To avoid layoffs, some companies opt for 'short time'


PHILADELPHIA -- If you now work -- or have ever worked -- for a company that lays off employees when recession hits, here's a question for you:

Assuming that your job is safe, would you give up a half-day of your pay once a week for as long as six months to save your workers' jobs? How about if, in return for that half-day's pay, you get an extra full day off?

That's the basic deal in a new program known as "short-time compensation," or STC.

In the 14 states where such legislation exists, including Maryland, a company that might reduce its work force by 20 percent when orders decline could instead -- if its employees agree -- arrange to have all employees work a four-day week and collect unemployment compensation from the state for the fifth day.

The Pennsylvania Department of Labor and Industry is drafting legislation that could make short-time compensation possible in Pennsylvania.

In most states, unemployment compensation is available only to someone who has lost a job, not to an employee working a short week.

The companies most likely to use such a plan are those with an interest in keeping a skilled work force intact during occasional business downturns, according to Martin Morand, director of the PennsylvaniaCenter for the Study of Labor Relations and co-author of a book on STC. It wouldn't apply in situations where a layoff is expected to be permanent, he said.

Short-time compensation has existed for decades in Europe and Japan, Mr. Morand said, but was not taken up in the United States until the late 1970s. California passed the first STC law in 1978, when municipalities feared that anticipated budget cuts would result in women and minorities being laid off in disproportionate numbers because they had been the most recently hired. It turned out those budget cuts did not materialize, but more than 600 California companies have since taken advantage of the law.

Although STC has been primarily pushed by business interests, Mr. Morand said, it has also received labor backing.

Labor likes it, said William George, president of the Pennsylvania AFL-CIO, because it keeps people working -- and covered by company medical benefits during recessions.

According to Rumelle MaCoy, associate director of the Center for the Study of Labor Relations, a survey of STC experience in 12 states showed that even employees who do not face layoffs like the idea of sharing both available work and available unemployment benefits. In fact, said Mr. MaCoy, the survey indicated that workers complained the most when the plan ended. "They liked having extra time off even though they made less money," he explained.

Business likes the plan, Mr. Morand said, because it eliminates both the disruption and morale problems that often accompany layoffs and the costs of rehiring or training new workers when business picks up.

John Dankosky, executive director of the Pennsylvania Business Roundtable, an organization composed of senior executives of 40 large Pennsylvania companies, endorsed STC as "helpful to businesses concerned about maintaining quality." His only concern, he said, was that the program be strictly voluntary.

In those states that have legislation, an STC plan can be initiated only by the employer, although employees may suggest it and must agree to it.

At a seminar on STC funded by the Pennsylvania Department of Labor and Industry, Dominic Rotundi, director of unemployment insurance for New York state, said that some 50,000 workers at 650 companies were involved in STC plans there in the 4 1/2 -year period that ended last June. That is barely a drop in the bucket of 3.8 billion unemployment claims statewide, he said.

"The use of the program has not been as great as we hoped," Mr. Rotundi said. "We have tried to explain the program to employers and to unions. But vast numbers of employees are unorganized, and so there is no way to reach them."

Copyright © 2021, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad