If you’re one of the 6.6 million Americans who filed for unemployment benefits last week there’s a good chance you’re anxiously waiting for a check to arrive in the mail. In the meantime, you might consider taking on gig work. What you may have given less consideration to is how that might affect your ability to collect unemployment benefits. The CARES Act attempts to tackle that.
“ While state unemployment offices process a surge in applications, they must answer another question: How much gig work disqualifies a person from receiving unemployment? ”
Last week, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in response to businesses closing in an effort to stop the spread of COVID-19, and provides $ 2.2 trillion to help businesses and individuals weather the storm. Its goal is to provide a bridge for the economy, as people either work from home or are furloughed (without pay).
The CARES Act temporarily increases weekly unemployment benefits for laid off workers by $ 600 a week for up to four months, in addition to existing state benefits. But while state unemployment offices rush to process a surge in unemployment applications, they must also answer a more complicated question: How much gig work disqualifies a person from receiving unemployment?
Some 76% of freelancers reported having contracts or gigs canceled by clients, according to a recent report published by the Freelancers Union, which represents 57 million independent workers. The Freelancers Union launched the Freelancers Relief Fund, which will offer up to $ 1,000 in financial aid to help freelancers afford necessities “not covered by government relief programs.”
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States are still figuring out how to interpret CARES
The CARES Act is “going to bring independent workers needed relief,” said Rafael Espinal, director of the Freelancers Union and a former New York City Council member. “But states have not yet been able to properly interpret the new rules and handle the high traffic.” For starters, freelance workers don’t have W2s, the traditional way of proving that you qualify for unemployment benefits.
Millions of freelance workers who qualify for extra cash under the CARES Act may be in for a long wait. For instance, the Michigan’s Department of Labor and Economic Opportunity site states: “Self-Employed Workers, Gig Workers, 1099-Independent Contractors and Low-Wage workers DO NOT APPLY AT THIS TIME. Applications will be open in the next few days.”
“ If people do not report their gig earnings and they are drawing unemployment, they could face jail time and would have to return the money they fraudulently received and pay a 15% fine. ”
Another complication: States are still trying to work out how gig work can impact your ability to collect unemployment, and it’s still not clear how they will interpret the CARES Act. Some states have rules that allow gig work and unemployment benefits. In New York, gig work over four days during one week eliminates any unemployment benefits an individual would have received that week.
New York has strict rules about the amount of gig work you can do before claiming benefits. “For every day worked, regardless of the hours worked or the amount earned, an individual loses one-quarter of their benefits,” the representative said. “As such, working four days would reduce a person’s benefits to zero.” Earning more than $ 504 a week in New York reduces benefits to zero.
Another consideration: The maximum unemployment benefits amount varies by state. In Texas, for example, if a person is eligible to receive $ 500 a week in unemployment benefits, but earns $ 150 on the side for gig work which they report, their weekly unemployment check is reduced by $ 25, a spokesman from the Texas Workforce Commission told MarketWatch.
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Full-time gig workers aren’t the same as full-time employees
People who earn money through Instacart, Uber UBER,
In California, a law passed last year, known as Assembly Bill 5, could eventually reclassify gig workers as employees of the companies they earn money from. Uber, Lyft and DoorDash have each pledged $ 30 million to support a ballot initiative to fight the new law, which could force them to offer drivers legal protections and minimum wage.
It would also mean that as W-2 employees, these companies would be required to report their workers’ earnings to California’s Employment Development Department, said Carole Vigne, a lawyer at Legal Aid at Work, a nonprofit legal services organization that provides assistance for low-income families in California.
In a statement to MarketWatch, Lyft said AB-5 would “lead to the widespread elimination of work for hundreds of thousands of Californians and potentially jeopardize these essential services at a time when millions are counting on them.” (DoorDash and Uber did not respond to a request for a comment on their efforts to fight AB-5.)
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Be mindful about reporting your gig work
For instance, in Texas, if people do not report their gig earnings and they are drawing unemployment, they could face jail time and would have to return the money they fraudulently received and pay a 15% fine. “To detect fraud, we compare what you report with other sources to verify the accuracy. If you don’t correctly report your work after being hired, the Texas Workforce Commission will find out,” the site states.
But given that state unemployment offices are swamped with an influx of people applying for benefits, it’s unlikely that they will have the bandwidth to go after people who misrepresent their earnings from gig work — at least not yet, said Wayne Vroman, a labor economist at the Urban Institute, a left-leaning think-tank based in Washington, D.C.
Currently, states are rushing to play catchup. “Unemployment agencies are so stretched to get checks out the door for people eligible for benefits,” Vroman told MarketWatch. That could change once state labor departments receive a portion of the $ 2 billion set aside for them as part of the $ 2.2 trillion stimulus bill known as the CARES Act, Vroman said.
In general, most states’ labor departments rely on people to self-report their earnings from gig jobs, said Gary Burtless, a senior fellow at the Brookings Institute, a center-left think-tank based in Washington, D.C. “Because no employer pays the unemployment insurance payroll tax for a gig worker, there is no earnings record accessible to the unemployment administrative system.”
Like Texas, Californians receiving benefits are required to report their income to the state’s unemployment agency. “There are serious consequences if Employment Development Department of California finds out later that a worker has not been forthcoming,” Vigne said. That includes clawback of payments, possible 30% penalties, and future disqualifications.
“In my experience, EDD is very aggressive with these cases,” she added.
