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When Workers on Unemployment Refuse to Return

May 18, 2020
Fear of COVID-19 can be cited as a reason. Separately, a massive fraud ring is being investigated.

As the economy begins to slowly reopen in different states where non-essential businesses were shut down, some employees who are recalled to work may refuse to do so because current unemployment benefits are higher than what they might earn or they fear for their safety, says attorney Peter Goetschel of the law firm of Vinson & Elkins.

He points out that thanks to the $600 federal supplement that many employees are now receiving (and may receive through July 31, 2020) as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), there are many employees who are temporarily getting unemployment benefits comparable to and, in some cases, greater than their usual wages.

In addition to the potential wave of employees refusing to return to work, evidence has surfaced of massive organized fraud perpetrated against state unemployment systems, according to recent news reports. Last week, Washington State halted unemployment payments for two days to clean up its computer system after finding hundreds of millions of dollars in fraudulent claims.

In addition, the U.S. Secret Service has warned its field offices that a well-organized Nigerian crime ring is exploiting the COVID-19 crisis by committing large-scale fraud against multiple state unemployment insurance programs that could result in potential losses of hundreds of millions of dollars.

The Secret Service says the ring is exploiting personally identifiable information (PII) belonging to identity theft victims, and that “a substantial amount of the fraudulent benefits submitted have used PII from first responders, government personnel and school employees.” Money obtained through fraudulent claims then flow through out-of-state banks to the ring.

The Secret Service adds, “It is assumed the fraud ring behind this possesses a substantial PII database to submit the volume of applications observed thus far.” While Washington has been the primary state the ring has targeted so far, there also is evidence of attacks in North Carolina, Massachusetts, Rhode Island, Oklahoma, Wyoming and Florida.

However, federal officials warn that all states not taking adequate measures to prevent fraudulent claims can be facing the same kinds of attacks on their systems.

“The banks targeted have been at all levels including local banks, credit unions and large national banks,” the Secret Service alert concluded. “It is extremely likely every state is vulnerable to this scheme and will be targeted if they have not been already.”

The Non-Fraud Issues

When it comes to the situation involving actual employees who refuse to return to work, the U.S. Department of Labor (DOL) has issued guidance on how such cases should be handled by state unemployment agencies: If a worker refuses to return to work because they want to continue to collect state and federal unemployment benefits, then they are no longer eligible for the supplemental federal benefits, DOL says.

Eligibility for state benefits is determined by state law, but Goetschel points out that it is unlikely that workers would be entitled to state benefits in that scenario, either.

To be eligible for supplemental unemployment benefits as the result of the CARES Act, workers must be unable to work as a direct result of defined, COVID-19 related reasons. These include situations where the employee or a member of their household has been diagnosed with COVID-19, or the worker is unable to reach the place of employment because of a COVID-19 quarantine.

“Neither a desire to continue collecting benefits nor a general fear of virus exposure constitute a qualifying reason,” Goetschel says.

When an employee refuses to return to work, employers should ask the person why they are refusing. If the reason is not one of the justifications provided for in the CARES Act, then the employer may consider reporting to the relevant state workforce agency that the worker has been given the opportunity to return to work and has refused the offer.

In fact, he notes that some state workforce agencies require employers to report these occurrences of refusal.

“On the other hand, even if an employee’s stated reason might disqualify them from federal unemployment benefits, employers should keep in mind that employees may still have compelling reasons to refuse to return to work. In these cases, it may be better to allow the employee to remain furloughed,” he says. “Employers would be wise to prepare for these and other possibilities in their return-to-work plans before the issues arise.”

Management will need to consider what processes should be put in place to address concerns of employees who don’t feel safe returning to the office, or who may have a medical or family situation that prevents them from doing so.

Also keep in mind that employees who have childcare or medical care responsibilities as a result of COVID-19-related conditions may be entitled to leave under the Family First Coronavirus Recovery Act (FFCRA). Employers will need to consider whether particular requests give rise to an FFCRA-covered leave and, if granted, be sure to document that leave.

In addition, if employees express reservations about returning, employers should be prepared to conduct individualized assessments about the reasons for those reservations and consider whether they need to explore potential accommodations under the Americans with Disabilities Act and other laws.

The situation can be different for employers who are rehiring employees because they obtained a potentially forgivable Paycheck Protection Program (PPP) loan under the CARES Act in cases where the amount of loan forgiveness could be reduced if there has been a reduction in full-time equivalent employees.

For these employers, there is an incentive to reinstate employees who are unable to work because their workplace remains closed and they do not have a job that can be done through teleworking. “Fortunately, employees who refuse an employer’s offer to return to work will not be included in any reduction of that employer’s PPP loan forgiveness amount, so long as the offer of rehire was made in good faith and the rejection is documented,” Goetschel explains.

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