For Immediate Release: April 03, 2012

Report: Work Sharing Finds Breakthrough in New Federal Law

The law President Obama signed in February to extend payroll tax cuts and unemployment insurance (H.R. 3630) also provided a nearly $500 million expansion of work sharing, an employment strategy that helps businesses avoid layoffs during downturns and can dramatically reduce unemployment. Today, in the first of three papers, the Center for Law and Social Policy (CLASP) and the National Employment Law Project (NELP) released a detailed summary of the new federal law and how states can access it to combat layoffs.

While work sharing is widely known abroad and credited in countries like Germany for preserving jobs and preventing a sharp rise in unemployment during the recent recession, the enactment of H.R. 3630 marks a major breakthrough for work sharing in the United States. Twenty-three states and the District of Columbia already have existing work sharing programs, with six states having adopted work sharing laws since 2009 (Colorado, Maine, New Hampshire, New Jersey, Oklahoma and Pennsylvania).

"This landmark legislation represents an unprecedented opportunity for states to launch and expand work sharing programs and help fend off layoffs now and in the future," said George Wentworth, senior staff attorney with the National Employment Law Project. "As they grapple with a slow economic recovery and strains on unemployment trust funds, states should use this law to adopt an innovative economic security program that benefits workers, businesses and communities."

"Few policy ideas have been as widely supported as work sharing," said Neil Ridley, senior policy analyst at CLASP. "As more states adopt the program, more workers and businesses will be positioned to weather the next economic downturn. Even with the current economic recovery gaining steam, it is not too late for states to use work sharing to prevent layoffs in some sectors."

Under work sharing, also known as short-time compensation (STC), a business that faces a slump in demand can reduce employees' hours instead of laying off part of its workforce. An employer could temporarily reduce hours by 20 percent, for example, instead of laying off one-fifth of its staff. In states with a work sharing program, workers with registered employers can apply for and receive pro-rated unemployment benefits to help compensate for the reduced work hours.

The new legislation, which is known as the Layoff Prevention Act of 2012, was first introduced by Senator Jack Reed (D-RI) and later in the House of Representatives by Rep. Rosa DeLauro (D-CT). It updates and clarifies short-time compensation provisions in federal law for the first time in 20 years. It provides two ways that states can use federal funding to adopt work sharing or expand existing programs. States with existing or pending programs that meet the new federal definitions of short-time compensation can receive 100 percent reimbursement for funds paid to employees under the program. States without work sharing programs can participate in a temporary federal program that makes work sharing immediately available to employers, and states are reimbursed for one-half the benefits paid to individuals. The temporary federal funds are available for either three or two years, depending on whether the state has a law enacted or not.

The new law requires that employers submit a written plan to the state workforce agency and certify that workers' health and retirement benefits will not be reduced due to participation in the program.

In addition to the reimbursement options, the Act includes $100 million in grants to make state programs more efficient and more effective for workers and employers. Grants are also available to help states promote work sharing and increase outreach to employers.

"Work sharing is generally a little-known option for employers, even in states with existing programs, but this new law will hopefully change that," said Wentworth.

Click here for more details and the full NELP/CLASP paper.


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