Our general counsel, Jeff King, working with Lobbyit, has been responding to Member questions about the recent legislation passed in response to the Coronavirus crisis. We have compiled the most common questions and answers below. This page will continue to grow. Please check back often.
Question: With so much information swirling around, can you explain the different laws, orders, and rule that are in place?
Answer:
There are two new federal laws enacted in the last two weeks.
First, The Family First Coronavirus Response Act (FFCRA) requires an employer to pay two weeks of sick pay if employees are sent home as a result of (1) a quarantine order, (2) a doctors order, (3) showing signs of having the coronavirus, (3) taking care of a family member with coronavirus, and (5) taking care of children because school is closed. The FFCRA also requires 10 weeks of family leave to take care of a child because school and daycare facilities closed as a result of the coronavirus
The second law is the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This law provides possible small businesses with loans to pay employees, and certain business costs.
Question: If I furlough employees, am I obligated to pay for sick and family leave?
Answer:
A business is obligated to pay two weeks of sick leave and 10 weeks a family leave only if the reason for sending employees home fits one of the limited circumstances, such as a quarantine order, or a closure of schools. If the employees are furloughed before April 1, 2020, then they have no obligation under the FFCRA to pay for leave. A business should, however, check with the local laws to see if they have any obligations.
Question: Can you please tell me about the emergency financial package?
Answer:
On Friday, March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. Based on our initial review of the 883-page Act, there are several important provisions for small businesses: (1) An emergency, forgivable Small Business Act (SBA) “payroll” loan program; (2) an “Employment Retention Tax Credit” in lieu of a Payroll Protection loan; and (3) an emergency SBA grant of up to $10,000 for certain businesses. The two loan programs are explained below.
Outline of Small Business Loan Payroll Program:
The U.S. Small Business Administration, and other lenders, will be able to offer forgivable loans of up to 2.5 times your average monthly “payroll costs.”
“Payroll costs” are defined as the sum of:
- Salaries, wages, commissions, or similar compensation (up to $100,000 annual compensation as prorated for the covered period);
- Your normal vacation, parental, family medical, or sick leave payments to employees;
- Severance payment;
- Health care benefits, including insurance premiums;
- Retirement benefits;
- State or local tax assessed on said compensation; and
- Payments of wages, commission, or similar compensation to any independent contractors that is $100,000 or less per year (as prorated for the covered period).
Payroll costs would not include:
- Federal income tax and payroll tax contributions;
- Compensation of any employee whose principal residence is outside the US;
- Qualified sick or family leave wages covered under the credits proposed in other sections of the CARES Act.
Other allowable uses of covered loans include:
Although the amount of the loans are based on payroll, the loans can be used to pay other certain other business expenses.
- Payment of interest on any mortgage obligation;
- Rent (including under a lease agreement);
- Utilities; and
- Interest on any other debt incurred before the covered period.
The interest rate for these loans cannot exceed 4%.
Your loan may be forgivable up to an amount that is equal to the payments you will make for the following items during the first eight weeks after the loan is originated.
- Payroll costs (defined above).
- Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).
- Any payment on any covered rent obligation.
- Any covered utility payment.
The amount forgiven can be reduced if the number of employees and employee hours reduced between February 15, 2020 and June 30, 2020
Emergency $10,000 Grant from SBA
The CARES Act also expanded the SBA’s existing Emergency Economic Injury Disaster Loan (EIDL). The Act lowers the loan requirements, waives most fees, and eliminates personal guarantees and collateral requirements. Additionally, under the expanded EIDL program, borrowers can access an immediate $10,000 grant to be paid within 3 days of applying for the loan. The grant funds do not have to be paid back to the SBA if the EIDL loan application is denied. The $10,000, however, will be deducted from the amount of the payroll loan forgiven if a business receive a payroll loan.
Question: What are the recent announcements in Nevada?
