CARES Act – Employment Provisions

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act (Act). The Act is intended to provide economic relief to individuals and businesses facing hardship due to the COVID-19 crisis. This section of this Sidley Update provides an overview of certain key employment provisions of the Act.

Unemployment Insurance Provisions

The Act both broadens eligibility for unemployment benefits and increases those benefits.

Expanded Eligibility. The Act broadens eligibility for employment benefits by providing for up to 39 weeks of unemployment benefit assistance for certain “covered individuals” who are unemployed or partially unemployed as a result of COVID-19. The Act extends eligibility for COVID-19-related benefits to individuals who otherwise would not be eligible for regular unemployment compensation. This includes expanding eligibility to include independent contractors, self-employed individuals and those with a limited work history. The Act also provides benefits for individuals who have exhausted all regular unemployment compensation or extended benefits under state and federal law or under the Act.

To obtain unemployment benefits related to COVID-19 under the Act, individuals must self-certify that they are able and available to work within the meaning of applicable state law and are unemployed, partially unemployed or are unable or unavailable to work because of one or more of the following:

• They have been diagnosed with COVID-19 or are experiencing symptoms and seeking a medical diagnosis.
• A member of their household has been diagnosed with COVID-19 or they are providing care for a family member or household member who has been diagnosed.
• A child or other member of the household for which the individual has primary caregiving responsibility is without care or out of school as a direct result of COVID-19.
• They are unable to reach their place of work due to a quarantine order (by a healthcare provider or otherwise).
• They were scheduled to begin their employment and either cannot reach the job or do not have a job as a direct result of COVID-19.
• They had to quit a job as a direct result of COVID-19.
• They have become the major support for a household because the head of the household died as a direct result of COVID-19.
• Their place of employment is closed as a direct result of COVID-19.

Individuals who are able to telework with pay or who are receiving paid sick leave or other paid benefits, including paid leave under the Families First Coronavirus Response Act (FFCRA), are not eligible for unemployment compensation under the Act. For most beneficiaries, compensation is calculated based on the weekly benefit amount authorized under the state unemployment compensation law where the covered individual was employed.

Increased Benefits. The Act also provides for unemployment benefits that are both increased in amount and extended in time and further incentivizes states to adopt or expand certain programs to assist affected workers. Individuals who receive unemployment compensation under the employment compensation law in the state where the individual was employed will also receive an additional $600 per week on top of ordinary state-authorized weekly benefits. This enhanced benefit is available only until July 31, 2020. Further, the federal government will fund up to an additional 13 weeks of pandemic emergency unemployment compensation for individuals who remain unemployed after they have exhausted their benefits under state law, up to a maximum of 39 weeks of unemployment compensation to such individuals. And if states waive their typical waiting period and choose to pay recipients as soon as they become unemployed, the federal government will fund the cost of the first week’s benefits. Apart from the additional $600 per week that is provided for up to four months, the other expanded benefits all last through December 31, 2020.

In addition, the Act addresses “short-time compensation programs.” Short-time compensation programs, in general, are administered by states and provide employees whose hours have been reduced with a pro rata portion of the unemployment compensation that employees would have received if fully laid off. Often, such programs require employers to submit short-time compensation plans to the state for approval before employees are able to take advantage of such a benefit. The Act provides funding for states that already have short-time compensation programs and incentivizes states without such programs to implement them by providing grants to do so.

Employers do not have specific responsibilities with respect to the employee relief provisions in this Act. However, as noted, state law may impose other employer obligations with respect to unemployment claims and/or short-time compensation programs. Moreover, some states have adopted new requirements related to unemployment in the wake of the COVID-19 pandemic.¹

Amendments to the FFCRA

The Act makes a number of minor changes to the FFCRA. It strengthens the language in the FFCRA regarding the caps on emergency paid sick leave and on the pay for the expanded leave under the Family and Medical Leave Act (FMLA). The caps themselves are not changed. See here for further information regarding the FFCRA.

It also includes a special provision to permit certain rehired employees to promptly use the enhanced FMLA leave provided under the FFCRA. As stated in the FFCRA, such leave may be taken only if the employee is unable to work or telework because the employee is caring for a son or daughter if the child’s school has been closed or childcare is unavailable due to COVID-19. Under the FFCRA as it was enacted, employees must have been on the job for at least 30 days before becoming entitled to the FMLA leave. However, the CARES Act amends the FFCRA to provide some flexibility for rehired employees: If an employee was laid off after March 1, 2020, and had worked for the employer for 30 days prior to the layoff, upon rehire, the employee is now immediately eligible for the 12 weeks of enhanced FMLA leave (until the applicable FFCRA provision sunsets at the end of 2020).

Tax Relief to Certain Affected Employers

The Act provides “eligible employers” with a refundable employment tax credit for each calendar quarter equal to 50 percent of “qualified wages” paid to employees during such quarter. An eligible business must either (1) have trade or operation fully or partially suspended by government order due to COVID-19 or (2) have seen a decline of gross receipts of more than 50 percent over 2019. The Act also postpones the due date for depositing employer payroll taxes for the period between enactment of the Act and January 1, 2021.

More information on this tax relief is available here.

Other Provisions

Select other portions of the Act include provisions that are tangentially relevant to employment issues.

For example, Title I authorizes certain loans for eligible small businesses. Such loans may be used to help pay various operational costs including payroll costs. Notably, payroll costs exclude individual employee compensation above $100,000 per year (as prorated for the covered period), certain federal taxes, compensation to employees who reside outside the U.S., and sick and family leave wages paid under the FFCRA. The Act also establishes an emergency grant that allows for an eligible entity to receive an advance of up to $10,000 within three days of applying for the loan under the Economic Injury Disaster Loan program, which can be used to offer sick leave to employees unable to work due to a direct effect of COVID-19 or maintain payroll, among other things.

Loan amounts, including payroll costs expended during the covered period (i.e., the eight-week period after the origination of the covered loan), are generally forgivable subject to certain conditions. See here for further detail on the loan provisions of the Act. However, forgiveness amounts will be reduced for cuts to employee headcount of certain levels and for wage reductions of certain levels, pursuant to a formula laid out in the Act. These reductions will not be taken from the forgiveness amounts if (1) reductions in the number of full-time equivalent employees and/or in salary or wages occurred between February 15, 2020, and 30 days after the Act’s enactment and (2) the employer has eliminated any such reductions by June 30, 2020.

Title IV of the Act includes emergency relief provisions for entities in certain distressed industries. Entities accepting such relief may be subject to certain conditions, including criteria regarding maintaining employment levels. Notably, a recipient must agree not to reduce its employment level by more than 10 percent from the level as of March 24, 2020, among other things. More information on these provisions is available here and here.

Title IV also provides for relief to certain eligible midsize businesses with between 500 and 10,000 employees. Entities accepting such relief must agree to certain conditions regarding outsourcing and maintaining headcount levels. Recipients must also agree not to abrogate any existing collective bargaining agreement during the term of the loan and for two years thereafter and must remain neutral in any union effort to organize its employees during the term of the loan. More information on these provisions is available here and here.

Finally, there are also limits on employee compensation for businesses receiving relief under Title IV, which generally apply to highly compensated employees. More information on these provisions is available here.

¹ For example, per recent Georgia law, employers are now required to file partial claims on behalf of their employees whenever it is necessary to temporarily reduce work hours or there is no work available for a short period. See Georgia Department of Labor, NEW Information for filing for unemployment, mandatory filing by employers for partial claims, and reemployment services, https://dol.georgia.gov/blog/new-information-filing-unemployment-partial-claims-and-reemployment-services.