COVID-19 employer update

UPDATED March 27, 2020

As discussed in our March 26, 2020 Employer Update, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Today the CARES Act was passed by the U.S. House of Representatives and was immediately signed into law by President Trump. We have provided a summary of the Act and its key components, with respect to employers, below.

Emergency EIDL Grants

• Which businesses qualify for the Program?
  • Applicable to businesses that have 500 or fewer employees
    • The term employee includes individuals employed on a full-time, part-time, or other basis
  • Includes sole proprietors, independent contractors, and eligible self-employed individuals
  • Expands allowable uses to include: payroll costs; costs of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; employee salaries, commissions, or similar compensations; interest on mortgage obligations; rent; utilities; interest on other debt obligations incurred before the covered period
• What are the specific requirements for the Program?
  • Eligible businesses may receive a grant not to exceed $10,000
  • Required to make good faith certification that the employer has been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations
  • No requirement that applicant is unable to obtain credit elsewhere
  • Coverage period January 31, 2020 through December 31, 2020
  • Business MUST be operational on January 31, 2020
  • Must be used for:
    • Providing sick leave due to COVID-19
    • Maintaining payroll to retain employees during disruption/slowdown
    • Covering increased costs due to interrupted supply chains
    • Paying rent/mortgage payments
    • Repaying obligations that cannot be met due to revenue losses
• How does an eligible business apply for a grant?
  • Within 10 days of enactment, the SBA will publish procedures for application and minimum requirements
• Does the Grant have to be repaid?
  • No. However, if an eligible business subsequently receives a loan under the Paycheck Protection Program, the amount of the grant will be deducted from the loan forgiveness amount

Small Business Loan Forgiveness (“Paycheck Protection” Program)

• Which businesses qualify for the Program?
  • Applicable to businesses that have 500 or fewer employees 
    • The term employee includes individuals employed on a full-time, parttime, or other basis
  • Includes sole proprietors, independent contractors, and eligible self-employed individuals
  • Expands allowable uses to include: payroll costs; costs of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; employee salaries, commissions, or similar compensations; interest on mortgage obligations; rent; utilities; interest on other debt obligations incurred before the covered period
• What are the specific requirements for the Program?
  • Eligible businesses may take out loans up to $10 million (subject to a formula tied to payroll costs) and can cover employees making up to $100,000 per year
  • Required to make good faith certification that the employer has been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations
  • No requirement that applicant is unable to obtain credit elsewhere
  • No personal guarantee or collateral is required for the loan o No pre-payment penalty
  • Business must maintain its March 24, 2020 employment levels through September 30, 2020 as much as practicable, and in any case shall not reduce its employment levels by more than 10%
• As a small business, does the Act incentivize me to keep employees on payroll?
  • Yes. The portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven on a tax-free basis as long as the employer does not: 
    • Reduce its number of employees during the 8-week covered period compared to the prior year; or
    • Reduce employee’s pay by more than 25% during the 8-week covered period 
  • No reduction if the employer rehires or increases the employee’s pay within the specified time period
• Where will I get my loan?
  • The loans will be available through banks and credit unions that already participate in the Small Business Administration’s 7(a) loan program 
• What interest rate will be applied to the loan?
  • No more than 4%
• When do loan repayments begin? 
  • No sooner than 6 months after disbursement of the loan funds but no later than 12 months o Repayment deferment includes principal, interest and fees
• What amount of the loan is eligible for forgiveness?
  • The forgiveness period is a period of 8 weeks from the date the loan is approved
  • The portion of the loan used to pay qualifying expenses during the 8-week period is eligible for forgiveness, up to the full amount of the loan principal
  • The amount forgiven will be reduced if the employer reduces its workforce during the 8-week period
  • The employer may rehire any employees who have already been laid off due to the COVID-19 crisis without penalty
• When will the loan be forgiven? 
  • No later than 90 days after submission of documentation required for loan forgiveness