Answer:
Governor Sisolak announced that construction/repair and home maintenance/repair services are essential businesses during the COVID-19 crisis. (http://www.labor.nv.gov: Non-Essential Businesses Closure Announcement March 17, 2020). There may be delays in permits, etc.
The Nevada Contractors Board issued an Advisory Notice indicating that contractors may continue to mail applications and forms to the Board’s office even while they are closed but recognize there may be processing delays. Even though the Board’s offices are closed, your obligations to license, respond to complaints, and adhere to investigations are still in effect.
The Board is directing all contractors to visit its site for additional information and instruction. You can find the Advisory Notice, along with other information regarding the Board’s instructions at http://www.nvcontractorsboard.com/
Question: It is not clear whether an SBA disaster loan applied for now will automatically be covered by the new law when it passes Congress as anticipated. Please do all you can to get the applications that have been put in recently qualified for whatever they decide.
Answer:
WFCA worked hard to ensure applying for a disaster loan would not prevent a business from getting a payroll loan. Under the CARES Act, if a business applied for a disaster loan, known as Emergency Economic Injury Disaster Loan (EIDL), after January 30, 2020, it can also apply for a payroll loan. The EIDL will be rolled into the payroll loans, and thus forgiven if used for the payroll loan purpose of paying payroll and certain business expenses.
Question: Want is considered a small business?
Answer:
Any business with fewer that 500 employees is consider a small business eligible for the payroll and emergency loans.
Question: As most of our industry uses sub-contractors, I am assuming all of them can apply for the Corona Disaster Relief loans/help?
Answer:
The CARES Act provides that all small businesses, including “individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals,” can apply for a payroll loan. WFCA Is working to see if it can identify and assist and providing access to these payroll loans.
Question: Should a small business go to the current SBA site for Disaster relief?
Answer:
The current WFCA guidance still holds. Please continue to go to the SBA site. The new CARES Act lowers the loan requirements, waives most fees, and eliminates personal guarantees and collateral requirements
Question: If your monthly payroll is $200,000 then you can get $500,000. Would that include factoring in health benefits?
Answer:
The payroll loans are based on a business’s average monthly payroll, so a $200,000 average monthly payroll would yield a $500,000 loan. The payroll includes healthcare, but not rent. This where the confusion comes into play. The amount of the loans is based only on the average monthly payroll, but the loan can be used for other business expenses such as rent, utilities, interest on business loans, and similar expenses,
To clarify, payroll costs are defined as the following:
- Salaries, wages, commissions, or similar compensation (up to $100,000 annual compensation as prorated for the covered period);
- Payment of cash tip or equivalent
- Vacation, parental, family medical, or sick leave;
- Severance payment;
- Health care benefits, including insurance premiums;
- Retirement benefits;
- State or local tax assessed on said compensation; and
- Payments of wages, commission, or similar compensation to any independent contractors that is $100,000 or less per year (as prorated for the covered period).
Question: The Executive Order I received from the governor of Michigan tells me that it is ok to work in a customer’s house. Am I correct? The line in the middle reads:
Construction workers may also undertake such projects as necessary to maintain and improve the safety, sanitation, and essential operations of residences
We are improving residences when we work in the homes. If a home has a pet or children, old carpet could be a health risk if not properly maintained. I am not concerned for myself as much as I am for my contractors. The small single operator is the last one to get help from anyone.
Answer:
Only a lawyer licensed in Michigan can advise on Michigan law. With that said, all the stay in place/quarantine orders I have seen, allow for construction need to improve or maintain safety and health. This should include completing any jobs (leaving it undone creates a potential safety hazard), and repairs or replacements that are needed to avoid safety (e.g., uneven flooring or torn carpet that could cause tripping) or health issues (mold, moisture, etc.). It is not clear whether the exceptions for construction allows any construction or only that which is need for safety or health concerns.
