Tag: CARES Act

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President extends PPP loan forgiveness, signs Paycheck Protection Program Flexibility Act of 2020

CARES Act, coronavirus

The Paycheck Protection Program Flexibility Act of 2020, which President Trump signed into law on June 5, makes several key business-friendly changes to the small business loans made under the CARES Act’s Paycheck Protection Program.

Specifically, this Act:

  • Extends the “covered period” borrowers have to use PPP loans and qualify for loan forgiveness from the original eight weeks to the earlier of 24 weeks from loan disbursement or Dec. 31, 2020.
  • Extends until Dec. 31, 2020, the CARES Act’s June 30, 2020, deadline to rehire employees and reverse salary cuts of more than 25 percent.
  • Exempts borrowers from the reduction in loan fordeadline to rehire employees and reverse salary cuts of more than 25 percent. giveness because of a reduction in employee headcount if the borrower is able to document in good faith that from Feb. 15 through Dec. 31, 2020, the borrower: (a) was unable to rehire employees who had been employed on Feb. 15 or hire similarly qualified employees for unfilled positions by December 31, 2020; (b) was unable to return to the same level of business activity at which the borrower was operating pre-Feb. 15 as the result of compliance with requirements, guidelines, standards for sanitation, social distancing, or other COVID-19 employee or customer safety issues.
  • Lowers the threshold for the use of PPP loan funds for payroll purposes from 75 percent to 60 percent.
  • Allows for an agreed-upon extension of PPP loan repayment from two years to five years.
  • Eliminates the CARES Act’s restriction on the deferral of payroll taxes for employers who receive PPP loan forgiveness.
As Suzanne Lucas (aka the Evil HR Lady) points out, this Act’s biggest benefit might be the gift of time it gives to employers to staff up. “Hiring is always a difficult part of running a business, and the terms of the original PPP put pressure on companies to act quickly.” She added, “If you don’t need someone working yet, you can wait until you do need someone in the position.”
Suzanne is correct. Even in the best of circumstances, hiring is time-consuming and difficult.
The current circumstances are far from best, and businesses that took PPP money felt tremendous pressure to hire by June 30 to qualify for loan forgiveness. Employees hired in haste often lead to mistakes. These amendments offer significant relief through the benefit of added time.
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Bringing your employees back to work when unemployment pays them more than you do

CARES Act

At 2 p.m. on Monday, April 27, Ohio Gov. Mike DeWine will announce his plan for restarting Ohio’s economy (currently expected to begin May 2).

One huge issue is how businesses can motivate their employees to return to work if unemployment is paying them more than you will.

Including the CARES Act’s $600 unemployment bonus that expires July 31, an employee earning maximum unemployment benefits from the state of Ohio earns $1,247 per week, the equivalent of an hourly rate of $31.17 or a yearly salary of nearly $65,000. My guess is that most of your employees do not earn this much. It’s one of the worst unintended consequences of the CARES Act — employees are making more money unemployed than they did employed.

Thus, how do you incent your employees to come off unemployment and return to work, either because you are reopening or you need to end their furlough? You can either use the stick or the carrot.

The stick? Employees who refuse return-to-work offers might be disqualified from collecting further unemployment benefits (unless their refusal is because of coronavirus), and you can advise employees that if they refuse a recall that you will be asking the state to terminate their benefits. You can also advise that with unemployment at record-high numbers, there are plenty of people waiting to fill their jobs, and there is no guarantee a job will be waiting for them when the CARES Act’s $600 expires at the end of July.

The carrot? Employees might need a financial incentive to come off unemployment and return to work. Temporary hazard pay? A return-to-work incentive bonus? A longer-term retention and/or attendance bonus for employees who report by a certain date and remain employed through Dec. 31 (or some other target date)? The possibilities are endless, but the reality is that certain employees will need some amount of financial incentive to come back to work.

Which tool you use will depend on which you think will best motivate your employees and your financial ability to pay for the carrot. You may have to do something, however, as this reality is that some (many?) of your employees might be too short-sighted to realize that a job in the long-term is better than few extra dollars in the short-term.

I’ll be discussing this and other issues related to restarting your business in the world of coronavirus, Tuesday, April 28, at 11 a.m. on Zoom. Pre-registration is required, and space is limited: https://us02web.zoom.us/meeting/register/tJYvdumpqjgiGdCQ3TtYZpmSsIpugmdQhTCs

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Coronavirus Update: We CARES about unemployment

COVID-19, coronavirus, mask

The past two weeks have seen a record 10 million new unemployment claims. This number does not even include many of the millions more who have had their hours or wages cut as businesses continue to struggle with the realities of operating in a world turned upside down by coronavirus. Sadly, we should expect this situation to get a lot worse before it starts to get better.

Thankfully for each worker unemployed or underemployed as a result of coronavirus, the CARES Act provides significant financial relief. It contains the following seven unemployment expansion and enhancement provisions.

1. Pandemic Unemployment Compensation (FPUC) — This program provides funding for an additional $600 per week in unemployment benefits through July 31, 2020, for any individual who becomes unemployed, partially unemployed, or unable or unavailable to work or telework because of any of the following coronavirus related reasons:

    • The individual has been diagnosed with coronavirus or is experiencing symptoms of coronavirus and seeking a medical diagnosis.
    • A member of the individual’s household has been diagnosed with coronavirus.
    • The individual is providing care for a family member or a member of the individual’s household who has been diagnosed with coronavirus.
    • A child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the coronavirus public health emergency and such school or facility care is required for the individual to work.
    • the individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the coronavirus public health emergency.
    • The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to coronavirus.
    • The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the coronavirus public health emergency.
    • The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of coronavirus.
    • The individual has to quit his or her job as a direct result of coronavirus (which one could interpret as covering employees who quit out of fear of contracting coronavirus).
    • The individual’s place of employment is closed as a direct result of the coronavirus public health emergency.

