Small Business Summary on COVID-19 Legislation
Theodore M. McGinn and Nataly Kaiser • March 23, 2020
US officials and agencies are responding in an effort to mitigate the economic damage posed by the COVID-19 outbreak. The following is a short overview of certain legislation recently enacted in response to the pandemic which impacts small businesses.
FAMILIES FIRST CORONAVIRUS RESPONSE ACT
Paid Sick Leave.
Employers with 500 employees or less must now offer full-time workers 80 hours paid sick leave (part-time workers receive the average number of hours over a two-week period). This leave applies to all employees that are either advised to self-quarantine, quarantined as part of a local/state/federal quarantine order, or are experiencing symptoms and are seeking a medical diagnosis. An employee with these reasons may receive two weeks paid leave at their usual pay rate but capped at $511 per day and an aggregate of $5,110.00. See H.R.6201 Enrolled Bill text here: https://www.congress.gov/116/bills/hr6201/BILLS-116hr6201enr.pdf
The paid leave is also available for those caring for an individual who is subject to such an order or has been advised to self-quarantine, or caring for a son or daughter whose care provider is unavailable or school has been closed. However, an employee taking leave for these reasons gets a reduced paid leave of two-thirds of their usual pay capped at $200 per day and an aggregate of $2,000.00.
Businesses are allowed to apply for these sick leave payments as a credit against the employer portion of FICA tax liability. If the total employer portion of the FICA tax is less than the paid leave expense you incurred, you will be refunded the difference.
Expanded Family Leave.
In addition to the two weeks discussed above, the new law works to expand the Family & Medical Leave Act when certain criteria are met. Employees that take expanded family leave to care for a child will be compensated at the reduced rate discussed above (two-thirds or usual pay capped at $200), and may not exceed $10,000.00 in the aggregate. The first two weeks of family leave are unpaid, but employees may elect to substitute accrued vacation time, PTO, or other paid sick leave for this period. The tax credit and refund process would be the same as above. Further, like standard family leave, employees have job restoration protection for 12 weeks beginning when the unpaid family leave period commences. But this is limited and only applicable if certain criteria are met.
Employees have the option of either: (1) going on FMLA leave right away and using the new sick leave, or any other paid time off, to cover the first 10 unpaid days, or (2) using the new sick leave, then going on FMLA (with the first 10 days unpaid unless they are able to cover it with another benefit) in an effort to extend their 12-week job restoration period.
Here is how the two sections would work in a continuous leave scenario where the employee takes the full paid sick leave then transitions to expanded family leave:
- Weeks 1 & 2: The first two weeks would be taken under the Paid Sick Leave mandate. Employees may take two weeks paid sick leave if they have a qualified reason as discussed in the Paid Sick leave section above.
- Weeks 3 & 4: the following two weeks would be taken under the expanded Family & Medical Leave Act, which requires that the first two weeks under this provision be unpaid. However, an employee may elect to substitute accrued vacation or paid time off for this period.
- Week 5 and on until 12/31/2020 or End of State of Emergency (whichever is sooner): The remaining weeks (leave from week 5 and on) is paid at a reduced rate of two-thirds of employee’s usual pay, and capped at $200 per day and the aggregate of $10,000.00.
Employers have until the end of the month of March to become compliant. Each employer must post an approved notice on their premises outlining the requirements of the Act for employee awareness of the benefits. The Secretary of Labor will have an approved notice published within the coming week that you can use.
Emergency Unemployment Insurance Stabilization and Access Act.
The new legislation provides $1 billion for emergency grants to assist with processing and paying unemployment insurance. $500 million is to be used to provide additional staffing, technology and other administrative costs for all states, while the remainder is apportioned for emergency grants to states that experienced at least a 10-percent increase in unemployment.
States will have more flexibility over waiting periods and the “able, available and actively looking” test for Unemployment Compensation (U.C.) eligibility. Some states, significantly impacted by COVID-19, will also have unemployment benefits extend past the normal 26 weeks, which will be funded by the federal government.
DISASTER RELIEF LENDING
Earlier this month, President Trump signed the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (“the Act”) providing $8.3 billion additional federal funds to address the COVID-19 outbreak. Under Title III of the Act, the Small Business Association was apportioned an additional $20 million for the “Disaster Loans Program Account.” See full text here: https://www.congress.gov/bill/116th-congress/house-bill/6074/text.
Disaster Loans Program.
The U.S. Small Business Administration (“SBA”) is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue an “Economic Injury Disaster Loan declaration.” An assistance declaration enables the SBA to make loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus (COVID-19). Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities.
What These Loans Provide.
According to the SBA press release published Thursday, March 12, 2020, these loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%. Loans include long-term repayment options with up to a maximum of 30 years. Terms, however, are determined on a case-by-case basis, based upon each borrower’s ability to repay.
If you have any questions regarding this article, contact Ted McGinn at 847-705-7555 or tmcginn@lavellelaw.com.
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