Tag Archives: CARES Act

COVID-19 – Economic Stimulus Packages for Employers

During the ongoing national economic and health care crisis caused by the global coronavirus pandemic, Smith & Associates, will remain open and available to assist our clients with their legal needs. We have received numerous inquiries about the recently enacted state and federal programs that are now available to address the economic dislocation caused by the pandemic. The good news is that there are federal and state programs that can provide immediate financial assistance in these stressful times. Since there is always much confusion when dealing with applications and the required supplemental documents that need to be gathered, we are here to assist you by explaining the programs available and the best options for you. Below is a brief description of some of the available financial assistance program.

Paycheck Protection Program (PPP) Loans

The Paycheck Protection Program is part of the federal economic stimulus bill known as the CARES Act. This program is intended to provide eligible small businesses with eight weeks of cash-flow assistance through a 100% federally guaranteed loan from the U.S. Small Business Administration. Provided the funds are used to maintain employee payroll and other business expenses as detailed below, the loan amount will be forgiven for those expenses incurred in the eight weeks following the approval of the loan. In other words, a small business owner who meets the requirements will receive a cash infusion with no required repayment if they meet the conditions set forth in the Act.

Who is eligible?

Small businesses with 500 employees or fewer and other eligible entities (includes corporations, partnerships, sole proprietors, independent contractors, self-employed individuals, 501(c)(3) and 501(c)(19) organizations) will be able to apply for funding in the form of an SBA loan to offset harm to the business caused by the coronavirus crisis between February 15, 2020 and June 30, 2020. This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls.

How much may I borrow?

Up to 2.5 times your monthly payroll costs as reflected in your most recent tax return (up to a maximum amount of $10 Million), which includes salaries, wages, tips, payments for sick and medical leave, insurance premiums, and state and local taxes assessed on the compensation of employees. Eligible payroll costs do not include compensation of individual employees for amounts exceeding $100,000 annually (this would be pro-rated for the relevant period). Any loan payments will be deferred for periods of six months and in some cases a maximum deferral of up to a year. No collateral or personal guarantees are required for loans. You do not have to provide financial qualifications for the loan. Neither the government nor lenders will charge small businesses any fees.

What can I use the loan for?

Payroll costs; mortgage, rent and utility costs; interest on debt obligations incurred prior to February 15, 2020.

Can my loan be forgiven?

You will not be required to pay back the portion of the loan used for the above expenses paid within the eight-week period after the loan closing date. HOWEVER, if the business does not retain or re-hire employees at the same level as the previous 12-month period, the loan amount forgiven will be reduced in proportion to any reduction in employees and/or reduction in pay of any employee beyond 25%. Businesses that rehire workers previously laid off by June 30, 2020 will not be penalized for having reduced payroll at the beginning of the period.

Forgiven expenses include:

  1. Up to eight weeks of payroll expenses in the form of wages, salaries, commissions, tips, health insurance costs, and retirement benefits.
  2. Mortgage payments on the business property.
  3. Rent payments for the business property.
  4. Utility payments.

What happens after the forgiveness period?

Any loan amounts not forgiven are carried forward as an ongoing loan with max terms of 10 years, at a maximum interest rate of 4% (the amount will be determined by the SBA lender at the time of the loan). Principal and interest will continue to be deferred for a total of six months with the potential to defer for up to a year after disbursement of the loan. The clock does not start again. (Be on the lookout for the Main Street Business Lending Program soon to be announced by the Federal Reserve as a complement to the PPP.)

SBA Economic Injury Disaster Loans & Emergency Economic Injury Grants

These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). To access the advance, you first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, even if you are not approved for the loan, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, and rent or mortgage payments.

Who is eligible?

Small businesses with 500 or fewer employees including sole proprietorships, with or without employees; independent contractors; cooperatives and employee owned businesses; and tribal small businesses. Small business concerns and small agricultural cooperatives that meet the applicable size standard for SBA are also eligible, as well as most private non-profits of any size.

What are the loan terms if I’m approved?

