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Work-sharing now the law in Michigan

July 10, 2012

Article courtesy of SBAM Approved Partner ASE

By Joe DeSantis

Beginning January 1, 2013 it will be legal for Michigan employers to set up Work-Sharing programs that will help them avoid laying off employees during downturns. The programs will need to be rigidly crafted under the terms of the law. But they hold out the potential not only for employers to retain key employees in anticipation of better times ahead, but also to lower their future unemployment tax rates.

On June 28 Gov. Snyder signed into law P.A. 216, U.I. Shared Work Plans. Under the law, employers facing the need to cut their labor costs would be able to set up, subject to state approval, Work Sharing programs. For example, if the employer needed to cut labor costs by 25%, the employer could set up a work-share plan under which all eligible employees would have their hours cut by 25%, and each employee would be eligible to receive a weekly unemployment benefit equal to 25% of what that employee would have received if he or she had been completely laid off. The employer would set up the plan in lieu of laying off 25% of its employees as it likely would have to do without this option.

Employers can realize potential savings in two ways. One is that if (in the language of the bill’s summary) “federal funding for the full reimbursement of costs related to benefits paid under a shared-work (program)” are available, then “half of benefits paid would be charged to the employer’s chargeable benefits account,” and “(b)enefits paid or deposits made under this provision would not be used to calculate the employer’s contribution rate.” The other is that, to the extent that full layoffs are avoided in the future as a result of the program, the state’s Unemployment Comp fund saves money and employer’s unemployment tax rate will be lower over time.

For the affected employees themselves, their 20-week yearly eligibility for unemployment benefits in the future would remain intact, because the benefits they receive would not be charged against that eligibility. However the total benefit received would count against their maximum amount of benefit available.

There are strict requirements that employers must meet in order for their work-sharing programs to be approved for benefits by the state.  They include (but are not limited to) the following:

  • The employer must be up to date on its account with MESA—all reports on file, all contributions and other required payments made.
  • The employer must have a positive reserve balance in its experience account.
  • The employer must have paid wages for three years prior to applying for the plan.
  • The potential layoffs would affect at least 15% of employees in the unit.
  • The employer cannot hire into the unit, or transfer into it, additional employees after the plan starts.
  • The employer cannot lay off affected employees once the plan starts, or reduce their hours more than agreed to at the start of the plan.
  • If unionized, the employer must get the approval of the bargaining unit for the plan.
  • The employer cannot reduce or eliminate employees’ fringe benefits during the plan.
  • The hour-reduction percentage must be at least 15% but no more than 45%.

In enacting its law, Michigan becomes the 24th state nationally to adopt work-sharing as an employee retention tool. In signing the bill, Gov. Snyder touted the win-win promise of the plan, saying, “This new alternative plan will enable Michigan to keep its skilled and talented workforce employed . . . By providing partial compensation to workers with reduced hours, we can support both families and businesses as we continue rebuilding our economy.”

Questions about this or any other human resource related topic?  Use SBAM’s free-to-members Ask An Expert service.

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