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What to do if you are laid off from work due to COVID-19

A view of the closed 'Time Out market' and food court is seen in the Dumbo neighborhood of Brooklyn, New York on March 17, 2020. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

Aggressive moves by the federal government announced Tuesday aim to keep businesses and their workers afloat as coronavirus fallout crushes cash flows, though none of the measures guarantee that workers can keep their jobs. Companies struggling to maintain pre-COVID-19 staffing levels are already turning to layoffs

Americans who are laid off or offered fewer working hours and therefore reduced pay should get a jump on filing for unemployment, according to Andrew Stettner, Senior Fellow for The Century Foundation.

“They should call their state immediately, or better if the websites can handle it, go online and file benefits,” he said. “Even if their hours have just been cut back they should contact their state right away...because it can take as many as three weeks to get your first payment.”

State unemployment benefits for eligible workers would come in addition to direct payments from the federal government, announced Tuesday by U.S. Treasury Secretary Steven Mnuchin as part of an $850 billion to $1 trillion stimulus package. In addition to direct payments, the administration indicated stimulus funds would also be directed to small businesses and airlines.

‘You are going to have some delays in processing’

Separately, lawmakers in the U.S. House of Representatives passed legislation currently being considered by the Senate that, among other emergency measures, adds $1 billion in grants to the U.S. Department of Labor’s state Unemployment Trust Fund, and offers distributions to states hit with a 10% or greater increase in unemployment claims.

“One reason that Congress gave states a billion dollars in the package was, they need more money to hire more people and to increase the bandwidth of their website to handle the crash of claims,” Stettner said. “So I think you are going to have some delays in processing just given how many people are filing claims.”

U.S. President Donald Trump takes questions as Treasury Secretary Steven Mnuchin and Vice President Mike Pence look on during the daily coronavirus (COVID-19) briefing at the White House in Washington, U.S., March 17, 2020. REUTERS/Jonathan Ernst

Moreover, Stettner said, to administer the new federal benefits, the federal government is likely to use state claim records to get money into the hands of those who need it. Plus, a surge in claims may be difficult for states to process.

The stimulus may soften the blow, but it won’t stop some companies from trying to survive by laying off workers. A national Marist Poll survey of 835 U.S. adults conducted March 13 to March 14 found that 18% had either personally experienced or had someone in their household experience a layoff or reduction in work hours as a result of coronavirus.

In a blog post Tuesday, the Economic Policy Institute projected that 3 million U.S. jobs would be lost by summertime under a moderate stimulus response. Treasury Secretary Mnuchin reportedly said that a lack of action could drive up the unemployment rate to 20%. And former White House Council of Economic Advisors chief, Kevin Hassett, told CNN as many as 1 million U.S. jobs could be lost by early April.

"And if that happens, you're looking at one of the biggest negative jobs numbers we've ever seen," Hassett said, adding that the numbers could recover as the viral threat subsides.

Most Americans can’t work from home

Stettner told Yahoo Finance that 60% of American workers are hourly workers who cannot work from home and do not get paid unless they work. Robust benefits, he added, are a luxury enjoyed by the minority.

“Most Americans have none of that,” Stettner said. “They have hourly jobs, they are paid when they go to work, and they can't work from home. And so we have to really understand that for most people, once they can't go to work at their location, they have no money.”

David Barron, a labor and employment attorney with Cozen O’Connor who heads the firm’s coronavirus task force, told Yahoo Finance that employers of 100 or more workers are typically subject to the WARN Act, which requires employers give employees either 60 days notice of a layoff, or 60 days pay. However, COVID-19 is likely an exception to the rule.

“One of [the exceptions] is an unforeseeable business circumstance, and I think unfortunately this is a classic scenario, what would be an unforeseeable business circumstance,” Barron said. “In talking to clients, I don't know anybody that's paying 60 days notice right now.”

‘States are not well prepared’

The unprecedented decline in work production, travel, and spending is setting the stage for a flood of state unemployment benefit claims that may require the federal government to backstop state coffers.

“A lot of states are not are not well prepared for this situation,” Stettner said. There are about 20 to 22 states, including California, New York and Texas, that may not have enough saved up in their respective trust funds to pay out recession level claims, he said. Still, claimants should not worry about getting an unemployment check if their state runs out of money, as additional funds can be tapped from a federal loan fund, currently holding $10 billion. 

If the $10 billion is depleted the federal government would then have to borrow from the general treasury in order to loan additional money to underfunded states.

“States are about as well prepared as they were at the start of the last recession, and the federal government is a little less prepared than they were at the start of the last recession,” Stettner said.

The Trump administration on Tuesday said that direct payments to Americans whose jobs are impacted by Covid-19 could total more than $1,000 a month. The stimulus is part of a Phase 3 effort to combat widespread financial turmoil already being experienced by U.S. companies and workers. The more aggressive move marked a change in tactic from last week when the administration said it was looking into employer and employee payroll tax deferrals — which fund Social Security — to get more money into the hands of American workers and businesses.

“We don't really have months in terms of people living,” Trump said during the Tuesday briefing, explaining why the administration had shifted its method. “You have people that work on tips — it's a large number of people and it's tremendous,” he said. “We have to take care of our people. We don't want to have people suffering during this period.”

Alexis Keenan is a New York-based reporter for Yahoo Finance and former litigation attorney.

Follow Alexis Keenan on Twitter @alexiskweed.

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