The order also requires the workers practice the recommended safety precaution including social distancing. If it was me, I would have installers work at least 6 feet apart if possible, provide gloves that would be discarded whenever leaving the job, suggest they shower immediately after a job, and launder their work cloths daily. I would also tell installers not to work if they are feeling ill.
Question: My key question is if I apply and request for an x amount of dollars and I am rejected, would that denial prevent me from reapplying for a different number?
Answer:
This raises several questions.
First, if you are rejected for an SBA loan, you are entitled to a written letter explaining the reasons. If it because of the amount, you can reapply 90 days later.
Second, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a new loan program. A business with less than 500 employees can apply for a loan to cover its payroll, rent, and utilities. To be eligible, the loan must be used to keep your business open and pay for your employees. The loan is likely to be forgiven to the extent that it is used to pay for payroll, rent, and utilities. The amount of the loan is 2.5 times your payroll and the lending standards are reduced. If you are rejected for a SBA loan, you can still apply for a payroll loan under the CARES Act
Question: I assume the CARES Act loans, unlike the conventional SBA loan is not collateralized, correct? Secondly, is it 2.5 for payroll, utilities and rent for the entire 12-month period or limited to few months?
Answer:
First the loan does not need to be collateralized.
Second, the amount of the loan is 2.5 times payroll. That includes:
- Salaries, wages, commissions, or similar compensation (up to $100,000 annual compensation as prorated for the covered period);
- Payment of cash tip or equivalent
- Vacation, parental, family medical, or sick leave;
- Severance payment;
- Health care benefits, including insurance premiums;
- Retirement benefits;
- State or local tax assessed on said compensation; and
- Payments of wages, commission, or similar compensation to any independent contractors that is $100,000 or less per year (as prorated for the covered period).
It does not include rent or utilities. The payroll is based on the 12-month before the loan is made.
Third, the loan must be used for:
- Payroll costs (defined below)
- Costs related to the continuation of group health care benefits AND insurance premiums
- Salaries, commissions, or similar compensations
- Interest on mortgage obligations (not to include any prepayment of said obligation nor any principal)
- Rent
- Utilities
- Interest on any other debt obligations incurred prior to February 15, 2020
Fourth, the loan can be forgiven to the extent it is used to pay:
- Payroll
- Interest on mortgages (not to include any prepayment of or payment of principal).
- Rent
- Utilities
Question: Can you address what if the dealer has no money to pay the things outlined in the FFCRA listed below? How can they get assistance? It’s great the government tells us we have to pay, but what if you are broke?
Answer:
We are conferring with the Department of Labor (DOL) regarding exemptions to the paid leave requirements. They advise us that they intend to have the rules on exceptions out before the FFCRA takes effect. We have suggested a blanket exception for small businesses. WFCA will issue an update on the exemption and, if feasible, provide a form letter to request an exemption.
In addition, the next relief bill may include small business loans that will not need to be paid back to the extent that the money is used to pay employees leave. How quickly a business could get the loan may create an issue.
In the end, it may be that a business that does not have the cash flow to pay the leave required un the FFCRA simple will not pay, but apply immediately for an exemption, a loan, or both. We will need to see what DOL issues on exemptions and what Congress does on small business loans.
Question: Will the final legislation and how to process the information easily be released to the general public next week?
Answer:
The Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act are new and there has been only guidance or interpretation issued. The Department of Labor has issued some guidance which can accessed at:
For more information about the laws enforced by the WHD, call 866-4US-WAGE, or visit www.dol.gov/agencies/whd.
For further information about COVID-19, please visit the U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention.
WFCA continues to be are in contact with the Department of Labor to get some clarification on the issues.
Question: Do you get around the 2 weeks paid leave requirement If you fire/let go of an employee? Are you still responsible for covering the up to 2 weeks or would that just go to unemployment like usual? Other than a spike in your unemployment rate next year (which will probably be forgiven) it would seem like letting someone go would be the easiest scenario of your company is not liquid enough to continue making payroll correct?
