New Law Gives Major Employment Strategy a Boost

Apr 04, 2012

By Neil Ridley

Following the enactment of recent federal legislation, work sharing - a strategy to reduce unemployment and help businesses and workers weather economic downturns - is getting a major boost to help more states buffer their economies and communities.  This is the focus of a new report, A Breakthrough for Work Sharing: A Summary of the Layoff Prevention Act of 2012, released this week by CLASP and the National Employment Law Project (NELP).

New Jersey, which passed a state law in January 2012, became the most recent addition to the ranks of states with work sharing programs - bringing the total number to 24 states and the District of Columbia. Now the Ohio state legislature is considering a work sharing bill.

Work sharing, also known as short-time compensation (STC), is an option within the federal-state Unemployment Insurance system that provides employers with an alternative to layoffs during a business slowdown. For example, a business facing a slump in demand can reduce employees' hours by 20 percent instead of laying off one-fifth of its workforce. In a state with a work sharing program, workers can apply for and receive prorated unemployment benefits to help compensate for reduced work hours. It's a win-win strategy for employers, workers, communities and local economies. 

The Middle Class Tax Relief and Job Creation Act (H.R. 3630), which President Obama signed in February 2012, marks a major breakthrough for work sharing. The final legislation updates and clarifies short-time compensation provisions in federal law for the first time in 20 years. In a significant boost to implementation, the Act provides nearly $500 million in temporary funding to states in three ways:

  • Full federal reimbursement for STC benefits paid to workers for up to three years in states with existing work sharing programs;
     
  • Partial reimbursement of benefits paid to workers in states without existing programs that enter agreements with the U.S. Department of Labor; and
     
  • Grants to states to increase business participation and upgrade state programs that are in line with new STC provisions.

The impetus for the work sharing changes came from Sen. Jack Reed (D-RI) and Rep. Rosa DeLauro (D-CT), who introduced the Layoff Prevention Act in the 111th and 112th Congresses.

Ramping up work sharing programs, as the new law does, will have several critical benefits. It will help prevent layoffs in what is still a fragile economy with an 8.3 percent unemployment rate. It will also help states establish an important economic security program for workers, businesses and communities and have it in place when the next recession hits.

To learn more about the new federal law, read CLASP and NELP's new publication.

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