A maximum low interest loan of $2 Million, determined by SBA; up to a 30-year term and amortization (determined by the SBA on a case-by-case basis) and no payments for the first 6-12 months. Within 72 hours of submitting a complete application, you can receive a grant of $10,000 if you have been in business since January 31, 2020. This does not have to be paid back, even if the loan is not approved. The deadline to apply is December 18, 2020.

If I get an EIDL and/or an Emergency Economic Injury Grant, can I get a PPP loan?

Whether you’ve already received an EIDL unrelated to COVID-19 or you receive a COVID-19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, you may also apply for a PPP loan. If you ultimately receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP. However, you cannot use your EIDL for the same purpose as your PPP loan. For example, if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll in March or for different workers in April.

Florida Small Business Emergency Bridge Loan Program

These short-term, interest-free working capital loans are intended to “bridge the gap” between the time a major catastrophe hits and when a business has secured longer term recovery resources, such as sufficient profits from a revived business, receipt of payments on insurance claims or federal disaster assistance.

Who is eligible?
Applications will be accepted by qualified for-profit, privately held small businesses that maintain a place of business in the state of Florida. All qualified applicants must have been established prior to March 9, 2020 and suffered economic injury as a result of the designated disaster. Qualified small business applicants must be an employer business with 2 to 100 employees.

How much may I borrow?

Up to $50,000 per eligible small business. Loans of up to $100,000 may be made in special cases as warranted by the need of the eligible small business.

What are the loan terms?
One year and loans will be interest-free for the loan term (one year). The Interest rate will be 12% per annum on the unpaid balance thereafter, until the loan balance is repaid in full.

When should I apply?

Applications will be accepted by qualified Florida small businesses under this program through May 8, 2020, contingent on the availability of funds.

Families First Coronavirus Response Act (FFCRA)

This Act imposes new requirements on small business employers to provide employees with paid sick leave for COVID-19 related illnesses and expanded family and medical leave with 2/3 pay for specified reasons related to COVID-19.

Who is a covered employer?

Covered Employers include certain public employers, and private employers with fewer than 500 employees.

What are qualified reasons for leave?

There are six qualifying reasons for an employee to take leave:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a health care provider to self-quarantine related to COVID-19;
  3. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to an order described in section 1 or self-quarantine as described in section 2;
  5. The employee is caring for his or her child whose school or place of care is closed or unavailable due to COVID -19-related reasons; and
  6. The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.

What is the duration of leave and the rate of pay?
An employer must provide up to two weeks of paid sick leave to qualified employees, paid at:

  • 100% of their regular rate of pay (up to $511 per day and $5,110 total) if the leave is for any of reasons 1 through 3 above; or
  • 2/3 of their regular rate of pay (up to $200 daily and $2,000 total) if the leave is for reasons 2 or 6 above.

Additionally, if the employee is taking leave due to reason 5, they are entitled to up to 12 weeks of paid leave at 2/3 their hourly rate (up to $200 daily and $12,000 total). If the employee has been employed for at least 30 days, the employee may be entitled to an additional 10 weeks of 2/3 pay if it is being taken for reason 5.
For part-time employees, the regular rate of pay is calculated based on the normal hours that the employee would have been expected to work during that weekly time period.

For example, workers can take time off if they’re isolated because of “a broad range of governmental orders,” including stay-at-home orders or mandates that “otherwise restrict” their mobility. However, they’ll only qualify if the order is what prevents them from working. A worker can’t take leave if they can telework or if they wouldn’t have work even without the isolation order, such as if they work for a coffee shop that has shuttered because of low business. Additionally, workers can use leave intermittently by agreement with employers and that employers can make workers take accrued vacation days or other paid time off at the same time they take leave to care for a child.

What Employees qualify for Family Medical Leave due to COVID-19 related reasons?

In general, employees of private sector employers with fewer than 500 employees, and certain public sector employers.

What if my business cannot afford to make these payments?

The long-term leave portion of the law includes a provision exempting businesses with fewer than 50 workers for whom granting leave would jeopardize business viability.

The regulation lays out three circumstances that qualify an employer for this exemption. Under the rule, these small business employers will not have to provide leave if doing so would raise expenses above revenue such that the employer would “cease operating at a minimal capacity”; the absence would “pose a substantial risk” to the employer’s financial health or operations because of the requesting worker’s skills, knowledge or duties; or the employer can’t find enough workers to perform the work of the employee requesting an absence. Such employers are not exempt from the two-week sick time requirement unless the worker is requesting time off to care for a child whose school has closed, however.

