In an effort to help prevent layoffs, make businesses more productive, and save taxpayers money, U.S. Senator Jack Reed (D-RI) has introduced the Layoff Prevention Act of 2011. This legislation would bolster state-based work sharing programs. Work sharing enables employers to reduce their workers’ weekly hours and pay, and states make up some of the lost wages from their unemployment funds. Under work sharing, companies are able to remain competitive by lowering costs and keeping a skilled work force, employees keep their jobs and health benefits, and states pay a portion of unemployment to help make up for lost wages.

“Unemployment is too high. We need to do everything we can to help businesses save and create jobs and work sharing has been an important and effective, but underutilized tool,” said Reed, whose previous legislation on work sharing served as the model for President Obama’s proposal of the initiative in his Fiscal Year 2012 budget. “Work sharing is a proven job-saver in both red states and blue states. It helps businesses retain skilled workers they have spent time and money to hire and train, keeps workers attached to the workplace and off the unemployment compensation rolls, and it should be expanded. This plan will help prevent layoffs, make businesses more productive, and save taxpayers money by keeping people on payrolls and reducing their need to access full unemployment compensation or benefit programs.”

Currently, 23 states across the country, including Rhode Island, operate work sharing programs. According to the U.S. Department of Labor, work sharing programs saved approximately 165,000 jobs in 2009 - nearly triple the number of jobs saved in 2008, and another 100,000 jobs in 2010. Multiple studies have found that countries that adopted more robust work sharing programs weathered the recent recession with lower unemployment rates.

In addition to saving jobs, work sharing also helps speed economic recovery, as every dollar devoted to finance state work share programs results in an estimated $1.69 in GDP, according to Mark Zandi of Moody's Analytics.

“Helping more businesses and workers stay afloat will not only strengthen our economy but it will also strengthen our communities and our nation. This is a smart investment for taxpayers, employers, and employees,” said Reed. “My goal is to expand this initiative by incentivizing more states to offer it. This will enable more companies to take advantage of it and help more employees keep their jobs as we work our way through these tough economic times and lay a foundation to protect businesses and workers from any future recession."

The Layoff Prevention Act, which is also being introduced in the U.S. House of Representatives by Congresswoman Rosa L. DeLauro (CT-03), provides states that have approved work sharing programs with temporary federal financing for 100 percent of work sharing benefits paid to workers, limited to 26 weeks worth of benefits spread out over the course of a year. This financing is available for three years.

While the bill is designed to incentivize states to enact permanent laws to create work sharing, the bill also includes provisions to allow states to get work sharing up and running more quickly. Specifically, a state can reach an agreement with the U.S. Department of Labor to create a temporary program under which they would receive 50 percent federal financing. This financing incentive would be available for two years, and such states would be eligible for a third year of 100 percent federal funding if they pass a permanent law.

In addition, the bill provides flexible grants to state labor agencies at a time when they are doing more with less. States that enact work sharing programs are eligible for grants to improve implementation and administration, as well as grants for promotion and enrollment. These resources will play a critical role in ensuring that states are efficiently able to inform employers of its benefits, and encourage greater use of work sharing to stave off layoffs. Moreover, as work sharing programs take hold, states will see their unemployment insurance systems less burdened as fewer individuals will need to avail themselves of full unemployment benefits.

States that currently have work share laws include: Arkansas, Arizona, California, Connecticut, Colorado, Florida, Iowa, Kansas, Louisiana, Maine, Massachusetts, Maryland, Minnesota, Missouri, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, as well as the District of Columbia.

Summary of the Layoff Prevention Act

Offers Temporary Federal Financing

States with approved work sharing programs receive federal financing for 100% of work sharing benefits paid to workers. This financing program is available for up to 3 years. States with existing work sharing programs automatically receive 100% financing for 2 years and are eligible for a 3rd year once their program is approved.

States without work sharing programs can take advantage of a federal program that would provide employers with access to work sharing and states with federal financing for 50% of work sharing benefits. This financing is available for 2 years.

Provides Additional Incentives

States with approved work sharing programs are eligible for grants for implementation and improved administration and larger grants for promotion and program enrollment efforts.

Contains Limitations Focused on Long-term Employment

Employers cannot participate if their workforce is employed on a seasonal or temporary basis.

Enhances Work Sharing

Requires the Department of Labor to 1) update model legislative language to help states develop and enact work sharing programs (model language was last updated during the 1980s); 2) consult with employers, states, and others to improve the administration of work sharing; 3) provide technical assistance and guidance to states; and 4) survey states and employers to determine challenges to enacting work sharing.