Employee Retention Credit

• Who is eligible for the Employee Retention Credit and what amount of credit may be claimed?
  • Eligible employers who partially or fully suspend operations due to orders from appropriate governmental authority are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee

Expansion of Unemployment Benefits (“Relief for Workers Affected by Coronavirus Act”)

• Who is eligible for the program’s unemployment benefits?
  • While unemployment is normally not available for those who are self-employed, those individuals are now entitled to benefits under the Relief Act
  • An individual who is unemployed, partially unemployed, or unable or unavailable to work because: 
    • Individual diagnosed with COVID-19 or experiencing symptoms and seeking a medical diagnosis of COVID-19 
    • Member of the individual’s household has been diagnosed with COVID19 
    • Individual is providing care for a family member with COVID-19 
    • Child or other person in the household in which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed due to COVID-19 and such care is required for the individual to work 
    • Unable to reach place of employment because of quarantine 
    • Individual has been advised to self-quarantine by a health care provider and is unable to reach the place of employment
    • Individual was scheduled to commence employment and does not have a job or is unable to reach the job as a result of COVID-19 
    • Individual has become the breadwinner or major support for a household because the head of household died as a direct result of COVID-19 
    • Individual has to quit as a direct result of COVID-19
    • Individual’s place of employment is closed as a direct result of COVID-19 
    • Individual is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law
• Who is not eligible for the Relief Act’s unemployment benefits?
  • An employee who is able to telework with pay
  • An individual receiving other paid leave benefits
• How does the Relief Act increase my unemployment benefits?
  • Individuals will not only receive the usual calculation of benefits from the State, but the federal government has allocated an additional $600 per week of unemployment for up to four months for each individual
  • All eligible workers will receive an additional 13 weeks of unemployment benefits, not to exceed 39 weeks 
• Have the procedures for collecting unemployment changed?
  • A one-week waiting period before receiving benefits is customary in many states, but the federal government has incentivized states to waive that requirement
• How long are the increased unemployment benefits available?
  • Benefits will cover the period of unemployment between January 27, 2020- December 31, 2020

Recovery rebates

• Who is eligible for a recovery rebate?
  • All U.S. residents who are not the dependent of another taxpayer and have a work-eligible Social Security Number, whose taxable income falls under one of several predetermined amounts
• How much money can I expect to receive?
  • Individuals earning $75,000 (or heads of household earning $112,500) or less will receive $1,200 with an additional $500 for every qualifying child 
  • Married couples earning $150,000 or less will receive a total of $2,400
  • Payments decrease for individuals earning above $75,000 or married couples earning above $150,000. Individuals making more than $99,000 or married couples earning $198,000 will not receive the direct cash payments
  • A formula to determine an individual or families’ expected rebate is attached as Schedule A
• What year is my income based on to determine eligibility for the direct cash payments?
  • For those that have not yet filed their 2019 tax return, 2018 income will be used
• Do I need to take any action to receive the payments?
  • No, there is no specific action you need to take
• Is the payment subject to income taxes?
  • No.

These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed. Employers should consult their tax advisors concerning the application of tax laws to their particular situation.

Employers are also encouraged to seek legal counsel prior to taking actions to avoid violations of federal or state employment laws including, but not limited to, the Family Medical Leave Act and its expansion under the Families First Coronavirus Response Act, the Fair Labor Standards Act, the Texas Payday Law, Texas small employer health insurance laws, new hire reporting laws, the Texas Commission on Human Rights Act, various EEO laws covered by Title VII of the Civil Rights Act of 1964, Occupational Safety and Health Administration laws, the Immigration Reform and Control Act, EEO-1 reporting requirements, the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the National Labor Relations Act, the Worker Adjustment Retaining Notification Act, and the Employee Retirement Income Security Act of 1974.

