A number of employers were able to reduce layoffs or avoid them altogether in the past year or two by using a low-profile state program called Work Share.

EUGENE — A number of employers were able to reduce layoffs or avoid them altogether in the past year or two by using a low-profile state program called Work Share.

The program, which began in the recession of the early '80s, allows employers to cut hours for workers, who can then collect part of their unemployment benefits to help make up for their lost earnings.

But some of those employers are reluctantly dropping the program because they've reached the point where their Work Share employees are taking more out of the state's unemployment insurance fund than the employer is paying into the fund.

That means the employers have to reimburse the fund for every additional dollar their Work Share employees draw from the fund, which employers say they can't afford to do. For their employees, it means further cuts in already reduced incomes, or even lost jobs.

The program gained a big following in this recession. Last year, Oregon paid out more than $27 million to about 19,000 Work Share claimants statewide, state Employment Department spokesman Craig Spivey said.

As of last week 875 Oregon employers, with a total of 4,290 employees were using Work Share, he said. That's up from about 100 employers and 1,352 employees a year earlier, Spivey said.

This recession has taken the Work Share program into "uncharted waters," Spivey said.

"In the past, generally, we have had one or two employers a year that would reach this threshold," triggering reimbursement to the state, he said.

Local employers facing the threshold are choosing to lay workers off or have them take occasional weeklong furloughs, rather than continuing to use Work Share. That has been difficult for both employers and employees.

Seneca Sawmill in Eugene is among the local employers that have used Work Share to help weather the recession. The company has a total of 260 employees: 195 at its mill and 65 in office and timberlands jobs, general manager Rick Re said.

Seneca has used Work Share for more than a year, and "a majority of our employees at one time or another have been on it," he said.

When faced with the mandate to start reimbursing the state for Work Share claims, Seneca discontinued the program, and instead will have occasional weeklong furloughs, Re said.

He said the company would have preferred to have stayed on Work Share.

To align lumber production with demand, Seneca had been operating three days a week. The Work Share program gave the mill the flexibility to add a fourth work day, if demand warranted it, Re said.

"We would rather be on Work Share, so we can more finely tune our production to demand," he said. "So we can be down for a day at a time, rather than a week at a time. That certainly works better for everybody."

Peterson Pacific, a heavy machinery manufacturer in Eugene, is another local employer that used Work Share last year, but won't this year, because of the reimbursement requirement.

The company had about 75 employees on the Work Share program last year, and dropped the program in the final week of December, human resources director Jennifer Lushenko said.

"Say an employee receives a $100 weekly benefit for a Work Share week," she said. Now "we have to pay back that same $100 to the unemployment insurance trust fund. We told our employees that it makes no sense to pay you to stay home. We'd rather have you here working."

That decision led Peterson to lay off a couple more employees last week.

The cuts followed two earlier rounds of layoffs — 25 workers were let go in April, and then 14 more in October, Lushenko said.

"We've done some reductions where we think we need to be for 2010, and we don't anticipate any additional layoffs," she said.

Lushenko said she was aware that increased use of unemployment insurance benefits through Work Share probably would lead to an increase in Peterson Pacific's unemployment insurance tax rate, which it did.

"But this payback of the entire amount of the benefit that the employees receive (if the company were to continue Work Share in 2010) was very much a new wrinkle in the program," she said.

Similar to auto insurance, where an individual's record affects his or her rate, an employer's unemployment insurance rate is affected by that employer's "experience."

Employers with many workers claiming unemployment pay higher annual rates than employers with few claims. Employers receive a packet of information explaining all of the Work Share rules when they sign up for the program, said Spivey, the Employment Department spokesman.

"It's fully disclosed up front," he said.

Employers often enroll in Work Share, thinking of it as a "short-term fix" to carry them through a slow period. This economic downturn has lasted a lot longer than most downturns, Spivey said.

Lushenko and Re said they don't understand why state rules prevent their workers from staying on Work Share and continuing to claim some unemployment, when those same workers could be eligible for unemployment benefits if they're laid off or furloughed.

Spivey said many factors play a role in determining whether former Work Share employees would qualify for additional unemployment insurance benefits if they're laid off or furloughed. Such decisions are made case-by-case, he said.

The dollar-for-dollar reimbursement required if Peterson and Seneca opted to continue the Work Share program actually is an improvement from the way the program used to operate, Spivey said.

Until the Legislature changed the program in 1993, when employers hit the reimbursement threshold, the employer was penalized by being kicked up one level on the unemployment insurance tax rate schedule, Spivey said.

The penalty was seen as being "quite heavy," he said.

"Their tax rate would go up for the whole next year, so it was really looked at to be more fair for employers to reimburse dollar-for-dollar what's drawn out," Spivey said.

Further changes to the Work Share program would require additional legislative action, he said.