Additionally, this program contains a non-reduction rule, which prohibits states from changing how they compute regular unemployment benefits to reduce the average weekly benefit amounts or the number of weeks of benefits payable to impacted employees.

In Ohio, this means that a minimum wage employee with no dependents would see his weekly unemployment benefit increase from $171 to $771 (an annualized salary of $40,092), and an employee with three dependents maxed out on unemployment would see his weekly benefit increase from $647 to $1,247 (an annualized salary of $64,884).

Because of this substantial increase, I am worried that many employees will decide that they are better off (either financially or for health-related reasons) quitting their jobs and collecting unemployment, leaving essential employers with huge labor gaps to fill to maintain basis minimum operations. For this reason, essential employers should be communicating with their employees on a daily basis about all of the steps they are doing to ensure, as best as possible their employees’ health and safety.

2. Pandemic Unemployment Assistance (PUA) — This program provides unemployment compensation through December 31, 2020, for individuals who are self-employed, seeking part-time employment, or who otherwise would not qualify for regular unemployment benefits because of one of the above-listed coronavirus related reasons.

3. Emergency unemployment relief for governmental entities and non-profit organizations — This program provides federal reimbursement of state unemployment payments made to governmental entities and non-profit organizations through December 31, 2020, regardless of whether the unemployment claim is related to coronavirus.

4. Temporary full federal funding of the first week of compensable regular unemployment for states with no waiting week — Through December 31, 2020, states that waive any waiting periods and provide unemployment benefits to applicants during their first week of unemployment will receive 100 percent federal funding for benefits paid during that initial week.

5. Emergency state staffing flexibility — States as provided flexibility through December 31, 2020, to modify their unemployment compensation laws and policies with respect to work-search requirements, waiting weeks, good cause standards, and employer experience rating. Ohio, for example, has eliminated its work-search requirement and waiting periods, and is not counting coronavirus related unemployment claims against an employer’s experience rating.

6. Pandemic Emergency Unemployment Compensation (PEUC) — This program provides up to 13 weeks of additional unemployment benefits through December 31, 2020, for individuals who have exhausted all rights to regular unemployment compensation under state or federal law or have no rights to regular unemployment compensation under any other state or federal law. The law requires individuals seeking PEUC benefits to be able to work, available for work, and actively seeking work. States, however, are required to offer flexibility in meeting the “actively seeking work” requirement for individuals unable to search for work because of coronavirus, including illness, quarantine, or movement restrictions.

7. Temporary financing, agreements, and grants for Short-Time Compensation (STC) — This program provides pro-rated unemployment benefits for up to 26 weeks through December 31, 2020, to employees who have had their hours reduced in lieu of layoff.

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Coronavirus Update: Employers, PLEASE don’t take your employees’ stimulus checks

CARES Act

One employer is an anomaly, two is a trend that must be stopped.

Last week, I nominated for the Worst Employer of 2020 an unnamed national restaurant chain that was reported to be stealing (the company called it “absorbing”) its employees’ CARES Act stimulus checks by reducing their scheduled hours in a pro-rata amount.

Now, another employer has been outed with similar plans.

According to KXAN, an unnamed national company advised its employees that it would be preemptively deducting funds from their paychecks based on the amount each employee anticipated receiving in their stimulus check.

The worker said his company emailed a form titled “Employee Acknowledgement of ‘Government Assistance’ Pay Reduction” to some staffers on Wednesday. “In response to the economic crisis that is affecting all of us due to the coronavirus pandemic…(company name redacted) are hereby enacting the Employee Emergency Compensation Fund,” the letter stated.

The agreement would put workers under a “temporary compensation reduction that is in line with the assistance that it receives from the federal government related to the COVID-19 pandemic.” By signing the agreement, the company’s employees would have their paychecks between April 6 and April 20 cut by 100% of any money received under the stimulus bill.

The company would also take half of the $500 stipend allotted for dependents under the bill.

The Lost Ogle identified the company as Oklahoma City-based ImageNet Consulting, and further reported that after public outcry it has delayed the plan. The company’s President/CEO Pat Russell sent the following email to his employees:

As a result of the few inquiries we have this week, I wanted to make the following points of clarification with regard to the Employee Emergency Compensation Program that was announced and specifically for those employees who have not already sacrificed with immediate pay reductions.

First, the plan will not go into effect until the earliest of April 6th and, there will be no pay reduction for the paycheck received on that date.

Second, it appears that Congress is very close to passing sweeping legislation to provide relief to companies like ours and to individuals. … If we can determine ways to minimize the amount of sacrifice that we have asked everyone to make, we will do so and amend the plan accordingly.

That last paragraph is his email is really important. The CARES Act contains key payroll and other relief to small and mid-size businesses, known as the Paycheck Protection Program. It allocates $350 billion to businesses with less than 500 employees through low interest (and, in some cases, fully forgivable) loans to help pay payroll, rent and utilities.

There are ways to keep your business operational and solvent without “absorbing” your employees’ stimulus checks. They need that money to live. Moreover, in the very same Act that makes those stimulus checks available, the government also makes available for businesses Paycheck Protection Program loans. Use those loans to help your business stay afloat during these trying and difficult times. Don’t absorb the money that’s meant specifically for your employees. It’s just plain wrong.

For more information on how your business can obtain funds through the Paycheck Protection Program, contact me and I’ll put you in touch with an attorney on our Coronavirus Response Team.