Answer:
Terminating or furloughing current employees after March 31, 2020 may not avoid the requirement to pay the two weeks sick leave. The Families First Coronavirus Response Act requires two weeks of paid sick leave only if your employees are sent home because of the following reasons:
- The federal, state, or local government has issued quarantine or isolation order because of coronavirus. The federal government has not yet issued such an order, and I am not aware of Pennsylvania issuing any order.
- The worker has been advised by health care provider to self-quarantine due to coronavirus.
- The employee is experiencing symptoms of coronavirus.
- The employee is caring for an individual who is subject to an order described in (1) or has been advised as described in (2).
- The employee is caring for their child because the school is closed or child care provider is unavailable due to coronavirus.
Since you are in a state that has not issued a quarantine order, you can argue that you furloughed workers because of slow business. Moreover, if an employee is sent home for any of the other reasons (2-5) then the sick leave would need to be given.
Question: The paid 10 weeks leave at 2/3 would only come into play if your business is open but that employee could not work because they were caring for a child?
Answer:
The ten weeks of family medical leave may still apply even if you closed your doors temporarily. Under the Family Medical Leave Act, the employment does not have to consecutive. Accordingly, laying off employees now will not avoid the obligation to provide partial paid leave if an employee is caring for their child because the school is closed or child care provider is unavailable due to a public health emergency.
WFCA has contacted the Department of Labor on this issue to get clarification.
Question: If your store was closed down, would you pay everyone the mandatory 10 days (2 weeks, 80 hours) and then pay those who qualified (employees with children in school) an additional up to 10 weeks at 2/3 pay?
Answer:
If you close your business permanently, you may avoid the obligation at to paying the leave. This, however, would leave you with other obligations, such as rent, stock, etc.
Question: For those who would not qualify for the 10 week’s pay, you would only be required to pay the 2 weeks, 10 days and then they could use other PTO instead, or they just wouldn’t get paid correct?
Answer:
You are correct. The 2 weeks of paid sick leave is on top of what you normally provide. Remember, however, the leave is only required for employees who are sent home for the listed reasons and were sent home before April 1, 2020.
Question: Would a “Shelter-in-Place” state count as a COVID-19 cause for all affected employees? I know if I have an employee whose child’s school is shut down or who has a spouse who may have the virus counts, but if the city is shut down and none of my employees can work, can I still pay them and then be reimbursed under this new law?
Answer:
If your state or local issue a quarantine or isolation order, then the sick pay requirements come into play. You would need to determine whether your store is covered by the order. For example, the order in Los Angeles does not cover hardware or building supply stores. A “shelter in place” order that does not prohibit your store from being open, would not necessarily be considered a quarantine or isolation order unless it required you to shut your doors.
Question: According to your letter, I would receive $200 a day per employee for up to 10 days per employee. If that employee chooses to use PTO instead of not working/receiving pay?
Answer:
The tax credit is to cover the required sick and family leave requirements. Under the Families First Coronavirus Response Act, an employee can choose to first use any PTO and there would be no tax credit for that pay. After using the PTO, the employer would then be required to provide the sick/family paid leave for which the employer receives the tax credit.
Question: Did they remove the 12 weeks of paid PTO from the legislation as it was originally written?
Answer:
No, the final bill sill requires 12 weeks of family medical leave but only 10 weeks have to be paid leave and then only if an employee is caring for their child because the school is closed or child care provider is unavailable due to a public health emergency.
Question: If we are in a “shelter-in-place” state and no one can work, will this be as easy as filling out a form that says “we paid these 10 employees for 5 days, $1,000 each last week” and they will mail me a check for $10,000?
Answer:
The IRS will issue its formal guidance this week which should provide the system and forms to apply for the refund. The refund, however, is to allow an employer to keep the payroll taxes otherwise due, and to get a refund for any amount not recovered from the payroll taxes.
Question: How does it work on the quarterly taxes since they have pushed back the date on which our quarterly taxes are due?
