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What happens when unemployment benefits pay more than your job?

Portland restaurateur Kurt Huffman thinks it's unlikely restaurants can reopen before federal unemployment benefits run out at the end of July.

PORTLAND, Oregon — Restaurants that survive the coronavirus pandemic may have a new challenge on their hands: rehiring kitchen staff. That's according to ChefStable restaurant group owner Kurt Huffman, who said he has struggled to rehire some of his employees who are making more money unemployed than they would be if they were working.

ChefStable, the restaurant group behind some of Portland's most well-known restaurants, closed their 20 restaurants and bars after service on March 15, two days before Oregon Gov. Kate Brown ordered restaurants to stop on-site dining. About 750 people were laid off from ChefStable restaurants.

But after a couple weeks of retooling their business model and implementing safety precautions, a number of restaurants in the group reopened for takeout and delivery. Suddenly short-staffed, Huffman began calling furloughed employees to hire them back, but that proved harder than expected.

That could be because many of Huffman's employees are making more money unemployed than they were as staff.

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"What we realized was that it made no sense for them to come back. Our line cooks are now making $1,000 a week instead of $640 a week in wages," Huffman said. 

For this reason, Huffman thinks most restaurants will have a hard time staffing their kitchens before the $600 in unemployment stimulus benefits expire at the end of July. By then, he hopes there will be widespread testing available and it will be safe to reopen dining rooms.

"I’m now in a mindset that Aug. 1 seems like the earliest we should reopen. I think it’s dangerous for restaurants to open prior to there being widespread testing. Testing is going to be critical. I’m hoping that would be in August but who knows... it could be December," Huffman said.

Under normal circumstances, those receiving unemployment benefits in Oregon receive 1.25% of their annual gross wages in a base year per week, up to $648. But under the recently passed CARES Act, those who qualify for unemployment will receive an additional $600 per week from federal stimulus funds through the end of July. The CARES act also allows part-time and self-employed workers who normally would not qualify for unemployment to receive benefits.

Huffman laid out the numbers for a line cook working 40 hours per week making $16/hour (tips included in hourly figure):

  • Employed: $16 per hour x 40 hours a week = $640 per week before tax
  • Unemployed: $416 (Oregon unemployment compensation of 1.25% annual gross wages) + $600 (Cares Act emergency money)  = $1,016 per week before tax

Huffman pointed out his line cooks typically make between $15 to $22 an hour, depending on tips and responsibilities. So in order to match the current unemployment benefits, he would have to raise hourly wages to about $25 an hour. Those who work the front of the house, like servers, typically make closer to $20 to $35 an hour after tips, according to Huffman. 

The additional unemployment benefits will be a boon to restaurant workers who've seen their jobs disappear amid the COVID-19 pandemic, but that's assuming they actually receive the money they've been promised. The Oregon Employment Department has been overwhelmed by the tens of thousands of Oregonians filing for unemployment, an issue they say has been resolved.   

Beyond optimizing their restaurant model for takeout and delivery, Huffman said much of ChefStable's focus has been directed toward making sure laid off employees have their unemployment benefits. He said he's thankful his staff have unemployment coverage and doesn't blame those who aren't eager to return to work, especially with the additional safety concerns, "In the absence of testing and making less money, why would you go to work?"

One of the reasons you might return to work is that usually in order to continue receiving unemployment benefits you have to prove you're searching for a job. But given the risk of returning to a job where you might be exposed to coronavirus, the Oregon Employment Department has expanded those guidelines. According to the Oregon Employment Department

Will I be eligible for unemployment benefits if my employer remains open but I don’t want to come to work because of the risk of exposure to the coronavirus?

You may be eligible for benefits. You can file a claim, and the Employment Department will gather information from you and your employer to see if benefits would apply.

If I am forced to remain in my home, either because I am sick or am under quarantine, will I be eligible for unemployment benefits?

Yes. A person will be considered available to work if they are:

• Quarantined by their health care provider, or by advice issued by public health officials to selfquarantine due to possible risk of exposure to, or spread of, the novel coronavirus, but they are not sick;
• Home sick because of the novel coronavirus or a condition with similar flu like symptoms and they have not turned down an offer of work since they began being at home due to the sickness; or
• Hospitalized, or in other institutionalized care, due to the novel coronavirus, but for less than half of the week, and they did not turn down an offer to work that week. 

Whether restaurant employees go back to work or not, Huffman expects the restaurant industry will look different long after Gov. Brown's stay-at-home order has been lifted. Social distancing and fear of subsequent coronavirus waves could alter the layout of many dining rooms.

"We’re in an industry where it fundamentally alters the experience and it fundamentally alters the economics because our restaurants that used to be 60 seat restaurants will now be 30 seat restaurants. We’re not built to make money with 30 seats, so how are we going to adjust the business model to survive in this new world?" Huffman said.

And in that new world, Huffman isn't sure how many of his employees he'll be able to rehire and he worries what will happen when the $600 in federal unemployment benefits expire.

"After Aug. 1, I’m going to really start worrying because these people have gone to battle with us and I would hate to see them enter a phase where they have no unemployment coverage. That would be terrifying," Huffman said.

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