SCHEDULE A

“RECOVERY REBATE FORMULA”

R = recovery rebate amount

K = number of qualifying dependents 16 years old or younger

G = adjusted gross income for 2019 (unless you haven’t filed your tax return for 2019, in which case taxable income for 2018)

For individuals not filing as head of household who made $75,000 or less 

R = [1,200 + (500 x K)]

For individuals not filing as head of household who made more than $75,000

R = [1,200 + (500 x K)] – [(G – 75,000) x .05]

For heads of household who made $112,500 or less

R = [1,200 + (500 x K)]

For heads of household who made more than $112,500

R = [1,200 + (500 x K)] – [G – 112,500) x .05]

For married filing jointly who made $150,00 or less

R = [2,400 + (500 x K)]

For married filing jointly who made more than $150,000

R = [2,400 + (500 x K)] – [(G – 150,000) x .05]

COVID-19 employer update

UPDATED MARCH 26, 2020

Stibbs & Co., P.C. published an Employer Update on March 20, 2020 which outlined key provisions of the recently enacted Families First Coronavirus Response Act (“FFCRA” or “the Act”). At the time of that update, it was anticipated that the Act would take effect on April 2, 2020. Since then, the Department of Labor’s Wage and Hour Division has published further guidance explaining Paid Sick Leave and the expansion to the Family Medical Leave Act (“FMLA”). Most importantly, theD epartment of Labor changed the effective date of the Act to April 1, 2020. Employers should be aware of the NEW EFFECTIVE DATE of the Act.

The FFCRA requires that employers who are covered by the Act post a specific notice related to the benefits extended to employees covered by the FFCRA. Section 5103 of the Act states that, “[e]ach employer shall post and keep posted, in conspicuous places on the premises of the employer where notices to employees are customarily posted . . . .” a copy of the notice.Employees who are currently working remotely will not see a notice posted at their office so employers may also comply with the requirement by posting the notice on their company’s internal or external website, e-mailing, or mailing it to the employee. As of this date, employers are required to give notice only to current employees. Providing notice to employees who have already been laid-off is not required. Violations of the provisions of the FFCRA will be subject to penalties and enforcement by the Department of Labor’s Wage and Hour Division. A link to the workplace poster i s provided below. (A separate poster which applies only to federal employees can be accessed here)

CORONAVIRUS AID, RELIEF, and E CONOMIC SECURITY ACT (“CARES Act”)

Late last night, the United States Senate passed an Economic Stimulus Bill – the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) – which will, among other things, expand unemployment coverage, provide small business loans, and provide stimulus payments for individuals. The CARES Act has not yet been passed by the U.S. House of Representatives nor signed into law by the President. Both are expected to occur before the end of the day tomorrow. During these extremely difficult times, Stibbs & Co., P.C. is focused on our firm’s number one priority, Helping Businesses Succeed®. We are monitoring the CARES Act at all stages and will provide concise insight on how it will affect your business. Should you have any questions related to the information above, please contact our office.

Helpful links:

https://www.dol.gov/agencies/whd/posters

https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed.

Employers should consult their tax advisors concerning the application of tax laws to their particular situation. Employers are also encouraged to seek legal counsel prior to taking actions to avoid violations of federal or state employment laws including, but not limited to, the Family Medical LeaveAct and its expansion under the Families First Coronavirus Response Act, the Fair Labor Standards Act, the Texas Payday Law, Texas small employer health insurance laws, new hire reporting laws, the Texas Commission on Human Rights Act, various EEO laws covered by Title VII of the Civil Rights Act of 1964, Occupational Safety and Health Administration laws, the Immigration Reform and Control Act, EEO-1 reporting requirements, the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the National Labor Relations Act, the Worker Adjustment Retaining Notification Act, and the Employee Retirement Income Security Act of 1974.

UPDATED March 20, 2020

The Coronavirus pandemic is an unprecedented world-wide crisis. Eve nts are happening very quickly and the response by Federal, State and local governmental officials is evolvingrapidly. It is our goal to provide current and relevant information in a format that is (hopefully) easy to understand to help you make informed decisions that are in the best interest of your business and your employees. However, due to the rapidly changing nature of the crisis and the resultant response, it is impossible to provide real time information in usable form. This is the latest information available as of the date of this update.