Answer:
You will still have to file quarterly returns, but the due date is pushed back. Prior to the effective date of the new law, April 2nd, you must still pay all the employment taxes collected from and that you owed for your employees.
Question: Do we have anymore clarity on the rule for the Small Business Administration (SBA) Economic Injury Disaster Loans? I’ve heard this got upped to $10M and part of it is non-recourse. Also do we know how to apply for it if it truly is non-recourse and you don’t need to pay it back which is what I’m hearing?
Answer:
As an initial matter, the Act provides three important provision for small businesses: (1) Paycheck protection program which provides for Small Business Administration (SBA) loans to be used to keep employees on and pay certain operating costs; (2) Emergency Economic Injury Disaster Loan (EIDL) grants of $10,000; and (3) tax credit for employers who retain employee during the coronavirus crisis. The options appear to be mutually exclusive—if you take a SBA paycheck protection loan, you cannot get the tax credit or an EIDL.
The amount of the payroll loan remain 2.5 times payroll, which includes pay, tips, commissions, leave, healthcare insurance, and state and local taxes, provide the total under $100,000 per employee. It does not include FICA, federal income tax withholdings or sick or family leave that was paid under the earlier FFCRA (you get tax credit for those amounts).
The most recent Act include changes from the earlier Senate version. One change we advocated for appear to be included. If a business got an EIDL loan between January 31, 2020 and the date when the paycheck loans are available, it can fold the EIDL into the paycheck loan with the possibility that the loan would be forgiven to the extent it is use for payroll, rent, utilities, and interest on mortgages and other business debt. The tax credit was also added. This is a preliminary read and we are still working our way through the Act.
Once we complete the review, we will send out an update that outlines all the programs and requirements.
Question: I just wanted to share with you some feedback we are hearing with regard to the family/sick leave credit that we were anticipating.
We closed all retail operations this week, by order of the NJ Governor, and were anticipating getting credit for our employees that we intend to pay this week. We are being told that companies that are forced to close, would not qualify for the reimbursement.
Comments from our Human Resources manager as communicated through ADP:
Facts so far….
Under the Employer Provided Paid leave you would not qualify for reimbursement.
The Act provides paid sick leave and expanded family leave for COVID-19 related reasons with reimbursement to the employer through tax credits.
Things are changing daily. I receive updates each morning from the Employers Association of NJ. I will keep you posted if there are changes.
Answer:
Let me try to clarify our earlier explanation of the Families First Coronavirus Response Act (FFCRA) tax credits and provide you with some additional information.
First, FFCRA is not effective until April 1, 2020, so neither the required leave or the tax credit are yet applicable. When effective the Act requires employers to pay 2 weeks of sick leave at 100% of salary with a cap if the employees are set home because of quarantine order, a doctor advises then to self-quarantine, or is experiencing symptoms of coronavirus. The Act requires the 2 weeks of sick leave at 2/3d of salary if the employee is home to care of ordered to stay home by a doctor or is subject to a quarantine, and for children is school and daycare is closed. Finally, FFCRA requires 10 weeks of family leave paid at 2/3d of salary for child care if child is home because school and daycare is closed.
FFCRA provides a 100% tax credits for these expenses. A business can collect the credit in two ways. First, the business can keep the federal taxes withheld from their employees’ paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. If the amount of taxes collected is not sufficient to cover the cost of paid leave, employers can seek an expedited payment from the IRS by submitting a streamlined claim form that will be released soon.
The new law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), includes three important provision for small businesses: (1) Paycheck protection program which provides for Small Business Administration (SBA) loans; (2) Emergency Economic Injury Disaster Loan (EIDL) grants of $10,000; and (3) tax credit for employers who do not take the payroll loan and retain employee during the coronavirus crisis. We are in the process of preparing a summary of the law for members.
Notice: The information contained in this blog is abridged from legislation, court decisions, and administrative rulings and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.
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