Employee Rights When Company Closes Down Due to Coronavirus


The coronavirus pandemic presents an unprecedented public health threat the world has been facing throughout 2020. Before the outbreak, pandemic preparedness was barely on the radar for most organizations. So when health officials and the Centers for Disease Control declared the coronavirus outbreak to be a pandemic, employers around the world suddenly had to stop allowing employees to come to work to ensure safety and health. Companies suddenly had to worry about how to protect employees, provide personal protective equipment, and ensure the cleaning and disinfection of facilities and work environments. However, for some companies that have been forced to shutter, the public health emergency and enforced social distancing has meant laying off employees on a massive scale.

But are employers allowed to do this? Can an employer require an employee to come to work amid the direct threat of the pandemic? Is there a labor law that ensures no one gets fired during these vulnerable times? What can you do if your company closes due to the pandemic, and you suddenly find yourself unemployed while fearing you may be the next to be diagnosed with serious health conditions?

Apart from worrying about the health and the well-being of their family members, workers have increased concerns about their jobs. According to numerous expert predictions, the global economy will experience severe crises due to the COVID19 lockdown. Numerous companies all over the United States struggle to keep their business operating and remain solvent at this time. Employers need to choose whether to lay off, furlough workers to cut costs, or close the company due to the adverse impact of COVID19 on the economy. For this reason, employees need to be well-informed about their rights in case they have to face this worst-case scenario.

This article will focus on federal and state acts that devised different emergency programs to support workers who have lost their jobs throughout this transition. It will also offer alternatives that may keep businesses afloat without firing employees or closing down completely. Also, you will find out what to expect once your company re-opens.

Work Sharing as an Alternative to Shutdown

Before closing down the company to ensure public health and safety, along with firing people due to the coronavirus lockdown, employers need to consider work sharing – a favorable alternative to this option.

Work sharing is an unemployment benefit companies can implement when faced with temporary business decline. Employers may reduce the wages and hours of the entire staff or a specified group of workers, making them eligible for pro-rated unemployment provisions to supplement their paycheck. Work sharing – also referred to as “shared work” or “short-time compensation” – is a voluntary program in which workers can choose whether or not to participate, based on their personal reasons. The CARES Act extended reimbursements and funding for state work-sharing plans. Thus, employers should explore existing shared work programs in their states before deciding to shut down businesses.

New York state provides work sharing programs for all employees whose wages were reduced from 20% to 60%, provided the Department of Labor has allowed your employer to participate in this program. The amount of paid unemployment benefits will supplement your paycheck at the same rate it has been reduced. For example, if your wages and hours have been cut for 30%, your weekly unemployment benefit will compensate for this 30%.

You can use this unemployment benefit once you file a claim for unemployment insurance. If you do not have a UI claim, you need to apply for one within a week of your first shared work week.

Still, if the employer decides to close the business due to the severe effects of the coronavirus outbreak, here are some federal-funded unemployment insurance programs workers can apply for.

A Right to Different Unemployment Benefits Types

According to the Department of Labor report, the number of unemployed workers soared by the end of May to a staggering 40 million, with 2.1 million people filing for unemployment weekly. Even though the US job market situation has improved slightly since then, there are still more than 30 million unemployed US workers seeking support.

The federal government devised the Coronavirus Aid, Relief, and Economic Security (CARES) Act and passed it into law on March 27th, 2020 to provide the necessary support for the unemployed during this crisis. This emergency act offers three different extended unemployment insurance programs, providing $260 billion for millions who have lost their jobs because of the COVID19 pandemic.

Pandemic Unemployment Compensation (PUC)

Starting from March 27th through July 31st, 2020, this unemployment insurance program will offer all workers eligible for regular UI and Pandemic Unemployment Assistance an additional $600 weekly. This is a flat amount that may be incorporated in the usual UI payment or distributed separately.

Pandemic Emergency Unemployment Compensation (PEUC)

This supportive act also ensures 13 weeks of extended unemployment insurance, once you have exhausted the regular state-provided UI. Most of the federal states, including New York, implement this emergency measure. This means that laid-off workers may expect to get 39 weeks paid unemployment insurance in the state of New York. You may be eligible for this financial benefit, provided you are in search of new employment and are able to work. Individual states need to approach this requirement flexibly because coronavirus measures may restrict people’s mobility. Also, this illness and the quarantine order may prevent the unemployed from actively seeking work.

All of these emergency UI programs are federally-funded. The federal government also distributed administrative funds needed for their implementation to all the states that complied with the CARES act.

Non-Reduction Rule

This rule forbids federal states that participate in these unemployment programs from decreasing the number of weeks of UI determined by the CARES Act, or the weekly benefits enabled by state law, effective from January 1st, 2020.

Waiting Week Rule

This is a one-week period people have to “wait” before they receive unemployment insurance. However, states that abandon this practice during the COVID19 crisis will be compensated for all that week’s payments, accompanied by all the administration expenses of the UI distribution.

Pandemic Unemployment Assistance (PUA)

PUA provides necessary support to workers otherwise left-out of regular state-funded unemployment insurance. This financial support is also aimed at workers who have exhausted all their state-provided and extended benefits. Namely, workers who are not included in the state UI system, like independent contractors, freelancers, part-time workers. Pandemic Unemployment Assistance also refers to those with little work experience that prevents them from applying for state UI benefits. The PUA may secure up to 39 weeks of unemployment insurance to all eligible workers.

Workers who wish to apply for the Pandemic Unemployment Assistance program need to provide valid evidence that they are partially or fully unemployed or employees are unable or unavailable for work for any of the following reasons related to COVID19.

  • They have COVID19 symptoms and seek diagnosis, or they have already been diagnosed with Coronavirus disease.
  • They have a family member suffering from COVID19, or they are taking care of a COVID19 patient.
  • They are put into quarantine by the federal, state, or local authorities orders, or their health care provider advised self-isolation
  • They take care of a child who cannot attend school or a childcare facility because of the COVID19 shutdown
  • They were supposed to start working and now cannot reach their workplace due to the COVID19 outbreak.
  • Their company closed because of the Coronavirus crisis.

Bear in mind that workers need to be authorized to qualify for PUA, all undocumented workers will be denied for this assistance program. Pandemic Unemployment Assistance will be effective from January 27th, 2020, to December 31st, 2020, providing up to 39 weeks of UI workers can receive retroactively.

Employees may require employers to provide them with documents needed to apply for these unemployment benefits, stating COVID19 as the reason for worker’s unemployment.

Workers’ Rights after the Company Re-Opens

Employers should comply with OSHA and CDC guidance to protect workers when they decide to get back to business and reopen companies. They also need to inform laid-off or furloughed workers that they started working and that they are hiring again to provide the first right refusal for re-established employment. When hiring, business owners need to apply non-discriminatory recruiting principles and reach out to those most affected by this pandemic.


This article introduced you to various types of unemployment benefits workers can apply for when the company closes down during the COVID19 pandemic. The CARES Act devised three different unemployment insurance programs to support employees who have lost their jobs amid the coronavirus crisis. Work sharing is an alternative option employers can resort to when faced with business difficulties caused by COVID19. This unemployment benefit will enable employers to reduce workers’ wages and hours while providing employees with weekly compensations. If you need more information on employer obligations and legal protections for employees or need additional help and support regarding your rights during the COVID19 pandemic, reach out to Cilenti & Cooper Wage and Hour law firm.



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