Specific upgrades NC should make to its unemployment insurance system

As North Carolina enters a period of economic recession brought on by the COVID-19 pandemic, it will be imperative for the state to make significant adjustments and improvements to its unemployment insurance (UI) system in order to prevent mass suffering. At present, North Carolina UI benefits are near the bottom of the 50 states with an average weekly benefit of $265 (and a maximum of $350) and the maximum term of eligibility is capped at a nationwide low of 12 weeks (most states provide up to 26 weeks of benefits).

Happily, thanks to recent congressional action in the CARES Act, the federal government is poised to cover 100% of the cost of an array of extended and improved benefits, but in order to maximize the impact of these changes, state lawmakers should take several additional actions.

Here’s what the CARES Act does:

The new federal law basically creates three UI programs, all paid for by the federal government with all claims being “non-charged,” meaning employers’ UI tax rates on employers will not be impacted:

  1. Pandemic Unemployment Assistance (PUA) – This will cover workers not eligible for UI under current law, like independent contractors, small business owners and workers who have exhausted all benefits. Benefits will be available for up to 39 weeks, which includes PUC & PEUC (see below).
  2. Pandemic Unemployment Compensation (PUC) – Workers will get $600 per week on top of the miserly amount North Carolina currently pays. Once a worker exhausts under North Carolina’s duration limit (12 weeks currently), they then move to PEUC.
  3. Pandemic Emergency Unemployment Compensation (PEUC) – PEUC provides 13 weeks of benefits to workers who have exhausted regular UI benefits under PUC, which is easy to do with our duration currently at 12 weeks. Once the worker exhausts the 13 weeks of PEUC, they may be eligible for PUA and can receive benefits for a cumulative total of 39 weeks.

It appears workers will move to the particular program when they exhaust benefits, with PUA being the last program to provide assistance.

All three programs provide an “add-on” benefit of $600 per week until July 31. The duration of all benefits is a cumulative 39 weeks for PUA, PUC and PEUC.

Note: North Carolina’s way of calculating the weekly benefit amount (no other state does it our way) will shortchange workers in the three federal programs. The $600/week add on ends on July 31, so we should both change the manner of calculating benefits and increase the maximum benefit amount of $350 to help workers post July 31. When that supplemental benefit ends July 31, workers will then receive an average weekly benefit amount of $265 with a maximum limit of $350 unless the law is changed.

Kansas, Georgia and Michigan have changed their duration to 26 weeks – click here to learn more. If indeed COVID-19 becomes cyclical as many public health professionals suggest and should a full recession in the national and state economy occur, it is critical that jobless workers in North Carolina have the same duration as most workers in states across the country—26 weeks so that they don’t get pushed into poverty and can consider retraining and new careers.

Recommended changes to North Carolina UI laws:

For North Carolina workers to get the maximum benefit from the CARES Act, the following changes will be necessary:

  1. Allow “attached claims” to be filed by employers. In 2013, changes made to North Carolina’s UI laws severely restricted the ability of employers to file attached claims for their workers. Allowing “attached claims” will be more efficient and allow greater access to benefits;
  2. Change North Carolina’s weekly benefit calculation. This will put more benefits in workers’ pockets and will really be needed after July 31 when the federal weekly supplement of $600 ends. In 2013, North Carolina adopted a formula for calculating weekly benefits that bases them on the last two quarters of a worker’s earnings. NO OTHER STATE USES THIS. It was meant to reduce benefits for workers. Before 2013, North Carolina based benefits on a worker’s highest quarter wages – a system that appears to be in use, for example, in Florida and South Carolina. North Carolina should base benefits on the average of the two highest quarters. See HB 713.
  3. Increase the maximum benefit amount. This will also put more money in workers’ pockets post July 31 when the federal add-on of $600 ends. North Carolina set its maximum benefit at $350 in 2013. It was not indexed in any way to increase over time. Pre-2013, the state’s maximum weekly benefit amount was 66.7% of the state’s average weekly wage. Currently, 40 states have higher maximum amounts than North Carolina, including Kentucky, Virginia, West Virginia and Arkansas. North Carolina should set the maximum weekly benefit at 50% of the state’s average weekly wage. This would be 50% of $850, so the maximum would be $425 and would increase as wages increase over time. See Section 2 of HB 713.
  4. Increase the maximum duration someone can receive benefits (Georgia and Michigan just took such a step). North Carolina has a sliding scale of 12-20 weeks. Most states have a maximum duration of 26 weeks. See Section 3 of HB 713.
  5. Address roadblocks created by the state’s low “earnings disregard.” At a recent House Committee meeting, lawmakers discussed the problem of employees who have their hours cut, but who are denied benefits because of North Carolina’s low $75 “earnings disregard.” For instance, if a worker makes $750 a week and has their hours cut so that they make only $425, they would receive $0 in UI because North Carolina’s maximum weekly benefit amount is $350 ($425-$75=$350). Solution – Increase the earnings allowance and increase the maximum weekly benefit amount.
  6. Adopt Work-Sharing/Short-Time Compensation Option for Employers. Work-Sharing/Short-Time Compensation allows an employer to reduce the hours of all or some workers instead of laying off a portion of the workforce. Workers with the reduced hours are then eligible for partial unemployment benefits to supplement their paychecks. For example, instead of laying off five workers, an employer can reduce the schedules of 25 workers by 20 percent. Approximately 40 states provide this option to their employers. The CARES Act provides $100M in grants to states to implement, improve and promote Work-Sharing. Recent Guidance from the U.S. Department of Labor recommended states adopt Work-Sharing. Click here for more information.

Finally, given the massive demands for assistance, it’s likely the Division of Employment Security needs further support, both in terms of technology and staffing and that should be addressed by the General Assembly if federal funds are not adequate.