Coronavirus - CARES Act provides Financial Relief
Wednesday, April 8, 2020
Employment Law Alert: April 8th, 2020
CARES Act Provides Financial Relief
for Employers and Employees
On March 27th, 2020, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which provides approximately $2 trillion dollars in aid to individuals and businesses. The Act also provides increased unemployment benefits, financial assistance through small business loans and grants, and various tax relief options.
Increased Unemployment Benefits
Under the Act, individuals who qualify for unemployment will be eligible for an additional payment of $600 per week until July 31, 2020. This payment is in addition to the amount they would otherwise qualify for under their state’s unemployment program. The Act also extends the period of time individual can receive unemployment benefits by 13 weeks and reimburses states that eliminate the one-week waiting period.
The Act also makes unemployment available to individuals who would not normally be eligible for unemployment due to COVID-19 related impacts, limited work history, previously exhausting state benefits, and other disqualifying reasons.
Paycheck Protection Program
Employers with less than 500 employees may qualify for a Paycheck Protection Program loan, which are processed by private lenders and guaranteed by the Small Business Administration (SBA). The loan may be forgiven if the funds are used to cover payroll costs and other approved expenses.
The maximum loan amount available to employers is equal to the sum of 2.5 times the average monthly payroll costs in the year prior to the loan date, plus any disaster loans refinanced as Program loans, not to exceed $10 million.
Loan proceeds may be used for the following allowable expenses: payroll expenses, healthcare costs, payments of interest on any mortgage obligation, rent, utilities, and interest on any other debt obligations incurred before the covered period.
Loans have a maturity of two years and an interest rate of 1%. Loan payment will be deferred for six months. Employers must use at least 75% of the amount of the loan to be forgiven for eligible payroll costs. 25% of the amount to be forgiven can be used for rent, utilities, and interest on a mortgage.
The following websites provide more information on the details of the loan:
Approved lenders are able to start accepting applications as early as April 3, 2020. Given the large number of employers expected to apply for a loan under this program; employers should contact an approved lender as soon as possible and start the application process.
It is recommended that employers contact banks with whom they have an existing relationship who are approved lenders and leverage that relationship to possibly expedite the application process.
Additional information about the program and a link to the application form is available at the following website: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp
Emergency EIDL Grants/Loans
The SBA will provide emergency grants in the amount of $10,000 to employers with less than 500 employees in operation on January 1, 2020 who applied for an SBA economic disaster loan. The grant should be available to employers within three days of applying.
The grant money must be used for providing paid sick leave to employees unable to work due to COVID-19 reasons, maintaining payroll to retain employment during business interruptions, meeting increased costs to obtain materials unavailable due to interruptions in supply chains, paying rent or mortgage payments, and repaying obligations that cannot be met due to revenue loss.
Employers with less than 500 employees can also apply for an Economic Injury Disaster Loan, which can be used to cover payroll fixed debts, accounts payable, and other expenses that cannot be paid because of the COVID-19 pandemics impact on the business.
More information on the EIDL Grants and Loans can be found on the following website: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance.
The CARES Act also provides a number of tax relief options. Employers should consult a Tax Accountant regarding the various options that might be available to their business.
Please do not hesitate to reach out to UEA's Employment Law Attorneys if you have any questions regarding complying with this new law, need guidance with specific employment or labor laws, or have concerns relating to the potential or actual impacts of the Coronavirus on your workforce.
Contact us for more information about these new changes at EmployerHelpline@UnitedEmployers.org or 503.595.2170.