Business and economic disruptions due to the coronavirus pandemic are ongoing, and we want to keep you informed on the latest legal developments. Provided below are links to our employment flowcharts intended to help employers navigate issues arising from the FFCRA.

Authored by Cris Jones and Asasia Pierce

The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law on Friday, March 27, and includes coronavirus (COVID-19) relief applicable to eligible retirement plans (including 401(k), 403(b), and governmental 457 plans and IRAs) and for the benefit of participants who are coping with the COVID-19 pandemic. This update summarizes two sets of key changes.

First, the CARES Act allows participants to take “coronavirus-related distributions” of up to $100,000 in the aggregate from their retirement plan accounts sponsored by the same controlled group employer. A participant may take such distributions between now and the end of 2020 if the participant or their spouse or dependent is diagnosed with COVID-19 by a test approved by the CDC or if they experience adverse financial consequences as a result of a quarantine, furlough, layoff, or reduction of hours due to COVID-19, or other related financial hardships (namely, being unable to work due to lack of child care due to COVID-19, or the closing or a reduction in hours of a business owned or operated by the individual due to COVID-19).


Continue Reading CARES Act Expands Retirement Plan Distributions and Eases Plan Loan Limitations for Participants Experiencing Coronavirus-Related Events

On Friday afternoon the House of Representatives passed and President Trump signed the CARES Act, an approximately $2 trillion relief measure to address the COVID-19 outbreak and economic fallout. The law includes approximately $350 billion for “Paycheck Protection Program” loans (PPP Loans) to support businesses in making payroll and other essential payments during the crisis.  PPP Loans are separate from Economic Injury Disaster Loans (EIDLs) made by the Small Business Administration (SBA). Included below is a high-level summary of PPP Loans and EIDLs. For a side-by-side comparison of PPP Loans and EIDLs, please see this matrix.

PPP LOANS

  1. What are PPP Loans?

PPP Loans are an extension of the SBA’s loan guarantee program, also known as the 7(a) program. PPP Loans will be made by approved SBA certified lenders and are 100% guaranteed by the federal government. They will be available through June 30, 2020. Borrowers will need to certify that the uncertainty of current economic conditions makes the loan necessary to support their ongoing operations and that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.

  1. What terms will PPP Loans have?
  • Maximum amount of PPP Loan equal to the lesser of (i) 2.5x average monthly payroll cost during the year prior to the making of the loan and (ii) $10 million.  For companies that were not in business during the period beginning on February 15, 2019 and ending on June 30, 2019, this can be calculated by reference to the average monthly payroll for the period from January 1, 2020 to February 29, 2020.  The average monthly payroll cost will exclude (i) compensation in excess of $100K per individual and (ii) compensation paid to employees that reside outside of the U.S.
  • Interest rate capped at 4% and loan fees waived. Payments deferred between 6 – 12 months.
  • If not forgiven after one year (see below), the PPP Loans will have a maximum term of 10 years.
  • No collateral or personal guaranties required.


Continue Reading Government Financing Options for Companies Impacted by COVID-19

Authored by Eliot Kaplan

Earlier today President Trump signed into law the CARES Act, an estimated $2 trillion economic stimulus package.  The full text may be found: https://www.congress.gov/bill/116th-congress/house-bill/748/text. The key aspects are:

  • $250 billion to make unemployment insurance available to more categories of workers and to extend the duration of unemployment benefits from 26 weeks to 39 weeks and increase benefits $600 a week for four months.
  • $301 billion in direct payments to households.
  • $349 billion in loans to small businesses, with the amount spent on payroll, rent or utilities converting into grants that don’t have to be repaid.
  • $500 billion for loans, loan guarantees or other aid to businesses, states and municipalities—including the possibility that the government will take direct equity stakes in distressed companies. Of the total, $29 billion is set aside for airlines, and $17 billion for national security businesses, such as Boeing. The remaining $454 billion would go to backstop losses in lending facilities by the Federal Reserve.


Continue Reading President Trump Signs CARES Act Into Law

The Coronavirus Aid, Relief, and Economic Security (CARES) Act has now passed the Senate and the House of Representatives and is reportedly headed to the President’s desk for signature. This post summarizes the key employment-related provisions of the bill.

The “Paycheck Protection Program”

The CARES Act would increase government guarantees for SBA loans to 100% through December 31, 2020. Notably, it specifies that such loans may be used for business operating costs including payroll, mortgage interest and rent, employee salaries, utilities, and costs associated with group benefits and insurance premiums and paid sick or medical leave periods. This is a key provision, given the new paid leave requirements implemented via the FFCRA. A borrower could not, however, receive this assistance along with that afforded by an economic injury disaster loan from the SBA. The maximum loan amount would be $10 million through December 31, 2020, but the loan amount is tied to actual payroll costs of the borrower. To be eligible, borrowers must attest that the loan is required due to business exigencies related to COVID-19. Finally, the proposal would allow complete deferment of section 7(a) payments for at least six months and at most one year.


Continue Reading The CARES Act: Key Employment Law Provisions

The Coronavirus Aid, Relief and Economic Security (CARES) Act (H.R. 748) has passed the Senate unanimously and the House of Representatives by a voice vote. The Act is headed to the President’s desk perhaps as early as today, Friday, March 27, 2020. Employers intending to apply for financial support via the Coronavirus Economic Stabilization Act of 2020 provisions must become familiar with the various attendant labor law requirements—including commitment to existing collective bargaining agreements and potentially to neutrality in union organizing efforts, depending on the size of the enterprise.

Section 4003 of the Act provides the Secretary of the Treasury with the authority to provide up to $500 billion in “loans, loan guarantees, and other investments in support of eligible businesses, States, and municipalities….” The Act also provides the Secretary of the Treasury with significant discretion to determine the terms of such loans but requires him to publish “procedures for application and minimum requirements” within 10 days after the date of enactment.


Continue Reading CARES Act Includes Significant Labor Law Commitments Among Requirements for Recipients of Financial Support