CARES Act & FFCRA | What you need to know

CARES Act & FFCRA | What you need to know

Here’s what you need to know about the Coronavirus Aid Relief and Economic Security Act and the Families First Coronavirus Response Act.

We know that there is a lot of information circulating about new legislation. We contacted our trusted partner and legal advisor, Greg Meihn of Foley & Mansfield to provide you a combined summary of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), enacted March 27, 2020 and the Families First Coronavirus Response Act (“FFCRA”), enacted March 18, 2020. 

As these laws aim to protect businesses, employers, employees and citizens of our country during unprecedented circumstances, we want to provide you with the following summaries applicable to you, as employers.  There are some new requirements and also, potentially, aid available to you under these pieces of legislation.  Implementation of these laws is ongoing and further guidance is expected from appropriate governmental agencies in the coming month.  As of now, you can find information on how they may affect you in the summaries below.

CARES Act – Coronavirus Aid, Relief and Economic Security Act

The CARES Act provided some good news for employers struggling with the economic impact of the COVID-19 crisis.  Two of the major pieces of assistance are business loans and potential forgiveness of that debt and the expansion of unemployment.

1.      Business Loan Forgiveness and Credits

First, the CARES Act permits small- and medium-sized business to receive federal loans, which under the right circumstances, may be completely forgivable, to cover payroll and other expenses.

A.     “Paycheck Protection” Loans

Now that the CARES Act has been signed in to law, loans administered by the Small Business Administration (“SBA”) can be issued by lenders to help employers continue to cover payroll costs and other expenses during this crisis.  To date, the covered period for loans is February 15, 2020 to June 30, 2020.

Who Can Apply for These Loans:

These loans are available for businesses with 500 employees or less.  Note that the legislation recognizes “per physical location” in this count.  For instance, a restaurant franchisee with 1,500 employees, but not more than 500 at any one location could qualify.  “Affiliation rules” are currently waived for franchises and businesses with 500 employees or less.

How to Apply for These Loans:

Paycheck protection loans will be available immediately through SBA-certified lenders, which include many banks, credit unions, and other financial institutions.  The deadline to apply is June 30, 2020.  For the paycheck protection program, lenders can apply at any lending institution that is approved to participate in the program through the existing U.S. SBA lending program and any additional lenders approved by the Department of Treasury.

This could be the bank you already use or a nearby bank—there are thousands of banks that already qualify.  First, try calling your bank to find out if they are an SBA-approved lender.  Second, you can use SBA’s online “Lender Match” tool (   Finally, if unsuccessful that way, you can us the U.S. SBA “Small Business Development Centers” as a resource and they will assist . For information on this in your jurisdiction:

The lender will be able to provide you with the application materials.  The lender will determine eligibility (must have been operation as of February 15, 2020) and is required to make a determination with sixty (60) days of application.  You will be asked to provide documentation to support your application.

What Can These Loans be Used For:

Generally, these loans can be used for the following:  (1) payroll costs, (2) healthcare, (3) rent, (4) utilities, and (5) other debts incurred by the business.  Please note that they cannot be used to cover payments for leave under the FFCRA (discussed below).  Payroll costs include salaries, wages, commission, cash tips, payment for vacation, allowance for dismissal/separation, retirement benefits, group health care and taxes on compensation.

Amount of the Loans:

The loans are calculated based upon a formula incorporating your 2019 payroll costs.  These costs are determined on an average monthly basis for 2019 and then multiplied by 2.5, unless the amount would exceed $10,000,000.  In the latter case, the loan will be for the lesser amount.  As an example, if you have an average monthly payroll of $500,000 for 2019, then the maximum loan would be $500,000 x 2.5 = $1,250,000.  Note that interest rates for these loans are capped at 4% and lenders are not permitted to require personal guarantees, either.

Loan Forgiveness:

One of the most significant pieces of this program is that the federal government will forgive these loans, at least to an extent.  For the eight-week period from the date of origination of the loan, the government will completely forgive the debt in the amount of “qualifying costs.”  These costs include payroll costs (exclusive of wages of $100,000/employee), interest on secured debt obligations, and rent and utilities in place prior to February of 2020.  However, there are situations where the forgiveness amount may be reduced:

·       First, if the employer reduces its workforce during the eight-week period after the origination; or,

·       Second, if the employer reduces the salary or wages paid to an employee by more than 25% during the eight-week period when compared to the most recent quarter.

