State Clarifies Unemployment Rules

Delaware Department of Labor Secretary Cerron Cade.

by Terry Rogers

Over the past few weeks, several Milford business owners have expressed concerns regarding employees who are collecting unemployment being reluctant to return to work. With the additional $600 per week federal stipend, some employees are making more money at home on unemployment than they are at their regular job.

Businesses who apply for Small Business Association Payroll Protection Program (PPP) loans require that employers keep their staff on payroll for eight weeks from the date they receive the first disbursement of the PPP loan and that the funds be used for payroll, rent, mortgage interest or utilities. In addition, the employer must maintain or quickly rehire employees and maintain their salary levels when the business is permitted to return to regular operating procedures. These conditions determine whether the PPP loan will be forgiven, or not need to be paid, by the SBA or if the business will be required to make payments once they reopen. Forgiveness is reduced if full-time headcount declines or if salaries and wages decrease.

The COVID-19 crisis did not change the requirements of those who are collecting unemployment benefits.

“An individual receiving regular unemployment benefits is required to be available for work and may be disqualified for UI benefits if they refuse suitable work,” Grant E. Vaughn of the Department of Labor said. “Suitable work is defined by state law. Employers are encouraged to contact their state unemployment office if they have offered suitable work to an individual receiving unemployment benefits and that work has been refused.”

A new rule has been created to deal with this same issue in the PPP forgiveness requirements.

“As an exercise of the Administrator’s and the Secretary’s authority under the CARES Act to prescribe regulations granting de minimis exemptions form the limits on loan forgiveness, SBA and Treasure issued an interim final rule excluding laid-off employees whom the borrower offered to rehire for the same salary and wages as well as the same number of hours,” the SBA website reads. “To qualify for the exception, the borrower must have made a good faith, written offer of rehire and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”

Vaughn also explained that unemployment claimants must report any income they receive while collecting unemployment.

“Claimants who fail to report income may be committing fraud which is subject to criminal penalties,” Vaughn said. “State law defines fraud for the purposes of the unemployment program. Failure to report income is likely to result in overpayment of benefits. If the state determines benefits have been overpaid, they are subject to recovery.”

An employer who fires someone who refuses to come to work must document their reasons for terminating the employee. The Department of Labor may request the documentation in order to determine if the refusal to return to work was due to a good cause. A good cause may be because they are caring for someone who has the virus or who is in a high-risk group or because there is a childcare issue due to closures of daycare. Simply being “afraid” to return to work does not qualify as “good cause.” Employers should put measures in place that will give employees a level of comfort as businesses begin to open in the early phases of the recovery plan.

Employers who are unsure if they have good cause to terminate an employee who does not return to work can call the Department of Labor Unemployment Insurance Office for guidance. There is also information online at the Department of Labor website. Employees who are concerned about losing benefits can also learn more by calling the Department of Labor or visiting the website.

The Delaware Department of Labor is announcing the launch of a new unemployment insurance benefits system that will process claims for independent contractors, self-employed individuals, and others as detailed in the CARES Act. These individuals can file benefits claims for Pandemic Unemployment Assistance beginning the week of May 11, 2020. Under federal guidelines, for workers to be eligible for PUA, they must first apply for benefits through the traditional unemployment system and be denied. Applicants will then receive a letter of denial for traditional unemployment benefits.

The denial letter will trigger a second letter explaining their potential eligibility for PUA and specific instructions on how to apply. The letter will explain information on the following: How to access the new PUA Benefits website; Login details for logging into the website; Documentation required when applying for PUA benefits. More details can be found at