On April 22, 2020, the Virginia General Assembly adopted Governor Ralph Northam’s proposed amendment to a bill that will re-establish a work-sharing program in Virginia.¹ The amended work-share bill received broad bi-partisan support in both chambers of the legislature.  As a result, on January 1, 2021, Virginia will join a group of more than 20 states that offer work-sharing programs, which provide prorated unemployment benefits to workers whose employers reduce their hours in an effort to avoid layoffs.

What is a Work-Sharing Program?

In general, work-sharing programs allow employers that may be experiencing a slowdown in business to save jobs by reducing the number of hours their employees work instead of laying off a portion of those employees. In exchange, employees whose hours have been reduced can recover prorated unemployment benefits tied to the amount of their reduced hours. This is typically true even if the employees’ income remains above the maximum eligibility threshold for partial unemployment benefits. 

Currently, under Virginia’s traditional unemployment benefits program, employees in the state may be eligible for partial unemployment benefits if they work less than their normal customary full-time hours because of a lack of full-time work and their earnings are less than the weekly unemployment benefit amount determined by the Virginia Employment Commission (VEC).  But the maximum weekly unemployment benefit in Virginia is $378.00. This means that many average-to-high wage earners, who make more than $378.00 per week, will not qualify for partial unemployment benefits even after a significant pay reduction. Virginia’s work-share program will relax this income threshold.

Virginia’s Work-Sharing Program

Virginia’s work-share program is designed to provide greater flexibility to employers that are looking to avoid laying off employees during a downturn in business. The VEC can approve a work-share plan for employees whose hours are reduced by as little as 10% or as much as 60%, and approved plans can last for up to one year. In turn, employees included in the work-share plan will be eligible to collect prorated unemployment benefits tied to the percentage reduction in hours. An employer can modify or terminate an approved work-share plan at any time—though an employer must request permission to modify its work-share plan unless the change is considered to be “not substantial.”  In the case of non-substantial changes, VEC approval is not required but it still must be notified of the change. Employers will also be able to submit new applications for another work-share plan after their current one expires. 

The VEC is tasked with implementing the Commonwealth’s work-share program by January 1, 2021, including developing an application for employers to request approval of their programs. Although the VEC has not yet published this application, the law details certain provisions that an employer will have to include when seeking approval of a work-share program. These include, but are not limited to, the following:

• A description of the affected unit covered by the work-share plan, the percentage of employees in the affected unit covered by the plan, and the identity of each employee in the affected unit;

• A description of how employees in the affected unit will be notified of the employer's participation in the plan, or a statement why it is not feasible to provide such notice;

• The usual weekly hours for employees in the affected unit and the specific percentage by which these hours will be reduced during all weeks covered by the plan; and

• An estimate of the number of employees who would have been laid off in the absence of a work-share plan.

Participation in the work-share program will be purely optional for employers. Participating employers, however, will have certain reporting requirements and must permit the VEC to access certain records. For those employers that decide to participate, the VEC will be required to review each application submitted within 10 business days. If the employer’s work-share plan is approved, employees in an affected unit will be permitted to receive work-share benefits for up to 26 weeks, which is the same duration as standard unemployment benefits in Virginia. Moreover, employees will not be required to look for other work while they are on a work-share program, so long as they are available to their employer during their regular hours.

The Virginia work-share program will provide added workplace protections to affected employees. In addition to receiving a paycheck and prorated unemployment benefits, employees included in a work-share program will be entitled to health benefits and retirement benefits “under their same terms and conditions” as though the employee’s hours had not been reduced or “to the same extent as other employees not participating in the [work-share program].”  Moreover, an employer may not hire or transfer new employees to replace those employees included in a work-share program. And just as an employer can terminate a work-share plan at any time, the VEC will be permitted to revoke a work-share plan at any time for “good cause.”

One of the main incentives for Virginia to implement a work-sharing program this year is the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, which earmarks funding to states to develop such programs. If the VEC does not obtain adequate funding from the Department of Labor for the state’s work-share program by January 1, 2021, the law providing for the work-share program will expire. Otherwise, the law providing for this program expires on July 1, 2022.

Work-share programs can offer attractive options to employers during difficult economic times. These programs help employers minimize or eliminate the need for layoffs, keep trained employees, quickly prepare for when business conditions improve, and avoid the costs of recruiting, hiring, and training new employees. At the same time, employees continue to receive a paycheck supplemented with prorated unemployment payments, along with their regular employer-provided benefits. Virginia employers that are interested in participating in a work-share program should continue to monitor developments through the VEC’s website or knowledgeable labor and employment counsel.