This Blog addresses federal relief and benefits available to small businesses during the COVID-19 pandemic.
Families First Coronavirus Response Act[1]
On March 18, 2020, the Families First Coronavirus Response Act (“Act”) was signed into law and requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. The following provisions apply from April 1, 2020 to December 31, 2020.
The Act applies to certain public employers, and private employers with fewer than 500 employees. Small businesses with fewer than 50 employees may qualify for an exemption from the requirement to provide certain paid sick leave if the requirements would jeopardize the viability of the business.[2]
Small businesses (fewer than 50 employees) may elect this exemption by demonstrating how they meet the criteria set forth by the U.S. Department of Labor. Small business is exempt from mandated paid sick leave or expanded family and medical leave only if:
- The employer employs less than 50 people
- The leave is requested because the child’s school or place of care is closed or childcare provider is unavailable due to COVID-19-related reasons and the employer offers compensation for childcare, AND
- An authorized officer of the business has determined that at least one of the three following conditions is satisfied:
- The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; OR
- There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
For non-exempt businesses, all employees are eligible for two weeks of paid sick time for specific reasons related to COVID-19.
Under the Act, employees who have been employed for at least 30 days prior to their leave request may be eligible for up to an additional ten weeks of partially paid expanded family and medical leave if caring for their child whose place of care or school is closed.
The Act will help by giving all business with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.
| Reason for Leave | Duration of Leave | Calculation of Pay | |
| Employee –
1. Is subject to federal, state, or local quarantine or isolation order related to COVID-19; |
Full time employee | Part time employee | Either regular rate of pay or the applicable minimum wage, whichever is higher, up to $511 per day, and $5,110 in the aggregate (over a 2-week period). |
| 80 hours | Average # of hours worked over 2-week period | ||
| 2. Has been advised by a health care provider to self-quarantine related to COVID-19; | 80 hours | Average # of hours worked over 2-week period
|
Either regular rate of pay or the applicable minimum wage, whichever is higher, up to $511 per day, and $5,110 in the aggregate (over a 2-week period). |
| 3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis; | 80 hours | Average # of hours worked over 2-week period
|
Either regular rate of pay or the applicable minimum wage, whichever is higher, up to $511 per day, and $5,110 in the aggregate (over a 2-week period). |
| 4. Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2); and | 80 hours | Average # of hours worked over 2-week period
|
2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period). |
| 5. Is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19 | for up to 12 weeks of leave (two weeks of paid of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave) at 40 hours a week | # of hours that the employee is normally scheduled to work over that period | 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period – two weeks of paid sick leave followed by up to 10 weeks of paid expended family and medical leave). |
| 6. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury | 80 hours | Average # of hours worked over 2-week period
|
2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period). |
The CARES Act
Coronavirus Aid, Relief, and Economic Security (CARES) Act is the $2 trillion package Congress recently passed to provide economic relief for Americans, businesses and the health care industry.[3] CARES provides for paycheck protection, loan programs, and employment retention tax credits.
Paycheck Protection
Under CARES, small businesses that maintain workers on payroll may have small business loans forgiven. The program provides small businesses with funds to pay up to 8 weeks of payroll costs, including employee benefits. The funds can also be used to pay interest on mortgages, rent, and utilities. Small businesses with 500 or fewer employees are eligible, including:
- Any small business concern that meets U.S. Small Business Administration’s size standards – either the industry based sized standard or the alternative size standard
- Any business, 501(c)(3) non-profit organization, 501(c)(9) veterans’ organization, or Tribal business concern[4] with the greater of:
- 500 employees, or
- That meets the U.S. Small Business Administration industry size standard of more than 500[5];
- Any business with a NAICS Code[6] that begins with 72 – accommodations and food services industry – that has more than one physical location and employs less than 500 per location;
- Self-employed individuals, sole proprietorships, and independent contractors.[7]
The program fully forgives loans when used for payroll costs, interest on mortgages, rent, and utilities – but at least 75% of the forgiven amount must be used for payroll. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.[8]
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time employees decline or if salaries or wages decrease.
Application times will stagger depending on the entity.
- April 3, 2020 – small business and sole proprietorship
- April 10, 2020 – independent contractors and self-employed individuals
The Small Business Administration recommends applying as quickly as possible because there is a funding cap.[9] The Paycheck Protection Program will be available through June 30, 2020
Economic Injury Disaster Loan Assistance Program
The CARES Act expands the long-standing Economic Injury Disaster Loan Program (EIDL).
