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SC business groups ask lawmakers to void unemployment-related penalties through 2020

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SC State House with in bloom

The South Carolina Statehouse. Business groups in the state have asked lawmakers to void unemployment-related penalties through 2020. File

COLUMBIA — Unless lawmakers act, South Carolina companies could be looking down the barrel of another tough decision amid the coronavirus outbreak: force employees to come back as the public health crisis continues or face the long-term impact of higher fees used to cover unemployment payments to laid off employees. 

Industry groups have taken different approaches to calling workers back, some not wanting to rankle employees by demanding their return, as cases of the virus in the state climbed to 8,030 as of Wednesday.

Gov. Henry McMaster continues to push ahead, allowing the reopening of businesses in the state in hopes of jumpstarting the state's idled economy. As the administration rolled back restrictions, South Carolina's jobs agency, at the end of April, encouraged employers to report employees who turn down offers to return to work while it tried to protect a dwindling trust fund from which unemployment payments are made.

S.C. Department of Employment and Workforce Director Dan Ellzey said his agency would take those employees off the unemployment rolls, even if workers might have health concerns about getting back on the job.

Ellzey said an additional $600 per week on unemployment checks through July, provided by the federal CARES Act, lessens the incentive for people to go back to work, especially if payments are higher than their typical income.

But S.C. Chamber of Commerce President Ted Pitts said his members likely won't report workers refusing to return. Not wanting to be antagonistic with employees in the face of the pandemic, they're more apt to wait for the higher unemployment payments to expire, forcing the issue. 

As of May 2, more than 461,000 unemployment claims had been filed in the state over the prior seven weeks, with S.C. DEW dispersing about $70 million in payments a week from the state's $1.1 billion trust fund.

McMaster's stringing together of emergency orders that contain a provision — if employees file for unemployment due to COVID-19, unemployment insurance tax rates paid by businesses would not be affected — have kept employers protected. 

The governor this week issued another order — his fifth in a row — to give businesses up to 15 more days. But knowing those extensions are likely to cease long before July 31, the chamber called on lawmakers to act, extending protections for the entirety of 2020.

“It is a concern of the businesses hit hardest by coronavirus, if we don’t get an extension, it could drastically impact rates and what they have to pay,” Pitts said.

All while they're still reeling financially from decreased demand for products and services.

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Under the state's unemployment insurance program there are eight rate classes. The rate a company pays varies based on how often and how many employees it furloughs. Without the added protections, coronavirus layoffs would move them up a rate class. New rates for 2021 will be set in the fall.

The last time the trust fund was significantly drawn down was during the Great Recession, when the state was forced to take out a nearly $1 billion loan from the federal government to continue making unemployment payments.

"The employers of the state spent the last decade rebuilding the trust fund after the last recession," said Sara Hazzard, president of the S.C. Manufacturers Alliance. "Now the trust fund is being tapped again during this COVID-19 pandemic. The state and the business community are going to have to work together to determine the best path to rebuild the trust fund."

Ellzey said in mid-April the state had about $970 million in the fund. At the current rate of payments, the trust fund would have enough for 14 weeks, and Ellzey warned of its possible depletion.

"I think the top priority for manufacturing companies right now is making sure workplaces and workers are safe, but as this situation continues, we are going to need to focus on the health and viability of the unemployment insurance trust fund," she said.

In a survey of S.C. Chamber membership, 1,842 respondents said they had to furlough or layoff a portion of their workers. The majority, 58.4 percent, of the 4,432 respondents hadn't turned to unemployment.

Those same chamber members also made predictions on how soon they might bring back workers. Within the next three months, 1,078 companies said they expected to have 100 percent of their workers back, 374 said they would be at about 75 percent of their pre-coronavirus workfroce, 211 said they'd be at 50 percent and 223 said they'd bring less than 50 percent of their workers back.

University of South Carolina economist Joey Von Nessen, referencing SC DEW data, said about 78 percent of workers laid off have a return to work date listed on their unemployment application.

Von Nessen said local unemployment data for the virus' peak is still pending, but he predicts a 15 percent unemployment rate statewide. The hardest hit areas, like Horry County, could see a rate as high as 20 percent, he said.

The rate of rebound, Von Nessen said, is vastly dependent on whether a proven treatment for COVID-19, the disease caused by the novel coronavirus, is developed. Should no treatment be found, single digit unemployment in the Palmetto State by end of the year would be a major success story. That's a far cry from the just over 2 percent rate boasted by the state prior to the virus' onset.

Correction: An earlier version of this story incorrectly stated the amount of weekly disbursements from the state Unemployment Trust Fund. S.C. Department of Employment and Workforce has been paying out about $70 million per week in unemployment claims from the fund.

 

Jessica Holdman is a business reporter for The Post & Courier covering Columbia. Prior to moving to South Carolina, she reported on business in North Dakota for The Bismarck Tribune and has previously written for The Spokesman-Review in Spokane, Wash.

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