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Legal Updates

Massachusetts WorkSharing Program: A Way To Cut Payroll Without Cutting Jobs

Massachusetts employers facing a temporary need to reduce payroll costs should be aware of an alternative to lay-offs available through the Massachusetts WorkSharing Program developed by the Commonwealth’s Division of Unemployment Assistance (“DUA”).  Implementation of a WorkSharing Program requires cooperation between DUA and an employer, but once approved, it can provide some unemployment assistance to employees whose hours have been reduced.  This may help the employees survive the cut in pay, while also helping the employer avoid layoffs and preserve its trained, skilled workforce.

Under an approved WorkSharing Program, the employer reduces the hours of its entire workforce, or of everyone working in a particular department or unit, while DUA pays a proportionate share of the unemployment insurance benefits the employees would have received if they had been laid off.

DUA must approve an employer’s WorkSharing Program before it can be implemented.  Some of the specific requirements for approval include the following:

  • To qualify for DUA’s WorkSharing Program, the cut in hours must either be shared equally by all employees in the company, or it must be shared equally by all the workers in a defined or definable unit (e.g. facility, department, shift, job function).
  • As long as the WorkSharing Program is in place, each employee in the affected unit must be scheduled for and work the same number of hours.
  • “If anyone in the unit is scheduled to work or does work more than the hours stated in the plan, the whole unit may be disqualified from receiving benefits for that week.”
  • The hours reduction can range from 10 percent to 60 percent and still qualify for DUA approval.
  • The employer must continue to provide the same health and retirement benefits to the affected employees that it provided before the reduction in hours.  In other words, eligibility for health insurance benefits cannot be changed as a result of the cut in hours, and any resulting reduction in retirement benefits must be explained to the affected employees.

Once approved, the Program works as follows:

  • Each eligible employee is entitled to receive a percentage of unemployment benefits equal to the percentage of reduction in his or her wages/hours.  If hours are reduced 20%, each is eligible for 20% of the unemployment benefit.
  • Generally, a person’s unemployment benefit rate is equal to ½ of the person’s average weekly wage, up to a maximum weekly benefit rate of $628.
  • Employees with dependent children are eligible for the same percentage of any dependency allowance ($25/dependent).  A 20% reduction in hours will qualify for 20% of the $25 allowance per dependent in additional benefits.
  • Because the employee’s WorkSharing benefits are less than what he or she would receive in regular (unreduced) unemployment benefits, it will take longer to exhaust the standard “benefit credit” of an unemployment claim.  That extends the number of weeks each employee can collect benefits.  If an employee has used up only a portion of available benefits during a period of reduced hours, he or she would remain eligible for full benefits for a while, if the reduction of hours becomes a full layoff, until the full “benefit credit” is exhausted.
  • Employees in a WorkSharing Program can work, or continue to work, in another part-time job and still be eligible for WorkSharing benefits.  However, every dollar earned from the second job over $188/week is deducted from the WorkSharing benefit, dollar for dollar.
  • The employer can terminate a WorkSharing Program at any time.

WorkSharing is another option available to Massachusetts employers who need to cut payroll.  It may help some employers reduce costs while also keeping their skilled, trained employees and reducing future hiring and retraining costs.  On the other hand, the limitations imposed by the program may outweigh the benefits.

Separately, employers should note that a WorkSharing Program may create risks of legal liability.  In particular, as discussed more fully in the accompanying article about “RIF Alternatives,” the salary reduction could cause some employees to lose their overtime exempt status.

We welcome the opportunity to assist your organization in implementing a DUA-approved WorkSharing Program, or to answer any questions you might have, regarding the WorkSharing Program or any other cost-cutting plan.