How a new Tennessee law could save jobs
If supply chain challenges continue or the U.S. goes into a recession, Tennessee employers can utilize the state's Work Share program
Wells Fargo’s CEO says it will be difficult to avoid an economic downturn. The head of Frontier Airlines predicts conditions for high airfares could last for years. A veteran health care entrepreneur expects some startups to be wiped out in a recession.
Executives in industries as varied as banking, transportation and health care are watching the effects of inflation and many of them are bracing themselves, as there is no sign of a slowdown.
But if or when a recession hits, Tennessee employers have a new life raft to reach to —rather than resorting to mass layoffs or plant closures.
In May, Governor Lee signed HB1274, better known as the “Work Share Bill” into law. The bi-partisan legislation allows businesses to better weather economic storms by establishing a voluntary shared work benefits program.
The program allows employers to combine reduced work hours for employees with partial unemployment benefits.
For example, a company needing to cut its payroll by 20%, instead of laying off one-fifth of workers, can reduce their hours by 20%. Workers would receive 80% of their regular pay and 20% of what they would be entitled to in state unemployment benefits.
“For companies experiencing a temporary decline in revenues, this is a really good way to keep employees,” says JK Simms, a Tennessee employment law attorney.
Workers benefit because they still get a paycheck and retain important benefits like health insurance. Employers are able to retain experienced employees, putting them in a better position to ramp back up when business improves. And from a government perspective, it's more cost effective to pay partial unemployment benefits rather than full unemployment benefits.
The program is available to Tennessee businesses with two or more full-time employees. It requires the business to submit a plan to the Department of Labor for approval. The plan must include the reduction of hours of at least 10% of a company’s workforce. Those employees’ hours must be reduced by at least 10% but no more than 40%. Health insurance, retirement pay, vacation pay and other fringe benefits cannot be reduced. The legislation goes into effect in 2023.
“As Governor McWherter said, ‘the best social service program is a good-paying job’,” says the bill’s sponsor, State House Representative Jason Powell (D — Nashville). “Work share programs work and keep people employed.”
He sites Germany’s “Kurzabeit” policy as evidence. Jobs in Germany fell more softly in the 2008 global financial crisis in Germany than they did here — and bounced back more quickly. While the U.S. and the rest of Europe still struggled at the end of 2013 to return unemployment to pre-recession (2007) levels, Germany had already pushed their unemployment 30 percent below its pre-recession level.
How did Deutschland do it?
Like Tennessee’s work share program, Kurzabeit encourages German companies to reduce employees’ hours, as opposed to laying them off completely. Those employees are eligible for partial unemployment benefits through the German government.
Currently, 26 other states and the District of Columbia have some sort of work share program in place, explains Ryan King, the Vice President of Government Affairs at the Tennessee Chamber.
Arkansas, California, Colorado, Connecticut, Florida, Iowa, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington and Wisconsin all have work share programs.
“The Tennessee Chamber is confident in this legislation for many reasons — including the effectiveness seen in other countries and states — but largely because of the bipartisan support it received,” opines King. “One of the most prominent Democratic leaders in the General Assembly worked alongside the Chairman of the Commerce Committee — a Republican — to unanimously pass this legislation.”
“This program helps employers temporarily reduce their payroll costs, retain a skilled workforce and avoid future expenses of recruiting, hiring and training new employees when the economy or supply chains improve,” says State House Representative Kevin Vaughn (R — Collierville) who chairs the House Commerce Committee. “Worksharing helps workers on the job, maintain their income and enables them to retain health and retirement benefits.”