A Discussion of Workforce Reduction in the Wake of COVID-19

Recent events involving the COVID-19 virus have brought up some questions about how to handle employees when business is not at full speed.  We’d like to share a few options that the Texas Workforce Commission has recommended to help you and your employees through this unprecedented time. 

Option 1: Create a Shared Work Plan through the Texas Workforce Commission 

You may be able to avoid fully laying off employees by submitting a Shared Work plan with the TWC. This plan works for both hourly and salaried employees. The plan is flexible, and allows you to reduce hours or furlough workers (example – some workers work one week, and switch with other workers the next week).  

Shared Work allows you to: 

  • Supplement employees’ wages lost because of reduced work hours with partial unemployment benefits. 
  • Reduce normal weekly work hours for employees by at least 10 percent but not more than 40 percent. The reduction must affect at least 10 percent of the employees in a unit. 

Employees who qualify will receive both partial wages from you for the work they do and Shared Work unemployment benefits through the TWC.  If you currently provide benefits like health insurance, you would have to keep paying for those benefits. 

It normally takes 30 days for the TWC to process these plans.  However, the TWC is doing everything it can to speed things up. 

Option 2:  Convert Full-Time Positions to Part-time Hourly Positions 

If the Shared Work program with the TWC doesn’t work for your situation, you are able to change the employee’s hours and status based on Texas “at will” employment laws.  This means that you may terminate their position at any time for any reason (and the employee can do the same). For people who are already hourly employees, you would simply assign them fewer hours.  For salaried employees, you would issue notice that because of the pandemic, business operations have declined and therefore, the employee’s salaried position is being eliminatedAt the same time, you inform them that you are offering the employee a part-time hourly position, which they may choose to accept. 

Option 3: Layoff 

If you don’t have enough work for your employees to keep them part time through the Shared Work program or a change in status to part-time hourly basis, a temporary layoff is where you will end up.  Because the pandemic and the resulting business closures or decline are not “reasonably foreseeable”, the rules related to age discrimination and other ADEA rules regarding notice periods for layoffs shouldn’t apply.  These employees will then most likely apply for unemployment benefits. 

When an individual submits a claim naming your company as the last employer, the TWC sends you notice. When you respond to this notice, be sure to include information that you were impacted by COVID-19. Once the TWC determines the former employees are eligible for unemployment benefits (they are waiving waiting periods and employment confirmation right now), the TWC will send you notice of your chargeback and will bill you for benefits paid.   However, you might not ultimately be liable for these payments.  On Friday, March 13, 2020, Governor Abbott declared a disaster relating to the pandemic which might protect you from chargeback.  That decision is still not final as of this post. 

By: Kim Rankin

Ms. Rankin is a Corporate Attorney at The Fuentes Firm who assists the firm’s clients in corporate matters including Business Structuring, Real Estate and Labor and Employment.