WASHINGTON, DC – The U.S. Department of Labor (DOL) today issued new guidelines on U.S. Senator Jack Reed’s (D-RI) work sharing law (also known as Short-Term Compensation (STC) programs).  The new law provides federal support to expand existing state STC programs and helps more states develop programs that give employers an alternative to layoffs during a business slowdown.

“This is a cost-effective program that saves jobs.  It benefits taxpayers, businesses, and workers.  It will save Rhode Island millions of dollars, help more workers earn a steady paycheck, and allow companies to save when they’re forced to temporarily scale back.  This is a bridge to better days and a smart alternative to mass-layoffs,” said Reed, who first proposed work sharing legislation in 2009 as a policy to help protect against future recessions.   “Giving states an incentive to expand their work sharing programs is a smart investment in preventing future layoffs and blunting economic downturns.”

Reed wrote the Layoff Prevention Act, which was signed into law by President Obama earlier this year as part of the package extending the payroll tax cuts (the Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. 112-96). 

The goal is to save taxpayer money and keep workers on the job by giving struggling companies the flexibility to reduce hours instead of their workforce, helping them save on rehiring costs while employees keep their jobs and receive a portion of Unemployment Insurance (UI) benefits to make up for lost wages. 

Already Rhode Island and 21 states and the District of Columbia have implemented similar programs, saving over 365,000 jobs since 2009.

Under Reed’s law, the federal government will provide an estimated $500 million for business-state partnerships nationwide to help prevent layoffs. 

Rhode Island’s cost-effective work sharing initiative has helped preserve over 10,000 jobs since 2009.  Under the new law, during the next three years the state will be relieved of all work sharing payments provided it meets all requirements.  If these provisions would have been in place over the previous three years, Rhode Island would have saved an estimated $36 million in state funding.  Since the law was enacted in February, Rhode Island has paid out approximately $1.9 million in work sharing benefits through June 15, 2012.  Thanks to Reed’s law, the state will be fully reimbursed for those expenditures.

“Those are resources that can now be targeted toward creating jobs and economic growth in Rhode Island,” said Reed, noting that economic estimates have shown that every dollar spent on short-term compensation will generate $1.64 in economic return.

The 22 states that currently have STC programs include: Arizona, Arkansas, California, Colorado, Connecticut, Florida, Iowa, Kansas, Maine, Massachusetts, Maryland, Minnesota, Missouri, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, and Washington.

Today’s DOL guidelines help codify and expand the existing definition of STC.  States that had been operating an STC program before enactment of the new law have two and a half years to amend their laws to conform to the new definition.

As an incentive for states to enact state STC programs and promote the use of STC, this law provides for 100 percent reimbursement of STC benefit costs paid under state law for up to 156 weeks (three years). Authority to provide these reimbursements ends on August 22, 2015.

The law also establishes an optional temporary federal STC program and provides “approximately $100 million in grants is available to states with eligible work sharing programs.”

DOL must provide model legislation, technical assistance, and reporting requirements after consultation with stakeholders.  DOL must also report to Congress in 4 years on best practices and state challenges and conduct a survey of employers.