. According to a report issued earlier this month by the National Employment Law Project (NELP), ten states cut unemployment benefits in their 2011 legislative sessions, despite continued high jobless rates nationwide. Here are some of the changes states have made (you can view the whole report, “Unraveling the Unemployment Insurance Lifeline,” at NELP’s website):

  • Six states (Arkansas, Florida, Illinois, Michigan, Missouri, and South Carolina) have cut the length of state benefits. Previously, all 50 states provided benefits for at least 26 weeks; a few states have now cut the maximum to 20 or 25 weeks. Florida has tied benefit cuts to the unemployment rate, with benefits lasting a maximum of 23 weeks when unemployment is highest, and only 12 weeks once unemployment falls to 5% or less. (The silver lining: There’s no danger of Florida reaching that number any time soon. Florida’s unemployment rate is more than 10.5%.) The federal government currently supplements state benefits, so that claimants in states with high unemployment rates are eligible for up to 99 total weeks. The additional federal benefits are calculated as a percentage of state benefits, however, so claimants in these six states will see significant changes. In a state that has cut benefits from 26 to 20 weeks, for example, the total state and federal benefit will be cut from 99 to 76 weeks.
  • A few states have also cut benefit amounts, by changing the formula for calculating benefits or capping the maximum benefit amount. In Indiana, for example, benefits will be based on the worker’s weekly earnings over an entire year, rather than in the highest paid quarter of that year. According to NELP’s report, this change will drop the average weekly benefit amount by $63.
  • Some states have adopted more restrictive eligibility and administrative requirements. Mostly, these have taken the form of making it more difficult for workers to qualify for benefits if they quit or are fired (rather than being laid off solely for economic reasons). A couple of states have also increased their earnings requirements (the minimum amount an employee must have earned during the base period) to qualify for benefits.

Insolvency is running high in state unemployment programs. According to NELP, the majority of states are borrowing from the federal government — to the tune of $40 billion — to continue paying benefits; interest payments on all of this debt will fall due next month. Continuing another nationwide fiscal trend, states have been generally unwilling to increase the unemployment tax rate on employers to close the gap. This might mean we can expect to see even more states getting even stingier with benefits as the cycle deepens.

California Employees, Take Your Seats

The big news in California class actions these days? It’s all about the bottom line, in more ways than one: Two large employers (Home Depot and 99 Cent Only Stores) have been sued for failing to provide suitable seating for their employees. According to two California appellate courts, this violates California’s wage order for mercantile employees and the state Labor Code. It also gives rise to civil penalties under California’s Private Attorney General Act (PAGA), which provides a separate penalty for each aggrieved employee, for each pay period in which the violation took place. Although a winning plaintiff has to share these penalties with the state’s labor department, they could still add up to a nice chunk of change. When you factor in that PAGA also provides for attorney fees and costs, these start to look like fairly lucrative cases.

The wage order in question (7-2001) says the following:

14. SEATS
(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of
seats.
(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing,
an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted
to use such seats when it does not interfere with the performance of their duties.

This wage order applies only to mercantile employees, but identical language appears in the wage orders that apply to different industries, including manufacturing, personal services, and professional and technical services.

I’m fairly certain reactions to this development are going to divide pretty neatly, on either side of the bright line labeled “retail experience.” My job history working in bookstores (remember them?) puts me firmly in the “pull up a chair” camp. Every store I worked in had a limited number of stools; although we could mostly agree on when we took breaks, what music to listen to, who had to throw out the shoplifter, and where everyone could smoke (it was a long time ago), we fought over those stools like nobody’s business. With more of these lawsuits springing up every week in almost every industry, it’s time for California employers to provide some rest for the weary.