Late Wednesday night (March 25th) the U.S. Senate passed 96-0 an unprecedented relief/spending package of over $2 trillion in response to the COVID-19 pandemic and its collateral damage to the U.S. economy and employees/businesses. [See, earlier CIRT story covering the major elements of the legislation].
Unfortunately included in the package, among other problematic elements, is one that may impact CIRT member firms with respect to potential affects on workforce and wage levels. A provision in the bill provides that: unemployed remittances may actually come out higher on an hourly basis than the some employees’ standard hourly rates. The danger: it will create pressure or a dynamic whereby this higher rate should become the “permanent” pay level for all the individuals affected by the temporary unemployment rate.
A group of Senate Republicans tried late last Wednesday night to amend the provision so unemployment only matched or made whole employees, not have them make more unemployed than if working. Their amendment was doomed to failure when it was required to muster a 60-vote cloture hurdle (meaning to move it to a final vote). This essentially ensured the minority in the Senate was in control of the amendment’s fate (which they promptly killed).
(1) The “wrinkle” related to the Unemployment Insurance came to light during a 92-minute phone call with the Senators describing the provisions in the bill on Wednesday morning (meaning it was slipped in during the final negotiations) and appears not have been in earlier versions.
(2) The White House/Treasury Secretary, Steve Mnuchin, were not in favor of the disincentive of the “one size fits all” approach, which means the same amount of dollars were to be applied across the country even if some areas/sectors standard pay rates are below the unemployment remittance. The Secretary didn’t have the time to put in place a more specific granular mechanism so his bargaining position was weak. [As an aide noted: "Each state has a different UI program, so the drafters opted for a temporary across-the-board UI boost of $600, which can deliver needed aid in a timely manner rather than burning time to create a different administrative regime for each state."] Certain elements in the negotiation took full advantage of this, to ram through an ideological position that minimum wages should be much higher. (In other word, they want the pressure to mount to create a potential outcome that forces permanent higher wages across the board – see, Senator Sanders’ comments opposing the amendment).
(3) As noted, a last minute effort was mounted by a half-dozen Republican Senators to amend the language – but, it failed on a 48-48 vote (it needed 60-votes for the amendment to be considered). The amendment would have capped unemployment benefits at 100 percent of an individual's salary before they were laid off.
This is what happens when the Congress goes into crisis emergency mode . . . certain elements will take advantage of the heated circumstances and get through things they wouldn’t have a chance in normal order or legislative business. In essence none of the normal safeguards of a deliberative legislative system were in play. Unfortunately, with the bill now headed to the HOUSE, it could be a potential minefield for more unrelated spending, policy changes, etc. tucked into must pass legislation. [Speaker Pelosi has NOT yet committed to a straight up or down vote on the Senate version – at the time of this Update].
The only silver lining: the provision is only in place for four months. Hopefully, people won’t be able to exploit it into a claim their permanent wages should be at these elevated levels (calculated to be $23.15 per hour, based on a 40-hour work week). It does beg the question, if a CIRT firm is back up and running and seeking to put people back on the job, and they refuse so as to take the Unemployment payments instead (for the four months), does the firm have any obligation or incentive to hire them back later?