Are there any benefits for the employer?

While the FFCRA imposes significant financial obligations on small businesses as described above, it also ensures that those financial obligations are 100% refundable. Employers who provide the leave and pay described above are entitled to 100% reimbursement. This reimbursement includes the employer’s share of the Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the leave period. To ensure that businesses already struggling due to the COVID-19 pandemic receive this reimbursement quickly, the IRS has set up a two-pronged process for reimbursement.

The first prong allows employers to deduct from their Federal payroll taxes the amounts they spent complying with the employee sick leave portion of the FFCRA. Thus, employers will immediately receive reimbursement up to the amount of their payroll taxes. The second prong allows the employer to submit forms for reimbursement of costs above the amounts covered by the payroll tax withholding, and even allows for advanced reimbursement for anticipated overages. The IRS is promising a fast turn-around time on these refunds (two weeks), to help ensure that employers are getting these refunds quickly.
Can I require that the employee provide documentation of the COVID related illness such as a doctor’s order?
Yes, and in order for the employer to get the credit discussed above, they must maintain sufficient documentation to show the employee’s leave was for one of the qualifying reasons.

Conclusion

In conclusion, there are programs available to help you during this unprecedented time. We are here to assist in finding the right program for you. Call or email us, we will help!

Employer’s Guide to the new FFCRA Paid Sick Leave Requirements

Updated April 2, 2020 with information from the Department of Labor’s new rule.

With the flurry of new legislation in response to the COVID-19 pandemic, many companies are concerned about what benefits they have to provide their employees regarding paid sick leave, especially related to COVID-19, and what, if any, programs are available to help them bear the costs of these new employee benefits.

In short, while employers are obligated to grant employees paid sick time in accordance with these new laws, the employer will receive immediate reimbursement in the form of a credit against any Federal withholding tax amounts due to the IRS and an additional cash refund if the credit is insufficient to offset the paid leave granted to employees.

Employee Rights and Benefits

The Families First Coronavirus Response Act (“FFCRA”) granted broad, new paid sick leave rights to employees of qualified employers – namely any private business with fewer than 500 employees. These new provisions, at least currently, are limited in time and only apply from April 1, 2020 through December 31, 2020.

Importantly, the FFCRA established six qualifying reasons for an employee to take leave. These reasons are:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a health care provide to self-quarantine related to COVID-19;
  3. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to an order described in section 1 or self-quarantine as described in section 2;
  5. The employee is caring for his or her child whose school or place of care is closed or unavailable due to COVID -19-related reasons; and
  6. The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.

Further, the FFCRA provides that an employer must provide up to two weeks of paid sick leave to qualified employees, paid at:

  • 100% of their regular rate of pay (up to $511 per day and $5,110 total) if the leave is for any of reasons 1 through 3 above; or
  • 2/3 of their regular rate of pay (up to $200 daily and $2,000 total) if the leave is for reasons 2 or 6 above.

Additionally, if the employee is taking leave due to reason 5, they are entitled to up to 12 weeks of paid leave at 2/3 their hourly rate (up to $200 daily and $12,000 total). If the employee has been employed for at least 30 days, the employee may be entitled to an additional 10 weeks of 2/3 pay if it is being taken for reason 5.

For part-time employees, the regular rate of pay is calculated based on the normal hours that the employee would have been expected to work during that weekly time period.

As with the FMLA, the employee must provide notice and that notice must only be given within a reasonable time given the circumstances. However, given the reasons for leave, reasonable notice could very well be shortly before or even shortly after the leave begins.