THERE IS AN EXCEPTION TO THESE REDUCTIONS:  If the employer either re-hires the employees that it laid off since February 15, 2020 or increases their wages back to the 25% or less reduction by June 30, 2020, then the reductions will not impact the forgiveness amount.

B.     Employee Retention Tax Credit

If an employer does not receive a “paycheck protection” loan outlined above, they may be eligible for an “employee retention tax credit.”  This tax credit provides a 50% payroll tax credit for 50% of the wages paid by employers during this crisis and applies to wages paid between March 13, 2020 and the end of the year.  This credit is available to employers whose operations were fully or partially shut down due to COVID-19 related “shut down” orders or saw their gross receipts decline by more than 50% when compared to the same quarter of the prior year.  This credit is applicable to the first $10,000 of qualified wages paid to an employee.  For those with more than 100 full-time employees, it is limited to wages paid when the employees are not providing services and for those with 100 or less, the wages may qualify whether open or subject to a shutdown order.

C.      Loans to Mid-Size Businesses

For employers classified as “mid-size”, i.e., with 500 to 10,000 employees, direct loans have been authorized under the Emergency Relief and Taxpayer protection of the CARES Act.  These loans require various certifications from the business, including:

·       The employer intends to restore at least 90% of the workforce it had as of February 1, 2020, including all compensation and benefits for those as of the same date—this must be done within four months after the public health emergency is declared over by U.S. HHS;

·       The employer will not outsource jobs for the term of the loan, not to exceed five years, and for two years after repayment;

·       The employer will not revoke any existing collective bargaining agreement for the term of the loan and for two years after completing repayment;

·       The employer will remain “neutral” in any effort to organize as union during the term of the loan.

These requirements and their impacts should be discussed with counsel prior to making these certifications.

D.     Payroll Tax Impact – Deferring Payments

One of the CARES Act benefits that may have the most immediate impact is the so-called payroll tax “holiday.”  This permits employers who have immediate cash-flow issues, to defer payment on their portion of Social Security taxes they would otherwise be obligated to pay.  While the deferred taxes would still need to be paid over the next two years (50% is required by December 31, 2021 and 50% by December 31, 2022), these deferments may provide immediate availability of funds that would have otherwise gone towards payroll taxes.

2.      Expansion of Unemployment

A.     Increase in Benefits

For employers that have been forced to make difficult decisions regarding employee retention, the CARES Act has expanded unemployment for causes related to the COVID-19 pandemic between January 27, 2020 and December 31, 2020.  For weeks of unemployment, partial unemployment or the inability to work, individuals may be entitled to unemployment compensation where they otherwise might not have been.  The weekly benefit will be equivalent to the amount determined by a particular state’s law, plus an additional $600 until July 31, 2020.

B.     Eligibility and Coverage Expansion

In terms of employees that may be eligible, self-certification is required that the employee is able to work, but is unemployed, is partially unemployed or is unable to work for one of the following reasons:

·       Individual diagnosed with COVID-19 or experiencing symptoms and seeking diagnosis;

·       Individual’s household member was diagnosed with COVID-19 or individual is caring for such a person;

·       Individual is primary caregiver and child/person is unable to attend school or work due to COVID-19;

·       Individual cannot reach place of employment because of quarantine imposed or advisement to self-quarantine;

·       Individual had to quit as a direct result of COVID-19;

·       Individual’s place of employment closed as a result of COVID-19.

Note that this expansion excludes those who might otherwise qualify if they have the ability to work remotely with pay or if they receive paid sick leave or other paid leave benefits.

FFCRA – Families First Corona Virus Response Act

A.     General

On March 18, 2020, the U.S. Government enacted FFCRA.  This Act generally requires certain employers to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19.

These provisions apply from April 1, 2020 through December 31, 2020.

Attached is a poster from the United States Department of Labor that must be displayed in the workplace.  However, given so many employees are sheltering in place and/or working remotely, distributing copies via e-mail is advised.

