The CARES Act: What Employers Need to Know
March 30, 2020
By: Mark H. Dellinger and Lucero Tennis Kieffer
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), commonly known as “Phase Three,” was signed into law. The CARES Act provides $2.2 trillion in direct financial assistance to individuals, businesses, and state and local governments. In addition to providing substantial resources for small businesses, the CARES Act also provides a broad range of financial assistance and other relief for employers and employees affected by the COVID-19 pandemic. The CARES Act greatly expands the eligibility for and enhances the amount of unemployment benefits. This is critical, given the rise in unemployment claims within the last few weeks. According to the U.S. Department of Labor, over 3.2 million Americans filed for unemployment during the week of March 21—an unprecedented increase of over 3 million from the previous week. This alert outlines the provisions within the CARES Act that are particularly relevant to employers, such as the revisions to the Families First Coronavirus Response Act (the “FFCRA”), provisions related to unemployment insurance, and union-friendly conditions imposed on emergency loans available to mid-sized businesses.
Revisions to the Families First Coronavirus Response Act
The FFCRA provides a broad range of economic relief for both businesses and families. The FFCRA, however, contained some ambiguity as to the obligations imposed on employers. In an attempt to provide further clarification, the CARES Act made a few changes. Below is a summary of the most significant changes.
- The CARES Act clarifies that a covered employer is not required to pay more than $200 per day and $10,000 in the aggregate for each eligible employee who takes leave under the Emergency Family and Medical Leave Expansion Act.
- Pursuant to the CARES Act’s revisions, expanded family and medical leave is now available to employees who (1) were laid off after March 1, 2020, (2) had worked for the employer for at least 30 of the last 60 days prior to the layoff, and (3) were rehired, in addition to employees who worked for the employer for the last 30 days.
- The CARES Act also clarifies that a covered employer is not required to pay more than $511 per day and $5,110 in the aggregate for each eligible employee who takes leave under the Emergency Paid Sick Leave Act due to the employee’s own illness or quarantine. However, this amount drops to $200 per day and $2,000 in the aggregate for each employee who takes leave to care for an individual subject to quarantine or care for a child whose school or place of care is closed, or whose child care provider is unavailable due to COVID-19 related reasons.
Federal Expansion of Unemployment Benefits
The CARES Act provides greater benefits to those individuals who become unemployed for COVID-19 reasons. However, in order to take advantage of these benefits, states will have to enter into specific agreements with the U.S Department of Labor.
Types of Benefits:
Expanded Coverage to Individuals Not Traditionally Covered: Section 2102 of the CARES Act creates a temporary Pandemic Unemployment Assistance program that provides benefits to those individuals who (i) have exhausted their unemployment benefits, (ii) are not eligible for pandemic emergency unemployment compensation under Section 2107 (discussed below), and (iii) are not traditionally eligible for unemployment benefits, e.g., self-employed workers, independent contractors (gig workers), and those with a limited work history. These benefits will cover those unemployed between January 27, 2020, and December 31, 2020, due to COVID-19 related reasons.
Under the CARES Act, a “covered individual” must self-certify that he or she is otherwise able to work and available for work, except that the individual is unemployed, partially unemployed, or unable or unavailable to work because:
- the individual is diagnosed with COVID-19;
- the individual has symptoms of COVID-19 and is seeking a medical diagnosis;
- a member of the household has been diagnosed with COVID-19;
- the individual is providing care to a family member or household member who has been diagnosed with COVID-19;
- a child or other person in the household for which the individual is the primary caregiving is unable to attend school or daycare due to COVID-19 related reasons;
- the individual is unable to reach his or her place of employment due to a quarantine order;
- the individual is unable to reach his or her place of employment because a health care provider advised the individual to self-quarantine;
- the individual is scheduled to begin work and does not have a job or is unable to reach the job as a direct result of COVID-19;
- the individual has become the “breadwinner” because the head of the household has died as a direct result of COVID-19;
- the individual was required to quit his or her job as a direct result of COVID-19;
- the individual’s place of employment closed as a direct result of COVID; or
- the individual is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for unemployment benefits under another state’s unemployment program.
Notably, the CARES Act excludes those individuals who can telework with pay or who are receiving paid sick leave or other paid leave benefits.
Expanded Coverage to 39 Weeks: Section 2107 of the CARES Act provides an additional 13 weeks of unemployment benefits through December 31, 2020, to help those who remain unemployed, so long as the individual is able to work, available to work, and actively seeking work (unless they are unable to do so as a result of COVID-19 illness, quarantine, or movement restriction). Additionally, the terms and conditions that apply to regular unemployment compensation - including those terms and conditions relating to availability for work, active search for work, and refusal to accept work - still apply to claims for pandemic emergency unemployment compensation, although states are given flexibility in adjusting these requirements.
Additional Compensation for Impacted Workers: In addition to the amount of unemployment benefits to which the covered individual was previously entitled to under his or her state’s unemployment program, a covered individual will now receive an additional $600 per week. This sizable increase is fully funded by the federal government and available until July 31, 2020. Further, these increased payments will not be considered in determining an individual’s eligibility for Medicaid and CHIP benefits.
Temporary Federal Funding of the Waiting Week: Prior to the COVID-19 pandemic, many states imposed a one-week waiting period. During this period, individuals would not receive unemployment benefits. To help encourage states to pay employees as soon as they become unemployed, the federal government is fully financing the first week of benefits through December 31, 2020 for states that choose to lift this one-week waiting period.
Watch Out for the Strings Attached to the Financial Assistance for Mid-Sized Businesses
Section 4003 of the CARES Act provides for financial assistance to eligible private businesses and nonprofit organizations with between 500 and 10,000 employees. However, employers who want to obtain these emergency loans need to be aware of the conditions that are attached. For instance, mid-sized employers who receive these loans will be not be able to outsource or offshore jobs for the term of the loan and for 2 years after completing repayment of the loan. In addition, employers receiving these loans will not be able to eliminate existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan. More problematically, employers receiving these loans must remain neutral in any union organizing efforts for the term of the loan. This condition infringes on employers’ free-speech rights and, while this requirement could be subject to legal challenge, employers need to factor this condition into their decision-making process about whether to seek loans under the CARES Act.