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Self-employed on sidelines as unemployment pays out $30M last week

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Delaware Department of Labor Secretary Cerron Cade addresses the media at an April 21 press conference in Wilmington. | DBT PHOTO BY JACOB OWENS

WILMINGTON – Delaware has seen a historic 61,842 people file for unemployment amid the coronavirus pandemic, but those numbers don’t capture many workers who are suffering from the closure of businesses in the state: self-employed workers and independent contractors, including those in the so-called “gig economy.”

Because they don’t pay into the state’s unemployment trust fund to be insured against job losses, the self-employed are struggling perhaps more than any other worker type right now and their wait isn’t expected to change for several more weeks.

Despite federal unemployment aid being extended to them via the Coronavirus Aid, Relief, and Economic Security (CARES) Act approved by Congress in March, they still haven’t been able to tap into relief funds because of a lack of a system to verify their incomes.

The Delaware Department of Labor announced April 16 that it has contracted with an outside vendor to build a software system that will allow the Delaware Division of Unemployment Insurance to verify earnings reported to the Internal Revenue Service and determine the eligibility of independent contractors and the self-employed to apply for benefits under the CARES Act. That work isn’t expected to be completed for three to six weeks, however, meaning self-employed workers may not be able to receive unemployment benefits until after Memorial Day.

“The hardship that the coronavirus pandemic has placed on Delaware workers is unprecedented. These workers will receive the much-needed assistance provided to them under the CARES Act. We are working around the clock to make that happen; Hopefully, ahead of schedule,” said Cerron Cade, secretary of the Delaware Department of Labor, in a statement.

In a letter to Cade, House Minority Leader Danny Short (R-Seaford) and House Minority Whip Tim Dukes (R-Laurel) called the delay “disconcerting.”

They noted that the CARES Act was signed into law three weeks ago, and sought greater insight into how other states have dealt with the requirements of the law.

“We are requesting that the DOL take immediate action to implement a short-term, stopgap plan to assist Delaware’s sole proprietors,” the pair wrote. “These small businesses – many of which are the backbone of our economy – are, quite literally, dying on the vine.”

One such self-employed worker who has seen much of his business dry up in recent weeks is commercial photographer Eric Crossan. He told Delaware Business Times that several significant contracts for portraiture work with the state’s judicial system and W.L. Gore have been postponed for several months.

“You expect that work will be rescheduled down the line, but nothing is set in stone,” he said.

Crossan has taken on some work shooting building exteriors for a client, but he said that with little cash flow, he’s largely depending on savings he’s built over the years right now. He said that he would be looking to apply for the unemployment assistance when it becomes available, but he worries more about friends in the industry who relied on weddings or events for their contract work, as such large gatherings will be restricted for some time.

During a Tuesday, April 21, press conference in Wilmington on the state’s economic impact amid the pandemic, Cade noted that the nearly 62,000 claims filed in the state included roughly 12,000 from self-employed or contract workers that were denied outright because of their current ineligibility.

He later told Delaware Business Times that those 12,000 denied self-employed applicants would have to reapply when the new system is established in May. Cade also noted that his department is expecting many more such eligible workers to apply under that system when it is launched, potentially boosting the unemployment claim total yet again.

Those workers will be eligible for the $600 a week federal assistance, but it’s undetermined what assistance they may get through the state program that has not historically served them, Cade said. It has a maximum $400 a week benefit.

Cade reported that the state processed $30 million in unemployment benefits last week after historically seeing a weekly high distribution of about $3 million.

“Whoa,” said Gov. John Carney, who raised his eyebrows upon seeing the figures.

Cade added that about 65% of the claims submitted have been approved and are being paid, equating to roughly 40,000 people.

When DBT asked Cade if DOL was able to define how many of the claims came from employees who were on furloughs rather than outright layoffs, Cade said the department does record return dates for employees but noted that such statistics would be imprecise right now as businesses can convert furloughs to layoffs as needed.

While there have been reports from some unemployment applicants about a delay in receiving funds, Cade told DBT that is likely because there was an error in their application. He said that eligible workers who submit info correctly should receive benefits within one week.

Some of the most routine errors seen by DOL are incorrect answers to security questions, such as which bank holds a car loan or mortgage for an applicant, as well as incorrect Social Security numbers.

“All of these cases have to be rectified by a live person,” he said. “The individual who falls into that pot has to now contend with trying to get through over the phones with 2,000 other calls that are coming in at the same time.”

Cade also emphasized that unemployment benefit recipients have to login every week and report their earnings, even if they are zero, in order to continue receiving the assistance.

By Jacob Owens

[email protected]

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