On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), an unprecedented $2 trillion economic rescue plan in response to the COVID-19 pandemic. Our firm has previously summarized the CARES Act’s tax and health and retirement benefits provisions here and here. Below, we summarize additional aspects of the Act that impact the workplace. It is important to note that there are a number of open questions presented by this legislation, which could impact employers’ structure for layoffs, furloughs, and pay reductions. We anticipate the various governmental agencies charged with implementing the CARES Act will be issuing guidance soon, and we will provide updates as appropriate.
Unemployment. The CARES Act greatly expands unemployment benefits for eligible individuals, including those affected by the COVID-19 pandemic.
First, the Act allows states to eliminate the one-week waiting period typically applicable to benefits and provides that the federal government will reimburse states for the unemployment costs associated with the one-week waiver. (§ 2105). Even before enactment of the CARES Act, numerous state governors had already waived the one-week waiting period, and now that the CARES Act provides reimbursement to states for doing so, we expect most, if not all, states will waive the one-week waiting period.
Second, the Act provides an Emergency Increase in Unemployment Compensation Benefits, which authorizes states to pay individuals who are otherwise eligible for regular unemployment compensation an additional $600 per week in unemployment benefits. (§ 2104). The federal government will then reimburse states who provide this additional compensation to eligible individuals. The $600 benefit enhancement runs through July 31, 2020 and is available to all individuals who are otherwise eligible for unemployment benefits under state law, regardless of whether the individual’s unemployment is due to COVID-19-related reasons.
Third, the Pandemic Emergency Unemployment Compensation (PEUC) provision extends the period for receiving unemployment benefits by an additional 13 weeks for individuals who have exhausted their state and federal unemployment rights but are able, available, and actively seeking work. (§2107). Most states provide for 26 weeks of benefits, which means that an eligible employee could receive up to a total of 39 weeks of unemployment benefits. In applying the “actively seeking work” requirement, the Act requires that states consider the effects of COVID-19. The weekly benefit amount of PEUC is equal to the regular compensation payable to such individual under state law, plus an additional $600 under the Emergency Increase. The federal government will reimburse states for 13 weeks of PEUC, as well as the additional $600 per week through July 31, 2020.
Fourth, the CARES Act provides for up to 39 weeks of Pandemic Unemployment Assistance (PUA) between January 27, 2020 and December 31, 2020. (§ 2102). PUA is available for individuals who are not eligible for state or federal unemployment, including self-employed workers, independent contractors, and those who have exhausted all rights to state benefits. (§ 2102). To be eligible for PUA, an individual must provide self-certification that they are otherwise able and available to work, except for the fact that the individual is unemployed, partially unemployed, or unable or unavailable to work due to a variety of COVID-19-related circumstances. Individuals who have the ability to telework with pay, or who are receiving paid sick leave or other paid leave benefits, are not eligible for PUA benefits under §2102. The weekly benefit provided by PUA is equal to the unemployment compensation the individual would receive under state law, plus an additional $600 of Federal Pandemic Unemployment Compensation through July 31, 2020.
The import of these provisions is that impacted employees may be eligible for higher-than-usual unemployment benefits and they may be eligible for benefits for a longer period of time. This means that employers who are contemplating layoffs, furloughs, and/or reducing employees’ hours or pay in order to deal with the financial and other repercussions of the COVID-19 pandemic may wish to consider the impact of their plans (negatively or positively) on the affected employees’ unemployment benefit eligibility. Among other things, employers may want to consult the particular state unemployment compensation provisions that apply to their workers to determine whether employees on furlough or with reduced pay or hours would be eligible for unemployment benefits and, if so, whether the amount of unemployment benefits received would be adversely impacted by compensation paid by the employer during the furlough period.
Clarifying Maximum Paid Leave under Families First Coronavirus Response Act. The CARES Act confirms that the caps on Emergency Paid Sick Leave and paid Emergency FMLA Extension Leave provided under the newly-enacted Families First Coronavirus Response Act are to be applied on a per employee basis. (§§ 3601, 3602)
Stipulations on Mid-Size Business Loans. The CARES Act also provides for loans to mid-size businesses with 500 to 10,000 employees if their business has been impacted by the uncertainty of economic conditions. However, there are important requirements for accessing such loans that employers should consider before signing up. For example, the loans must be used to retain at least 90% of the recipient’s workforce at full compensation and benefits until September 30, 2020, and if the recipient has recently implemented layoffs, the recipient must restore at least 90% of the workforce that existed on February 1, 2020. Also, the business must agree that it will not abrogate existing collective bargaining agreements for the term of the loan plus two years after completing repayment, and will remain neutral in any union organizing effort for the term of the loan. This latter requirement means that, if the business is the target of union organizing activities during the term of the loan, the employer cannot oppose such union organizing activities, which significantly increases the likelihood of unionization.
Paycheck Protection Program. The Act also creates a loan program administered by the Small Business Administration for small businesses that can use the funds to retain workers and meet payroll obligations, among other uses. You can find information from our law firm about this program here.