Families First Coronavirus Response Act:

• Enacted into law on March 18, 2020
• Effective April 2, 2020-December 31, 2020
• Applies to employers with fewer than 500 employees
• Two paid leave provisions1.
  • Emergency Paid Sick Leave Act2.
  • Emergency FMLA Expansion Act:
• A business with fewer than 50 employees may be exempt if the provisions “would jeopardizet he viability of the business as a going concern.”
  • The Department of Labor has yet to issue regulations on this exemption, so it is unclear how this exemption will be applied, but expect that it will be very narrow.

Emergency Paid Sick Leave Act:

• Which employees qualify for paid sick leave under the Act?
  • The following are entitled to employer paid sick leave, an employee:
    • subject to a Federal, State, or local quarantine or isolation order related to COVID–19;
    • that has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
    • experiencing symptoms of COVID–19 and is seeking a medical diagnosis;
    • caring for an individual who is subject to an order as described in category no.1 or has been advised as described in category no. (2);
    • Сaring for a son or daughter, if the school or place of care of the son or daughter has been closed, or the child-care provider of such son or daughter is unavailable, due to COVID–19 precautions; and/or
    • experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
• What are the key provisions under this part of the Act?
  • Employer paid sick time is available for immediate use no matter how long the employee has been employed by employer
  • The employee is entitled to take up to the following hours of leave:
    • Full time employees – 80 hours
    • Part time employees – the number of hours that employee works on average over a 2-week period
  • The employee’s sick leave pay is based on his/her rate of pay:
    • If the leave is for the employee’s own medical condition, it is paid at a rate of 100% of the employee’s regular rate, subject to a cap of $511/day or $5,110 total.
    • If the leave is for the employee to act as a caregiver, it is paid at 2/3 the employee’s regular rate or minimum wage, whichever is greater, subject to a cap of $200/day or $2,000 total.
  • If the employee is unable to work, remotely or otherwise, because of one of the qualifying circumstances listed above, the employer must provide sick leave pay.
  • The employer cannot require the employee to first use other paid leave.
  • If the employee does not need the emergency paid sick leave, it does not accrue into the next year.

Emergency FMLA Expansion Act:

• Which employees qualify for the expanded FMLA leave under the Act?
  • NOTE: This provision of the Act was narrowed significantly from the original version of the bill.
  • An employee may take FMLA leave if the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.
    • The term “public health emergency” means an emergency with respect to COVID–19 declared by a Federal, State, or local authority.
• What are the key provisions under this part of the Act:
  • An employee qualifies for this Emergency FMLA if he/she has been employed for 30 calendar days.
  • The first ten days of FMLA leave may be unpaid, subject to the following:
    • The employee may elect to use their employer paid sick leave under the Emergency Paid Sick Leave Act; or
    • The employee may elect to use their accrued, unused paid time off under any existing company policy.
  • The next 10 weeks must be paid at 2/3 of the employee’s regular rate of pay, but the pay is capped at $200/day and $10,000 total.
  • If a business has fewer than 25 employees, the employer does not have to reinstate the employee if:
    • The employee takes the Public Health Emergency Leave;
    • The position held by the employee when the leave commenced does not exist due to economic conditions or other changes in operating conditions of the employer—
      • that affect employment; and
      • are caused by a public health emergency during the period of leave;
    • The employer makes reasonable efforts to restore the employee to a position equivalent to the position the employee held when the leave commenced, with equivalent employment benefits, pay, and other terms and conditions of employment; and
    • If the reasonable efforts of the employer under subparagraph (C) fail, the employer makes reasonable efforts to contact the employee if an equivalent position becomes available.

