In a further effort to address difficulties posed by the COVID-19 pandemic upon the real estate industry, the Realty Advisory Board and Local 32BJ, representing apartment building workers, entered into a Memorandum of Agreement, which is effective for a period of 60 days from April 11, 2020 (subject to extensions). This Memorandum of Agreement provides a potentially valuable tool for apartment owners, including cooperatives and condominiums, to reduce expenses by signing on to New York State’s Shared Work Program, referred to by the New York State Department of Labor as the “Layoff Alternative.”

With regular residents temporarily living elsewhere and no construction or alterations taking place, many buildings are finding they are temporarily overstaffed but do not want to consider layoffs or furloughs. The Shared Work Program provides an alternative. This program, as it existed prior to the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, allowed a temporary reduction in hours of staff members (from 20% to 60% in any one week) and, therefore, a proportionate reduction in wages paid by the owner, with a proportionate payment of unemployment benefits to mitigate the lost income to the employee. In the CARES Act, Congress encouraged use of programs like New York's Shared Work Program (also known as a short-time compensation program in other states) by underwriting these programs and providing that, in addition to the proportionate payment of state unemployment benefits, each worker would be entitled to an additional weekly payment of $600. (Note: This $600 payment is available through July 31, 2020.) With the additional $600 payment, workers will not only be made whole through unemployment, but in many cases will find their income is greater than it would have been had they continued to work a 40-hour week.

By way of example, under the 32BJ collective bargaining agreement with residential buildings in New York, the average porter makes $1,026 weekly and the average handyman makes $1,129 weekly. A typical plan that would reduce work hours by 50%, and therefore payroll costs to the employer by that amount, would provide for one half of the staff to work two days one week and three days the next, and the other half to work three days the first week and two days the next. As a result, the individual wages would be reduced by 60% for one week (a reduction of $615.60 for porters and $677.40 for handymen) and by 40% the other week (a reduction of $410.40 for porters and $451.60 for handymen). The savings to the employer is significant and, as discussed below, with no loss of income for the employees.

Provided a shared work plan has been filed with and accepted by the New York State Department of Labor, the impacted employees are eligible for unemployment compensation for the shortfall in wages – even though they are still working and even though they are not actively seeking other employment, typical requirements of unemployment compensation. While the maximum amount of that weekly compensation in New York is currently $540, and employees are entitled to only the proportionate amount of that sum (so an employee cut by 60% would be entitled to 60% of the $540, or $324; in the case of a 40% cut, that employee would be entitled to $216 in unemployment benefits), because of the CARES Act payment, an additional $600 would be added to "shared work" unemployment benefits. These amounts are in excess of the wage reduction, so that when these sums are added to the amounts paid by the employer for the reduced hours, employees will be, as set forth below, receiving more than their $1,026 or $1,129 weekly wages!

The following chart illustrates the economics for a week in which a 60% cut in hours and wages would be in effect and shows that employees would get a sizeable “bonus” for participating as follows:

During the period the plan is in effect, the employer must continue to pay fringe benefits for the employees as if they were working full time. The plan has to be certified every week, and it can be changed by the employer as needs change. The plan can also be discontinued at any time. The employees must also file weekly claims for unemployment, which can be done online, with their checks deposited electronically to their checking accounts.

While this plan does not work for all buildings, it may offer some measure of relief during these times when rental payments (including maintenance and common charges) may be running behind.

Armstrong Teasdale attorneys are actively monitoring and providing updates regarding the impact of COVID-19. For additional information, visit Armstrong Teasdale’s COVID-19 Resource Center.