‘Breathtakingly Cruel’ Rule Will Hit Some Nonprofits That Have Laid Off Workers

A new rule from the U.S. Labor Department will have a “breathtakingly cruel” impact on some nonprofits that have had to lay off employees, according to one leading nonprofit advocate.

The rule applies to certain nonprofits, businesses, Indian tribes, and other organizations that self-insure claims for unemployment benefits by paying back the state unemployment trust fund for benefits paid to their laid off employees.

Under the stimulus bill enacted in late March, nonprofits that self-fund unemployment benefits can get reimbursed for up to half the costs of benefits provided to their laid-off employees.

The rule tells states to bill those employers immediately for 100 percent of the costs of unemployment benefits paid to employees. Nonprofits will then have to wait for their 50 percent reimbursement at a time when many are tapped out financially.

The rule “can only be described as breathtakingly cruel in its impact on charitable nonprofits, their current employees, and the communities they serve,” said Tim Delaney, chief executive at the National Council of Nonprofits, in a statement.

A Labor Department spokeswoman did not return a call seeking comment.