As anticipated, the Senate unanimously passed the $2T coronavirus stimulus package. We now await expected passage by the House of Representatives followed by President Trump signing the legislation—known as the Coronavirus Aid, Relief, and Economic Security Act (read: CARES Act)—into law, though that likely will not happen until Friday, March 27 at the earliest.
Over the past couple of weeks, employers have had to make many difficult decisions with respect to their employees by virtue of the growing list of state and local stay-at-home and shelter-in-place orders that have served to cripple or otherwise completely shut down their operations—all in an effort to contain the spread of COVID-19. Fortunately, the CARES Act addresses many questions Michelman & Robinson’s labor and employment attorneys have been fielding from employers in the wake of the pandemic.
Q. What relief, if any, is the federal government making available to my employees?
A. The CARES Act includes an extended unemployment insurance program that some lawmakers have called “unemployment on steroids.” Not only is eligibility for unemployment benefits expanded, but also the program offers workers an additional $600 per week for up to four months, in addition to any state unemployment benefits they receive. Of note, the unemployment benefits also apply in the event of a reduction in hours, and they are being made available to independent contractors and gig economy workers (who typically do not qualify for unemployment benefits) as well.
Q. Who qualifies for unemployment benefits under the CARES Act?
A. Eligibility for unemployment benefits pursuant to the pending federal law is similar to applicable state law requirements. First and foremost, an individual seeking these benefits must be able and available to work. Beyond that, a worker applying for unemployment relief must check at least one of the following boxes:
- has been diagnosed with COVID–19 or is experiencing symptoms of the illness and is seeking a medical diagnosis
- a member of the individual’s household has been diagnosed with COVID–19
- the individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID–19
- the individual is providing care for a child who has been affected by a school closure as a result of COVID-19
- the individual physically cannot get to work because of a quarantine (this excludes work from home)
- the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- the individual was about to start a job and then lost it because of the COVID-19 public health emergency
- the individual has become breadwinner because the head of household has died due to COVID-19
- the individual has had to quit his or her job as a direct result of COVID–19
- the individual’s place of employment is closed as a direct result of the COVID–19 public health emergency
The CARES Act extends unemployment benefits to individuals who are self-employed (as referenced above) and seeking part-time employment (who otherwise would not qualify for regular unemployment benefits), so long as they meet one of the requirements above.
Q. What workers, if any, are specifically excluded from receiving unemployment benefits under the CARES Act?
A. If an individual has (1) the ability to telework with pay or (2) is receiving paid sick leave or other paid leave benefits (regardless of whether the criteria above apply), he or she will not be eligible for federal unemployment relief.
Q. Are workers who are on reduced schedules as a result of COVID-19 covered by the CARES Act?
A. Yes, in addition to workers that are fully unemployed, the bill provides unemployment benefit assistance to those that are partially unemployed (or otherwise unable to work in weeks in which the employee is not entitled to any other unemployment compensation).
Q. Does the CARES Act make unemployment benefits retroactive?
A. Yes, benefits will be retroactive to January 27, 2020, as applicable.
Q. Does the CARES ACT provide any other financial relief for employees and individuals?
A. Yes, as indicated in our prior alert about the stimulus package, individuals will be eligible for “recovery rebates.” More particularly, the CARES Act provides for a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). In addition, taxpayers receive another $500 for each of their qualifying children.
Of note, the “recovery rebate” phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers who are childless. To calculate the “recovery rebate," 2019 or 2018 tax returns will be used (line item 8b on the 2019 Form 1040, and line item 7 on the 2018 Form 1040).
Separately, the CARES Act waives the 10% early withdrawal penalty for distributions of up to $100,000 from retirement accounts (e.g., IRAs) for coronavirus-related purposes, retroactive to January 1.
Q. What relief is available for employers subject to significant reduction or closure due to COVID-19?
A. The CARES Act provides several areas of relief to employers as a result of the coronavirus outbreak, as follows (see this alert as well):
Businesses that are fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) as a result of the coronavirus, or who have experienced a decline of at least 50% in gross receipts as compared to those in the same quarter in the prior year due to the pandemic, shall be allowed a tax credit against applicable employment taxes for each quarter in an amount equal to 50% of the qualified wages for each employee in the applicable quarter up to $10,000/employee, or when the gross receipts get back to 80% as compared to the same quarter in the prior year.
Deferral of Tax Payments
Businesses will be able to defer payment of 50% of payroll taxes, including estimated taxes, until December 31, 2021 in most cases.
Limitations on Paid Leave and FMLA Leave
For employers affected by the paid leave and FMLA leave provisions under the Families First Act, sick leave that employers must pay to employees is limited to no more than $200/day and $10,000 in the aggregate for each employee. Similarly, employers shall not be required to pay employees more than $511/day and $5,110 in the aggregate, or $200/day and $2,000 in the aggregate, for each employee using the FMLA as set forth in the Families First Act, depending upon the reason for the leave. It should be noted that the CARES Act does not change, in any meaningful way, the provisions of the Families First Act.
Advance Refunding of Credits
Payroll credit for paid sick leave and paid family leave may be advanced by the government.
Q. What is the Paycheck Protection Program and does it apply to my business?
A. The CARES Act creates a Paycheck Protection Program for small employers, self-employed individuals, and “gig economy” workers, with $350B to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The PPP will provide eight weeks of cash-flow assistance through 100% federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities will be forgiven, which will help workers to remain employed and affected small businesses and our economy to recover quickly from this crisis. The PPP, as presented, will be retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls.
In terms of eligibility, the PPP applies to “small businesses” with fewer than 500 employees per physical location, including sole proprietorships, independent contractors, non-profits, franchises, veterans, or tribal businesses.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.