$2 Trillion Stimulus Package Signed by the President Will Provide Relief to Many Individuals and Businesses Impacted by COVID19.
On March 27, 2020, President Donald Trump signed into law a $2 trillion stimulus package, the largest emergency aid package in United States history. This law, the ”Coronavirus Aid, Relief, and Economic Security Act” (“CARES”), provides various forms of relief to businesses and individuals affected by COVID-19 and the resulting global health and economic crisis. The following is an explanation of some provisions that could impact the operation of your business and decisions concerning your workforce.
Small Business Loans
CARES provides Paycheck Protection Loans for businesses with less than 500 employees (and other businesses in certain circumstances). The provisions include loans for individuals who operate under a sole proprietorship, as an independent contractor or eligible self-employment individuals. Notable parts of this provision include:
Loans can be used for:
- payroll costs (excluding prorated amounts for employees with compensation greater than $100,000)
- costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, as well as insurance premiums
- employee salaries, commissions, or similar compensation
- mortgage interest (not principal) or rent
- interest on a debt incurred before the covered period
- The bill provides for the forgiveness of the loan for money borrowed to pay for payroll costs, interest on a mortgage obligation, a covered rent obligation, and covered utility payments.
- Loan forgiveness, however, is reduced if employees are laid off or if the employer lowers employee salaries by more than 25% as compared to the most recent quarter unless the employer rehires the employees and restores any decreases in wages or salaries by June 30, 2020. Additionally, employers can increase the amount of loan forgiveness if the employer increases the wages of tipped employees.
In addition to loans, CARES also provides for emergency grants for some small businesses (less than 500 employees), independent contractors and sole proprietorship. Notable parts of this provision include:
- The maximum amount of the emergency grants is $10,000 for employers who:
- provide paid sick leave for employees unable to work
- maintain payroll to employees during business disruptions or substantial slowdowns
- meet increased costs to obtain materials unavailable from original sources
- make rent or mortgage payments
- repay obligations that cannot be met due to revenue losses.
- This is a grant and no repayment is necessary (but the amount of the grant is reduced from the loan forgiveness amount for payroll costs from a Paycheck Protection Loan)
Emergency Increase In Unemployment
Under CARES, individuals who qualify for state unemployment insurance will receive an increase in their unemployment insurance payments of $600 per week, and there will be no waiting period.
Employee Retention Credit
Under these provisions, there is an employee retention credit for employers subject to closure due to COVID-19. Eligible employers are allowed a credit against applicable employment taxes for each calendar quarter equal to 50% of the qualified wages of each employee during the calendar quarter. Notable parts of this provision include:
- This employee retention credit applies to employers carrying on trade or business in the 2020 calendar year where that business is fully or partially suspended due to government orders resulting from COVID-19.
- The maximum credit for wages per employee for all calendar quarters is $10,000.
- The credit allowed cannot exceed the applicable employment taxes (reduced by specified credits) on wages paid to employees of the eligible employer for the calendar quarter.
- The credit includes payment for qualified health plan expenses.
- Importantly, this credit does not apply to small businesses who get a Paycheck Protection Loan as discussed above.
Paid Leave For Rehired Employees
This provision amends the Emergency Family and Medical Leave Act to state that eligible employees include those who have been rehired by former employers.
- Normally, employees must be employed for at least 30 calendar days to qualify for FMLA leave.
- Under this provision, employees who were laid off on March 1, 2020, or later, and had worked for the employer for not less than 30 of the last 60 calendar days prior to the layoff, and were rehired by the employer are considered eligible employees under E-FMLA.
What This Means For Employers
CARES is a sweeping bill with significant relief and options for many different types of businesses. We have highlighted some of the important provisions above, but please consult with legal counsel to discuss how the CARES legislation may impact your particular business and its needs.
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