The following entities that have suffered substantial economic injury caused by a disaster are eligible, provided they were in existence on January 31, 2020:
- Businesses with fewer than 500 employees;
- Cooperatives, ESOPs, and tribal small business with fewer than 500 employees;
- Sole proprietors;
- Independent contractors; and
- Most private nonprofits[10].
The loan parameters are:
- The maximum EIDL is a $2 million working capital loan at a rate of 3.75% for business and 2.75% for nonprofits up to a 30-year term;
- Payments on COVID-19 EIDL loans are deferred for one year;
- Up to $20,000 can be approved without a personal guarantee;
- Approval can be based on a credit score and no first-year tax returns are required;
- Borrowers do not have to prove they could not get credit elsewhere;
- No collateral is required for loans up to $25,000 or less:
- For loans of more than $25,000, general security interest in business assets will be used for collateral instead of real estate;
- The borrowers must allow the U.S. Small Business Administration to review their tax records.[11]
In response to the COVID-19 pandemic, small business owners are eligible to apply for an Economic Injury Disaster Loan advance for up to $10,000. The advance will provide temporary relief to businesses that have a loss of revenue with funds available after successful application. This loan advance will not have to be repaid.[12]
This is for any small business with less than 500 employees – including sole proprietorships, independent contractors, and self-employed persons – private non-profits or 501(c)(19) veterans organizations affected by COVID-19. Businesses in certain industries with more than 500 employees may be eligible if they meet the SBA size standards.[13]
There is no obligation to repay the grant or be approved for an EIDL loan. However, if the business can secure a payment protection loan, the $10,000 grant will be subtracted from the forgiveness amount. The paycheck protection program created by the CARES Act prohibits borrowers from taking out two loans for the same purpose.[14]
Employment Retention Tax Credit
The new employee retention tax credit is for employers who are closed, partially closed, or experiencing significant revenue loss as a result of COVID-19.[15] The tax credit is a 50% tax credit for the first $10,000 of compensation, including employer portion of health benefits, for each eligible employee.[16]
- Compensation does not include paid sick or family leave for which the employer is reimbursed under the Families First Coronavirus Response Act.
- The credit only applies to wages paid after March 12, 2020 and before January 1, 2021.
Eligible employers, including non-profits carrying on a trade or business in 2020, must:
- Have operations partially or fully suspended as a result of orders from a government authority due to COVID-19; or
- Experience a decline in gross receipts by more than 50% in a quarter compared to the same quarter in 2019 – eligibility ends when gross receipts in a quarter exceed 80% compared to the same 2019 quarter.
Employers who receive a paycheck protection loan are not eligible for a tax credit. Tax exempt organization under 501(c) of the tax code must have all operation of the organization partially or fully suspended to get the tax credit.
| Employees that count toward Eligibility
|
|
| Employers with > 100 employees | Full time employees – being paid but not providing service due to either a full-blown shutdown or a reduction in gross receipts |
| Employers with < 100 employees or fewer full-time employees | All employees, regardless of whether those employees are providing services |
Employers may not claim the same employee for this credit and work opportunity tax credit for the same period or credit under Paid Family and Medical Leave.[17]
The refundable credit is applied against the employer portion of payroll taxes. The treasury department will develop a process for employers to receive an advance payment for the tax credit.
What to Expect Next
As the COVID-19 pandemic evolves, the government is providing aid to ensure the success of businesses and employees. There are still unanswered questions regarding what we can expect in the post pandemic economy. For small PT practices and businesses there is federal relief to maintain revenue and keep fellow PTs employed. PTs practicing as sole proprietors or independent contractors are also able to get aid currently.
If you have any additional question about federal aid and how COVID-19 is affecting PTs, please contact our expert legal team at Simas & Associates. Please call us at 888-999-0008 or email us at info@simasgovlaw.com.
[1] https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave.
[2] https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave.
[3] S. 3548 – 116th Congress (2019-2020).
[4] 15 USCS § 657a subsection (b)(2)(c).
[5] 13 CFR § 121.201.
[6] www.naics.com (North American Industry Classification System used by the US, Canada and Mexico to classify business by industry).
[7] https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp.
[8] https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp.
[9] Apply through any existing Small Business Administration 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
[10] S.3548 § 1102(7)(a).
[11] Id.
[12] Id. at § 1105.
[13] 13 CFR § 121.201.
[14] www.uschamber.com/sbloans.
[15] S. 3548 §2201 et seq.
[16] Id.
[17] https://www.uschamber.com/report/guide-the-employee-retention-tax-credit; see also 26 USC § 45S.