Additionally, documentation as to the reason for the leave is required. This documentation must include a signed statement by the employee containing the following information: (1) the employee’s name; (2) the date(s) for which leave is requested; (3) the COVID-19 qualifying reason for leave; and (4) a statement representing that the employee is unable to work or telework because of the COVID-19 qualifying reason. Additionally, this documentation must include whatever additional information is necessary to show that the employee is lacking leave for a qualified reason. For example, if the employee is taking leave due to a government quarantine, the name of the government entity that ordered the quarantine is required in the documentation. An employee requesting paid sick leave due to a doctor-imposed quarantine must provide the name of the health care provider who advised him or her to self-quarantine for COVID-19 related reasons. An employee requesting paid sick leave to care for an individual must provide either (1) the government entity that issued the quarantine or isolation order to which the individual is subject or (2) the name of the health care provider who advised the individual to self-quarantine, depending on the precise reason for the request. An employee requesting to take paid sick leave or expanded family and medical leave to care for his or her child must provide the following information: (1) the name of the child being cared for; (2) the name of the school, place of care, or child care provider that closed or became unavailable due to COVID-19 reasons; and (3) a statement representing that no other suitable person is available to care for the child during the period of requested leave.

The Department of Labor (“DOL”), in a temporary rule issued April 1, 2020, has also clarified that employers are not required to pay this sick leave if there is no work for the employee. The DOL provided the following example:

For example, if a coffee shop closes temporarily or indefinitely due to a downturn in business related to COVID-19, it would no longer have any work for its employees. A cashier previously employed at the coffee shop who is subject to a stay-at-home order would not be able to work even if he were not required to stay at home. As such, he may not take paid sick leave because his inability to work is not due to his need to comply with the stay-at-home order, but rather due to the closure of his place of employment.

Additionally, the temporary rule provides that if an employee subject to an isolation order is able to telework, that employee is not eligible for the paid sick leave benefits of the FFCRA.

Finally, the employer must post in a conspicuous place notice of these FFCRA requirements. The Department of Labor poster containing these rights is available here.

Employer Benefits, and Potential Exemptions

While the FFCRA imposes significant financial obligations on small businesses as described above, it also ensures that those financial obligations are 100% refundable. Following the passage of the FFCRA, the IRS issued guidance to businesses as to how to obtain refunds. This guidance was adopted into law with the passage of the CARES Act.

Importantly, the FFCRA provides that employers who provide the leave and pay described above are entitled to 100% reimbursement. This reimbursement includes the employer’s share of the Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the leave period. To ensure that businesses already struggling due to the COVID-19 pandemic receive this reimbursement quickly, the IRS has set up a two-pronged process for reimbursement.

The first prong allows employers to deduct from their Federal payroll taxes the amounts they spent complying with the employee sick leave portion of the FFCRA. Thus, employers will immediately receive reimbursement up to the amount of their payroll taxes.

To the extent the reimbursement exceeds the payroll taxes, the IRS has created a second prong that allows the employer to submit forms for reimbursement of costs above the amounts covered by the payroll tax withholding, and even allows for advanced reimbursement for anticipated overages. The IRS is working on drafts of these forms and they are expected to be final in the very near future. Further, the IRS is promising a fast turn-around time on these refunds (two weeks), to help ensure that employers are getting these refunds quickly.

As mentioned above, the IRS is requiring that employers who claim this credit maintain sufficient documentation to show that the employee’s leave was for one of the qualifying reasons.

Finally, if the company has less than 50 employees, it may be eligible for an exemption to the requirement that the employer cover leave for reason number 5. To qualify, the employer must believe that providing said leave would “jeopardize the viability of the business as an ongoing concern.” The DOL’s temporary rule sets forth the criteria for determining if a business qualifies for this exemption:

  1. Such leave would cause the small business employer’s expenses and financial obligations to exceed available business revenue and cause the small business employer to cease operating at a minimal capacity;
  2. The absence of the employee or employees requesting such leave would pose a substantial risk to the financial health or operational capacity of the small business employer because of their specialized skills, knowledge of the business, or responsibilities; or
  3. The small business employer cannot find enough other workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services the employee or employees requesting leave provide, and these labor or services are needed for the small business employer to operate at a minimal capacity.

If a company believes it qualifies for this exemption, it must keep documentation and records that support its reasoning. However, that documentation should not be submitted to DOL.

Conclusion

If you need any assistance in implementing the new FFCRA sick leave provisions, obtaining the refund, or determining if you qualify for the exemption, you should contact an attorney at Smith & Associates to discuss your rights and options.