Employee Medical Inquiries and Examinations:

• Can an employer require employees to undergo a temperature check?
  • Yes. The EEOC has advised, based on CDC guidance, that COVID-19 poses a direct threat in the workplace, and it is permissible for the employer to perform temperature checks—and send employees home that are running a fever. Employers should monitor State and local authorities to determine when a direct threat no longer exists.
• Can an employer send an employee home who is displaying influenza symptoms?
  • Yes. The EEOC, following CDC guidance, advises employers to do so.
• Can an employer ask employees if they have influenza symptoms?
  • Yes. But the employer must maintain the employee’s illness as a confidential medical record.
• Can an employer ask employees if they have traveled to locations that the CDC or public health officials have advised not to travel?
  • Yes. And the employer may follow the CDC advice regarding when the employee is safe to return to work.

Furloughs versus Layoffs:

• What is furlough and how do they operate?
  • Furloughs are mandatory suspensions from work without pay. Furloughs are temporary, by nature, and can last for as long or as short as necessary.
    • For employees who are not exempt from overtime laws (ex. hourly employees and employees who do not fall into one or more overtime exemption), furloughs can be by the day. For example, you may reduce a worker to working one or two days in a week and only pay them for the hours worked.
      • Note that a reduction in hours may result in the employees’ entitlement to unemployment benefits based on the reduced hours.
    • For employees that are exempt from overtime laws (employees who meet the salary and other requirements for one or more exemption), furloughs must be by the week. You may not reduce a salaried, exempt employee’s hours and pay them for a partial week.
      • Be very cautious with furloughs for salaried, exempt employees. If they work for even a few minutes, they are entitled for their salary for the entire week. Otherwise, you risk losing the exemption in the future. For similar reasons, we do not advise converting salaried, exempt employees over to hourly.
• What is the difference between furloughs and layoffs, if the furlough will require a complete suspension of all work?
  • The two operate very similarly under the present circumstances. Both methods mean that the employee will no longer be working and, therefore, will not earn any compensation. Accordingly, both methods entitle employees to unemployment benefits. Furloughs can be advantageous from the perspective that some health insurance benefits plans will permit the employee to be covered for a longer period(although, some plans will require employees to be active, so be sure to check with your plan provider for how a furlough will affect your employees’ benefits). Furloughs also provide employees with an expectation that their work will resumeand make for a more seamless transition back. On the other hand, furloughs often require more monitoring to ensure that employees are not working—even checking emails—otherwise you must pay the employee for the time worked (and for a salaried employee, that means the entire week) or risk a F air Labor Standards Act claim.
• Does the WARN Act require that I provide notice of an intent to do layoffs in light of COVID-19?
  • Unfortunately, the answer to this question is maybe. In general, the federal WARN Act requires employers with over 100 employees (not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week) to provide 60 days-notice of mass layoffs or a plant closing. However, the WARN Act has a few exemptions that could apply under the circumstances. If you are considering a layoff and believe the WARN Act might apply, it is important to seek legal counsel beforehand.
    • Note that the following states have adopted their own “mini-WARN” acts: California, Connecticut, DC, Georgia, Hawaii, Illinois, Iowa, Maine, New Hampshire, New Jersey, New York, Tennessee, Vermont, and Wisconsin.

Employer Options to fund paid medical leave required by the Families First Coronavirus Response Act:

• How can an employer afford to provide the required paid leave to employees?
  • The Act has provided a dollar-for-dollar tax credit to be administered on a quarterly basis in connection with the payment of payroll taxes;
  • If the employer does not have the cash flow to make the payments up front, employers may apply for a Small Business Administration Disaster Loan;
  • If providing paid sick leave will “ jeopardize the viability of the business,” and the employer has fewer than 50 employees, the employer may be able to receive anexemption. We are closely monitoring the Department of Labor website and will give more information on how to claim the exemption once such information is made available.

Useful links:

Texas Division of Emergency Management- Economic Injury Disaster Loans

Texas Workforce Commission- COVID-19 Resources for Employers

CDC- Resources for Businesses and Employers

Department of Labor- Coronavirus Resources

These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you andStibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed.