Employers may face a big bill for unemployment benefits when they finally reopen

May 20, 2020

Washington is one of a handful of states that may require employers to pay increased unemployment taxes due to COVID-19 when they reopen. Despite the vast majority of states waving the requirement to replenish their unemployment trust fund accounts, Washington will only waive the increased repayment requirement if the business had a COVID-19 infection at the business site.

As they reopen, many small businesses will be grappling with re-stocking shelfs, re-filling refrigerators and re-hiring staff. The last thing they need is another big hit to their expenditures due to increased payments to cover the COVID-19 unemployment insurance claims. The majority of the layoffs are a direct result of the state ‘Stay at Home’ order in March and are beyond the businesses control.

For many small businesses, this may be the last financial straw and is likely to discourage them from re-opening again.

As Washington Policy Center (WPC) has reported previously, the Washington Employment Security Department (ESD) is plagued with fraud, delays in benefit payments and a lack of transparency into fund balances and benefit payments. Current state policy is for the businesses to pay to replenish the unemployment trust funds and repay any federal loans that are required to keep the trust fund solvent.

This policy will result in significantly higher employment costs next year when the new rates are calculated on business based on their layoffs that were mandated by the state itself.

There are currently 26 states, plus the District of Columbia that have chosen to waive the employer portion of the increased costs. These states will be at a competitive advantage when the economy starts to gain momentum.

As Washington continues to restrict employment with byzantine rules, sector by sector, there appears to be no consideration for the pending, second economic hit to business that is looming on the horizon.

Washington State needs to join the other 26 states in waiving the employer portion of the increased unemployment costs for all businesses, not just ones that have had COVID-19 infections at their job sites.

By waiving the repayment costs there will be no disincentive for a business, already under financial pressure from COVID-19, to reopen.

The longer businesses are forced to remain closed and workers are home, the larger this problem will become.

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