In March, Congress passed the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. Among other things, the $2.2 trillion coronavirus relief package included programs that created new loans for paycheck protection, authorized economic injury (stimulus) payments to millions of Americans and expanded unemployment benefits. In Texas, unemployment claims filed with the Texas Workforce Commission (TWC) have already exceeded 2.1 million since cities and counties began issuing “stay-at-home” orders in early March. In that time, the state has paid out $3.4 billion in unemployment benefits.
Churches, associations of churches and religious schools are all exempt from paying both federal taxes under the Federal Unemployment Tax Act (FUTA) and state taxes under the Texas Unemployment Compensation Act (TUCA). As a result of these tax exemptions, church employees have traditionally been ineligible for unemployment benefits. Under the CARES Act, however, Pandemic Unemployment Assistance (PUA) may cover church employees.
Are church employees eligible for Pandemic Unemployment Assistance?
Maybe. Generally speaking, any “service performed in the employ of a church, a convention or association of churches, or an organization that is operated primarily for religious purposes and that is operated, supervised, controlled or principally supported by a church or convention or association of churches,” has been an activity that is exempt from federal and state employment tax. Because these activities are not taxed, the employees that provide the service are typically not eligible for unemployment benefits.
Although church employees have traditionally been ineligible for unemployment benefits, the PUA program is intended to provide benefits to those who are not eligible for regular unemployment compensation. Under the PUA, covered individuals are those individuals who, “have no rights to regular compensation with respect to a week under any such law or any other State unemployment compensation law or to compensation under any other Federal law…”. Church employees fall into this category. Additionally, Unemployment Insurance Program Letter No. 16-20 sent from the Department of Labor (DOL) to state workforce agencies says, in relevant part, “The CARES Act includes a provision of temporary benefits for individuals… who are not eligible for regular UC [Unemployment Compensation]…These individuals may also include certain gig economy workers, clergy and those working for religious organizations who are not covered by regular unemployment compensation, and other workers who may not be covered by the regular UC program under some state laws.” A full copy of the DOL letter can be found here.
Despite this statement from the DOL, it remains ambiguous whether all employees of churches, a convention or association of churches, or religious schools will qualify for PUA. In another PUA guidance document, the DOL defines “self-employed individuals” as “individuals whose primary reliance for income is on the performance of services in the individual’s own business… These individuals include independent contractors, gig economy workers, and workers for certain religious entities.” It is unclear what those “certain” religious entities are. In its guidance, the DOL often references clergy in connection with self-employed individuals. Because of this, it is unclear if the eligibility will apply to all church employees or only to ordained ministers who hold a dual tax status as both self-employed and employees of the church.
Still, all church employees who meet the other requirements for the PUA program are encouraged to apply. One TWC employee said that while the employee is unsure if all church employees will be eligible for PUA, they should apply anyway. The employee said that TWC is encouraging contract laborers to apply and, because of that, church workers should apply too.
What are the eligibility requirements for Pandemic Unemployment Assistance?
To qualify for PUA, an individual must not qualify for regular unemployment benefits or for other extended benefits under state or federal law, or Pandemic Emergency Unemployment Compensation (PEUC). If an individual qualifies for regular unemployment benefits, he or she will receive regular unemployment benefits instead of PUA. As previously discussed, church employees do not qualify for regular unemployment benefits. However, this eligibility hurdle likely means that a church employee will have to file for regular unemployment benefits with the TWC and be denied before being allowed to participate in the PUA program.
Failing to qualify for regular unemployment benefits is only one requirement for PUA eligibility. In order to be eligible for PUA, an individual must also self-certify that he or she is unemployed, partially unemployed or unable or unavailable to work because of a COVID-19 related reason. There are 11 COVID-19 related reasons that qualify an individual for the PUA program:
- The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
- A member of the individual’s household has been diagnosed with COVID-19;
- The individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID-19;
- A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 public health emergency and such school or facility care is required for the individual to work;
- The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID-19 public health emergency
- The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID-19 public health emergency;
- The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19;
- The individual has to quit his or her job as a direct result of COVID-19;
- The individual’s place of employment is closed as a direct result of the COVID-19 public health emergency; or
- The individual meets any additional criteria established by the Secretary of Labor for unemployment assistance under this section.
The final COVID-19 related reason works as a type of “catch all” that provides the Secretary of Labor broad discretion in determining PUA eligibility. Individuals who have the ability to telework with pay and individuals receiving paid sick leave or other paid leave benefits are not eligible for PUA. However, if an individual’s paid sick leave or other paid leave benefits are less than his or her usual weekly income, the individual may still be eligible for PUA.
Prior to the CARES Act, individuals were required to wait for one week after becoming unemployed, partially unemployed, or unable or unavailable to work before applying for unemployment benefits. However, the CARES Act has waived this one-week waiting period, and employees may apply immediately.
What are other important provisions of Pandemic Unemployment Assistance?
PUA differs from Texas’ regular unemployment benefits in several ways.
- Unlike regular unemployment benefits, the PUA program is temporary. The PUA program only provides benefits for the weeks beginning on or after January 27, 2020 and ending on or before December 31, 2020.
- PUA may last for a total of 39 weeks. This extends the benefit time frame from the 26-week period for regular unemployment benefits by an additional 13 weeks.
- PUA will provide a Weekly Benefit Amount that is the same as what the individual would have received had he or she qualified for regular unemployment compensation. However…
- Federal Pandemic Unemployment Compensation (FPUC) provides an additional $600 per week for each week that an individual is entitled to for employment compensation from the time period beginning the week ending April 4, 2020 through the week ending July 25, 2020. This includes $600 per week for each week a church employee qualifies for PUA.
Will the church be liable for any unemployment benefits paid to its employees?
No. The PUA is federally funded through the CARES Act which has dedicated $250 billion to increase access to unemployment benefits. This makes it unique. Ordinarily, unemployment benefits are funded by employers through either Unemployment Insurance (FUTA and TUCA tax) or through a dollar for dollar reimbursement from self-insured employers. Additionally, when an employee receives regular unemployment benefits the employer’s Unemployment Insurance taxes typically increase. This is not the case with PUA. Churches remain exempt from Unemployment Insurance taxes. Additionally, because the PUA program is federally funded, churches will not be required to reimburse the state for any benefits paid to church employees under the program.
Attorney John Litzler directs the church law division of Christian Unity Ministries in San Antonio. He also serves as a BGCT legal consultant to assist Texas Baptist churches in understanding various legal issues.
Disclaimer: This article provides general information and a general understanding of the law and does not constitute specific legal advice. By utilizing the Texas Baptist website, you understand that there is no attorney/client relationship between you/your church and the author or between you/your church and the Baptist General Convention of Texas. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state with the specifics of your situation.