The FFCRA applies to all employers with fewer than 500 employees, as well as governmental employers.  This threshold is determined at the time the employee’s leave is to be taken.  Unlike the CARES Act, there is no per physical location exception.  Non-profit organizations are also not exempt from the FFCRA.

There are a few exceptions for certain small employers, employers of health care providers and first responders:

B.     Key Requirements and Provisions

There are six primary relief measures of which employers should take note:

1.      Up to 2 weeks of paid leave to all employees for certain COVID-19 related matters;

2.      FMLA expansion to provide partially paid leave for child care (where ill, school or care has been closed or care provider unavailable) due to COVID-19;

3.      Leave for employees of employers apart of multi-employer collective bargaining agreements;

4.      Tax credits equal to 100% of the FFCRA paid leave wages subject to certain caps (government employers are not entitled to these credits);

5.      Access to unemployment insurance for employees;

6.      Coverage of COVID-19 testing at no cost under health plans.

C.      Paid Sick Leave – Emergency Paid Sick Leave Act

Employers with fewer than 500 employees and government employers must provide all employees up to two weeks of paid sick leave for COVID-19 related absences for immediate use until December 31, 2020.  Length of employment is irrelevant.  Employers of certain health care providers and emergency responders may exclude such employees from this rule.

Qualifying Reasons for Paid Sick Leave:

·       Employee is subject to quarantine or isolation order related to COVID-19;

·       Employee has been advised by health care provider to self-quarantine due to COVID-19;

Qualifying Reasons for Paid Sick Leave continued:

·       Employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;

·       Employee is caring for individual who is subject to quarantine or isolation order or as above;

·       Employee is caring for a child because the school is closed, place of care is closed or care provider is not available;

Amount of Paid Sick Leave:

Full-time employees may receive up to 80 hours.  This is capped and overtime hours will not increase entitlement to additional paid leave.  For example, if an employee works 55 hours in the first week, he or she is entitled only to 25 hours the second week.

Part-time employees may receive the average number of hours of work they work over a two-week period (if it varies greatly, use the average number of hours per day over the prior six-month period).

For employees’ own care, they are to be paid the greater of their regular rate of pay* or the applicable minimum wage, capped at $511/day and $5,110 total.

For employees’ care of others, they are to be paid two-thirds of their regular rate of pay* or the applicable minimum wage, capped at $200/day and $2,000 total.

*Regular rate of pay is the average of the regular rate over a period of six months prior to the leave date or the average for each week if less than six months of employment.  Commissions and tips count.

Another way to calculate the regular rate of pay is by adding all of the employee’s compensation over the past six-months and dividing it by the sum of the hours actually worked during that time.

Significantly, intermittent leave is not required, but will only be used where the employer chooses to allow it.  Any increment is acceptable so long as the employer and employee agree.

Requiring reasonable notice is also permitted, but we are waiting further guidance from the Department of Labor on this issue.  Additionally, documentation may be requested, including name, qualifying reason and the dates of leave requested.  Other documentation permissibly requested is a self-quarantine or isolation order, or notice that a particular place of care is closed.

This information should be retained in a confidential medical file.

Employees must return to work at their next scheduled shift if the need for leave ends or they have otherwise exhausted the leave.  There is no carryover/payout on unused hours under this Act.

Implementing with Existing Policies:

All of you should have existing policies in place for sick leave.  The FFCRA obviously impacts and may conflict with those.  Here are a few quick points to keep in mind when trying to properly implement both:

·       Employees have the right to choose between using FFCRA emergency sick leave before existing paid time off benefits;

·       Employers may not require any employee to their existing paid time off benefits prior to emergency sick leave;

·       This paid sick time is in addition to time already available under an employer’s existing policies;

·       Even if employer already provided emergency paid sick leave before April 1, 2020, they still must provide up to two weeks required;

Finally, note that employees on layoff or furlough are not entitled to benefits under FFCRA until they return to work.  For example, if an employee was sent home because employer has no work and cannot pay the employee, they will not get these benefits, but should look to unemployment increases under the CARES Act.

