On March 27, 2020, the House passed and President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest stimulus bill in United States history. The comprehensive statute includes multiple provisions designed to expand unemployment benefits during the coronavirus pandemic, along with other provisions of critical importance to employers. We provide a brief summary below.
Pandemic Unemployment Assistance
The Act creates a temporary Pandemic Unemployment Assistance program to provide payment to those not traditionally eligible for unemployment benefits. These include the self-employed, independent contractors and those with limited work history. The individual’s full or partial unemployment, or inability to work, must be as a direct result of the coronavirus public health emergency because:
- The individual or a household member has a COVID-19 diagnosis.
- The individual is providing care to a family or household member with COVID-19.
- A child that the individual has primary caregiving responsibility for is unable to attend school or another facility as a direct result of COVID-19 and the child’s attendance at the school/facility is necessary for the individual to work.
- The individual cannot reach the place of employment due to a quarantine or the order by a health care provider to self-quarantine.
- The individual was scheduled to start employment and does not have a job or is unable to reach the job due to COVID-19.
- The individual has become the breadwinner or major support for a household because the head of household died due to COVID-19.
- The individual’s place of business is closed.
Individuals who either have the ability to telework with pay or are receiving paid sick leave or other paid leave benefits are not eligible.
The benefits are available retroactively starting on January 29, 2020 and will extend to December 31, 2020, but shall not exceed 39 weeks. There is no waiting period. The benefit amount will be as authorized by State unemployment (or in accordance with 20 CFR 625.6 if the individual does not qualify under State law, for example because he is self-employed), plus the amount of the $600 per week pandemic unemployment benefit under the Act (see below).
Emergency Unemployment Relief for Governmental Entities and Non-Profit Organizations
Under the Act, government entities and non-profits (who generally cover unemployment claims for their employees) will be reimbursed 50% of the amounts they pay into their State unemployment funds. The applicable period is March 13, 2020 to December 31, 2020.
Emergency Increase in Unemployment Compensation Benefits
The Act provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months. The $600 subsidy applies until July 31, 2020.
Federal Funding of the First Week of Compensable Regular Unemployment
The Act will reimburse States that do not require a one-week waiting period for unemployment benefits the full amount of the first week of benefits paid to any claimant through December 31, 2020.
Pandemic Emergency Unemployment Compensation
The Act provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after State unemployment benefits are no longer available. The amount of benefits is the State maximum for the individual, plus the $600 per week “Emergency Increase in Benefits” (see above).
Recipients must be actively seeking work, but the State must be flexible where individuals are unable to search for work because of COVID-19 (i.e., due to illness, quarantine or movement restrictions).
Short-Time Compensation Payments
The Act provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs States incur in providing this short-time compensation through December 31, 2020 if their program is already in place. For states that begin such a program, the Act funds 50% of the costs through that date.
The payments cannot exceed 26 weeks of full unemployment, and do not apply to individuals employed on a seasonal, temporary or intermittent basis.
The stimulus package imposes penalties in the event an individual engages in fraud or material omissions in securing the available benefits. The individual will be disqualified from receiving additional benefits under the Act and may be criminally prosecuted. In addition, the government may recoup the benefits. The Secretary of Labor may, however, waive repayment of benefits if the payment was without fault on the part of the individual and repayment would be contrary to “equity and good conscience.”
Employee Retention Credit
The CARES Act provides a refundable credit on payroll tax for 50 percent of applicable wages paid by employers during the COVID-19 pandemic. The credit is available to employers whose (1) operations were fully or partially suspended due to a government order limiting commerce, travel or group meetings (for commercial, social, religious or other purposes) due to COVID-19, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
For employers with more than 100 full-time employees, applicable wages are those paid to employees when such employees are not providing services due to the COVID-19 qualifying circumstances. In contrast, for employers with less than 100 full-time employees, all wages are subject to the credit during the period of the qualifying circumstances (regardless of whether the employees are providing services or not). This credit will be available for the first $10,000 of compensation for each employee, including health benefits paid on behalf of the employee. The credit is available for compensation paid from March 13, 2020 through December 31, 2020, but does not apply to Emergency Paid Sick Leave or Paid Family and Medical Leave under the Families First Coronavirus Response Act (“FFCRA”).
Delayed Payment of Employer Payroll Taxes
The Act permits employers, including self-employed individuals, to defer the employer portion of the Social Security tax on applicable employee wages. The deferred employment taxes must be paid over two years: 50% is due by December 31, 2021 and the remaining 50% is due by December 31, 2022.
Paid Leave for Rehired Employees
The Act authorizes the grant of paid Family and Medical Leave to employees who were laid off by an employer on or after March 1, 2020 if they are re-hired by the same employer. To qualify, the employee was required to work for the employer “not less than 30 of the last 60 calendar days prior to the employee’s layoff.”