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Dipping into FEMA disaster relief funds, President Trump authorizes up to $400 per week to Americans unemployed because of the pandemic

The $600-per-week federal subsidy for unemployed workers because of COVID-19 expired at the end of July and was not extended by a divided Congress. In response, President Trump issued an executive order on Aug. 8, 2020, authorizing the Federal Emergency Management Agency (FEMA) to divert up to $44 billion in disaster relief funds to provide supplemental payments to those Americans unemployed because of the COVID-19 pandemic. Under the Lost Wages Assistance program, FEMA will contribute $300 per week to individuals who are receiving at least $100 per week in unemployment benefits and are unemployed or only partially employed because of COVID-19. The states are to share in providing the benefit. To access the FEMA funds, states must apply for a grant and they will be responsible for administering the program. To explain the program, FEMA has provided answers to frequently asked questions.

If a state’s grant application is accepted by FEMA, the state will be able to provide claimants a lost wages supplement of up to $400, comprised of a $300 federal contribution from the disaster relief fund and an additional amount of up to $100 from its own funds. The state-funded portion may be sourced from the Coronavirus Aid Relief and Economic Security (CARES) Act. However, states also are permitted to simply provide claimants with the lost wages supplement of $300 paid entirely from the federal contribution by leveraging existing state funding already used to pay regular unemployment benefits. Once the grant application is approved, the FEMA funds will be released, retroactive to Aug. 1, 2020, to be administered through the states’ unemployment systems.

This lost wages supplement of either $300 or $400 per week (depending upon the state in which the unemployed individual resides) is significantly less than the $600 per week Federal Pandemic Unemployment Compensation benefit, which expired at the end of July. However, the lost wages supplement is intended only to be a stop-gap measure. It will expire when Congress acts, when the disaster relief fund falls to $25 billion, or on Dec. 27, 2020, whichever event occurs first. Indeed, delivering $300 per week to 24 million eligible Americans will cost $7 billion per week, which will quickly deplete the available $44 billion pegged for this lost wages assistance.

Since the executive order, more than 30 states have applied for the FEMA grants, including neighboring Michigan and Indiana. Illinois is preparing its grant application. FEMA has set Sept. 10, 2020, as the deadline for states to submit their grant applications. Some may challenge this executive order since Congress has the “power of the purse,” but helping Americans through the economic distress of their lost employment because of the pandemic may be hard to fault. Still, diverting existing FEMA funds when the country is experiencing other disasters, including wildfires, hurricanes and tropical storms, is not a permanent solution. The program is not a perfect solution, especially since it excludes some of the most vulnerable unemployed individuals, those receiving less than $100 per week in underlying unemployment benefits. Still, with the Senate on recess and Congress unable to reach a compromise, this temporary reprieve offers some needed economic relief to Americans unemployed because of the pandemic.

For more information, please contact one of Chuhak & Tecson’s Employment attorneys.

Client Alert authored by Jeralyn H. Baran (312 855 4613), Principal and leader of Chuhak & Tecson’s Employment Practice.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.