D.     FMLA Expansion

As of April 1, 2020, employers with fewer than 500 employees and government employers are not required to provide additional FMLA leave under the FFCRA for qualifying COVID-19 related absences until December 31, 2020.

This applies to employees who have been on the job for at least 30 days with 12­­ weeks of job-protected leave.

Small businesses with fewer than 50 employees are going to be exempt, but we are awaiting further guidance from the Department of Labor on the scope of this exemption.

Eligibility for FMLA under FFCRA:

This applies to all full-time, part-time and temporary employees who have been employed for 30 calendar days.  There is no minimum number of hours worked required.  For example, an employee seeking leave on April 1, 2020 must have been on the employer’s payroll as of March 2, 2020.

Qualifying Absences for FMLA:

An employee may use this leave if the employee is unable to work (or telework) due to a need for leave to care for the employee’s child under the age of 18 if the school/place of care is closed or the child care provider is unavailable due to COVID-19 issues.

Paid and Unpaid Leave:

Generally, the first ten (10) days of this FMLA will be unpaid.  However, the remaining time off, up to 12-week maximum, must be paid at two-thirds of the employee’s regular rate.  This can be calculated the same way as referenced with paid sick leave above.

FMLA paid leave is capped at no more than $200/day and $10,000 total.

If the need for leave if foreseeable, an employee must provide notice as soon as practicable.

Employers may require some supporting documentation and information to confirm the need for this leave.  This includes employee’s name statement they are unable to work because the school or day care or care provider is closed and dates for which leave is requested.

All existing certification requirements under FMLA remain in effect for other existing forms of FMLA.

Restoration to Position:

Employers with 25 or more employees must return their employees to the same or substantially equivalent position, consistent with the previous existing FMLA rules.

Just as with paid sick leave above, employees on layoff or furlough are not entitled to expanded FMLA until they return to work.

E.      Tax Credits under FFCRA

As employers, you may receive refundable tax credits against the share of Social Security taxes equivalent to 100% of qualified paid sick leave paid for each calendar quarter for those paid out pursuant to the FFCRA.  No deduction is permitted for the amount of any such credit.

These tax credits are not available to State or local government employers, BUT they are still subject to the requirements under the FFCRA.

F.      Impact of CARES Act on FFCRA

The FFCRA was enacted prior to the CARES Act.  As a result, the government used the CARES Act to make additional changes to paid leave laws.  Luckily, most of the changes to the FFCRA by the CARES Act are clarifying in nature.

First, as a result of the CARES Act, the Department of Labor has updates its frequently asked questions about the FFCRA.  This employer resource can be found here:

Second, as noted above, the Department of Labor has clarified that employees on layoff or furlough are not entitled to benefits under the FFCRA until they return to work.

The remainder of the updates/impacts of the CARES Act on the FFCRA are incorporated in to the analysis above.

Last, as always, no discrimination or retaliation is permitted against employees for taking paid sick leave or FMLA under the FFCRA or for reporting complaints, testifying or instituting proceedings related to the law.

Employer Workplace Policies for COVID-19

In addition to the changes in the law, there are practical implications that must be considered in light of this pandemic.

To that end, we have a model form Coronavirus Workplace Policy that you as an employer can implement to guide your employees during this time and ensure that you are protected and are protecting the health, safety and welfare of your employees and business.  Also available is a “Client Certification of Lack of Exposure” form that may be used by your employees to certify their lack of exposure/risk to COVID-19.  Note that this information is absolutely confidential.  Click here to claim your policy or exposure form.

For questions regarding the information in this document or additional resources, please contact your Byars|Wright Agent.

Byars|Wright is a locally owned and operated independent insurance agency with five offices in the greater Birmingham area – including Jasper, Gardendale, Homewood, Alabaster, and Cullman – that has developed into a major provider of commercial and personal insurance. Since 1946, the agency has expanded its scope of business and delivers a wide-range of insurance products with quality coverage at competitive prices. Byars|Wright has been designated a Best Practices Agency by the Independent Insurance Agents and Brokers of America and was also named “Best Companies to Work For in Alabama” by Business Alabama in 2016, 2017, 2018. 2019. We Build People, Protect Relationships. Byars|Wright is Where Relationships Matter.

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