The Employee Job-Sharing Furlough Protection Act

NOTE: this article was updated on May 8 to reflect new information available with the introduction of legislation.

Due to the economic effects of the COVID-19 pandemic, all levels of government in New Jersey are preparing for very significant fiscal challenges in the months and years ahead. In particular, elected officials are seeking out ways to reduce costs and save money without harming services to residents or hurting public employees. To help accomplish that, Senators Sweeney, Pou, and Oroho introduced the Employee Job-Sharing Furlough Protection Act which passed out of committee on May 7, 2020. A similar bill has been introduced in the Assembly. The proposed bill will take advantage of the Federal CARES Act’s reimbursement provisions for states with existing job-sharing furlough laws. It will increase the amount of federal aid New Jersey can obtain to support employees of public, private, and non-profit entities, as well as for their employers.

How it works

The federal CARES Act stimulus package provides a $600 weekly federal unemployment payment on top of weekly state unemployment benefits and requires the federal government to pay 100% of the state unemployment benefit costs through July 31 for any worker furloughed. The combination of state unemployment benefits and the additional federal benefit means that many employees (those earning under $89,000 per year) would make more money through the furlough bill than by working during the three months from May 1 to July 31.

Under the NJ job-sharing furlough law, participating employers would pay furloughed employees 40% of salary and those employees would continue to work 40% of their regular hours (e.g. two days a week, instead of five.) NJ unemployment benefits for furloughed employees under this program would represent up to an additional 36% of salary up to a maximum of $428 per week.  The CARES Act benefit would add an additional $600 per week to the furloughed employees’ salary and state unemployment benefits.

For local associations, the employer and bargaining unit would have to agree in writing to the furlough program in advance, and the employer would be required to certify in the furlough application that such an agreement has been reached.

Examples of increased take-home pay for employees

Over a three-month period:

  • An employee earning $30,000 who would normally make $7,500 over three months would get $13,500 – a $6,000 increase.
  • An employee earning $50,000 would jump from $12,500 to $17,300 – an effective pay raise of $4,800.
  • An employee earning $70,000 would make $17,500 by working and $20,361 on furlough – a $1,361 increase.
  • $89,000 is approximately the break-even point, where $22,250 in regular pay is just $11 less than $22,261 in furlough reimbursement.

Pensions, health benefits, seniority protected

Pension, health benefit, and seniority rights will be preserved for all furloughed employees. Future pension calculations for furloughed public employees will be calculated as if they had worked at full pensionable salary. The pension system’s unfunded liability would not increase because the program continues full employer and employee contributions. Furloughed employees will continue to accrue seniority as if they were working full-time, and any pension loan repayment due during the furlough period will be suspended.

Health and pension benefits would continue uninterrupted with the employer and employee continuing to contribute the same amounts as if employed full time.

Savings and benefits for government employers

There are approximately 400,000 full-time state, county, municipal government and school district employees, of which 80% earn less than $89,000 per year.  Based on preliminary projections for the 3-month furlough period, if 100,000 state and local employees were furloughed, the saving could be as high as $750 million for the employer and $500 million for the employee.  It is estimated that approximately 80% of the savings would be achieved by county and municipal governments, by authorities and, to a lesser extent, by school districts.

Union approval required

New Jersey’s existing job-sharing furlough law requires the approval of the affected unions to implement the furlough program. It will apply to furloughs from the effective date of the program through July 31, 2020. Legislative leaders believe the program itself can be implemented by executive order, upon agreement of the public employee unions and approval by the state Labor Commissioner.

NJEA is carefully evaluating this proposal to ensure there are no unintended harmful outcomes for those members who would be covered by the legislation. Because of the current extraordinary circumstances facing our state and the unusual nature of the federal unemployment benefit, this plan represents an opportunity to help NJEA members in a financially challenging time while also providing needed relief to boards of education as they prepare their upcoming budgets.

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