Rep. Golden: Maine Delegation Calls on Department of Labor to Change Guidance to Protect Nonprofits From Financial Disaster

WASHINGTON, May 28 -- Rep. Jared Golden, D-Maine, issued the following news release:

Maine's congressional delegation took action this week to protect nonprofits -- which employ one in every six workers in the state -- from federal guidance that would lead to hundreds of thousands of dollars in unexpected, upfront costs for many nonprofit organizations. In a letter to U.S. Department of Labor (DOL) Secretary Eugene Scalia, Congressman Jared Golden (ME-02), Senators Susan Collins (R-ME) and Angus King (I-ME), and Congresswoman Chellie Pingree (ME-01) pushed for changes to DOL guidance that currently forces some nonprofits to pay 100 percent of their unemployment compensation costs upfront, even though 50 percent of those costs are covered by the federal government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

"USDOL guidance... does not provide needed flexibility to the states and would prohibit the Maine Department of Labor (MDOL) from requiring reimbursing employers to cover 50 percent of the cost of claims up front and drawing down the remaining 50 percent from USDOL directly," the delegation wrote. "Instead, reimbursing employers - including hundreds of Maine nonprofits - would have to come up with 100 percent of the cost up front and then seek a 50 percent reimbursement from an already overburdened MDOL. Having to provide such a significant investment up front is untenable and could result in the elimination of vital services."

The Members of Congress went on to urge Secretary Scalia to "update the guidance to allow state departments of labor to provide the 50 reimbursement up front, consistent with Congress' directive that USDOL provide maximum flexibility pursuant to the CARES Act. Doing so would help ensure that Maine's nonprofits can continue to serve communities at a time when they are needed most."

Nonprofit organizations in Maine spoke out about the impact DOL's current guidance would have on them.

"In the wake of COVID-19, Goodwill NNE had to make difficult choices, including having to furlough more than 1,200 employees. No one could have anticipated this current situation. Like most Goodwills across the country, our unemployment insurance is self-insured; our liability for our furloughed employees is $425,000 per month. The unemployment financial burden combined with virtually no revenue since closing 31 retail stores two months ago could permanently close our doors and shut down our community programming." - Karin Anderson, Senior Director, Foundation and Partner Relations, Goodwill Industries of Northern New England

"In Maine, the YMCA employs more than 3,800 full and part-time people. All Maine YMCAs closed their facilities in late March and have had to lay off significant portions of their workforce. For the 11 YMCAs in Maine that self-fund their unemployment benefits, the total estimated cost of directly reimbursing their claims is more than $500,000 per month. YMCAs simply cannot afford to pay these claims while their facilities continue to be closed and their programming significantly reduced. If the Maine YMCAs that self-fund must directly reimburse all their unemployment claims during this crisis, there is a significant possibility that many will not be able to survive long enough to wait for reimbursement of 50% of those claims. The Maine YMCAs serve 130,000 Mainers each year; our demise would have a significant negative impact on our communities." - Meg Helming, Director of Advocacy and Impact, YMCA Alliance of Maine, New Hampshire, and Vermont

"The US labor department's latest guidance will devastate self-insuring nonprofit organizations. The Maine Association of Nonprofits is thankful to our Congressional delegation for urging the department to revert back to their original, workable guidance. Maine's nonprofits not only provide vital services, but also employ 1 in 6 workers. It's imperative to our state economy that COVID relief efforts support this sector, not hold it back." - Sarah Skillin Woodard, Advocacy and Public Affairs Director, Maine Association of Nonprofits

The Maine delegation has worked to ensure Maine nonprofits have the resources they need throughout the COVID-19 pandemic. In March, they wrote a letter in support of Governor Janet Mills' application for a disaster declaration from the Small Business Administration for the state of Maine, which made nonprofits in the state eligible for up to $2 million in low-cost loans. Reps. Pingree and Golden also called on the Small Business Administration (SBA) to provide zero-interest loans to nonprofits as they contend with the coronavirus. Earlier this month, Senator King led a bipartisan coalition of 30 senators in a letter urging aid for nonprofits in upcoming coronavirus relief legislation.

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May 26, 2020

To: The Honorable Eugene Scalia, Secretary of Labor, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210

Dear Secretary Scalia:

We are writing to share our concerns about the recently issued guidance to the states from the U.S. Department of Labor (USDOL) regarding the implementation of unemployment relief to "reimbursing employers" through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under the guidance, states are required to bill these entities for 100 percent of the costs of unemployment benefits paid to employees who have been laid off because of the COVID-19 crisis. Left unchanged, this guidance would financially cripple Maine's nonprofit community and risk disrupting the services they provide to Mainers in this challenging time.

Under Maine law, 501(c)(3) nonprofits are given the option to forgo contributions to the unemployment compensation fund, and instead may reimburse the fund for benefits paid to their separated employees. Nonprofit employers often elect the reimbursement option because they rarely experience large layoffs. However, nonprofits have experienced significant layoffs of their workforce as a result of the COVID-19 pandemic and are charged for unemployment benefits filed by previous employees who worked for the organization during a "base period" that goes back several quarters. Consequently, for those who self-fund their unemployment benefit, the total estimated cost of directly reimbursing these claims could reach into the hundreds of thousands of dollars. Recognizing the unprecedented financial challenges facing nonprofits, the CARES Act requires the federal government to cover 50 percent of the cost of claims charged to reimbursing employers. Additionally, Section 2103 of the legislation directs the USDOL to allow the states to provide "maximum flexibility" to reimbursing employers as it relates to the timely payment and assessment of penalties and interest.

USDOL guidance, however, does not provide needed flexibility to the states and would prohibit the Maine Department of Labor (MDOL) from requiring reimbursing employers to cover 50 percent of the cost of claims up front and drawing down the remaining 50 percent from USDOL directly. Instead, reimbursing employers - including hundreds of Maine nonprofits - would have to come up with 100 percent of the cost up front and then seek a 50 percent reimbursement from an already overburdened MDOL. Having to provide such a significant investment up front is untenable and could result in the elimination of vital services.

It is our hope that the Department will update the guidance to allow state departments of labor to provide the 50 reimbursement up front, consistent with Congress' directive that USDOL provide maximum flexibility pursuant to the CARES Act. Doing so would help ensure that Maine's nonprofits can continue to serve communities at a time when they are needed most.

We appreciate your attention to this important matter and await your response.

See signatories here https://golden.house.gov/sites/golden.house.gov/files/LTR%20to%20DOL%20%28Nonprofit%20UI%20Direct%20Resimbursement%29.pdf