Emergency Loans, Expanded Unemployment Pay
On March 27, 2020, after many sectors of the economy have come to a virtual standstill and millions of Americans have filed for unemployment as a result of the coronavirus, the United States Congress passed, and President Trump signed, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in its effort to respond to the COVID-19 pandemic.
The CARES Act provides various forms of economic assistance to employers to address the economic effects of the pandemic, although this assistance is subject to certain conditions and restrictions.
This alert summarizes the significant provisions of the CARES Act that affect employers and employees.
Expanded Unemployment Benefits for Individuals
The CARES Act includes expanded rights to unemployment compensation for individuals who are unemployed due to various reasons related to COVID-19. Notably, the CARES Act provides a special unemployment compensation program for gig workers, independent contractors, and self-employed individuals, and an individual whose work histories might not otherwise qualify.
The Act also provides for payments of an additional $600 per week in unemployment compensation benefits above and beyond what an individual is otherwise entitled to under state law, for up to four months. Further, the CARES Act extends an individual’s ability to receive unemployment benefits by an additional 13 weeks, through December 31, 2020. However, individuals cannot receive unemployment compensation simultaneously they are receiving paid sick leave from an employer.
The federal government has incentivized the states to waive the one-week waiting period by funding the costs. In addition, the federal government will fund expanded unemployment benefits.
The CARES Act includes some favorable tax provisions for employers as it concerns their employees. Certain provisions are limited to “eligible employers,” while other provisions are more generally applicable.
What Should Businesses Do Immediately?
Every business should contact its banker(s). The expanded SBA Section 7(a) loans, sometimes referred to as the “Paycheck Protection Program,” will be administered by banks and other financial institutions.
Evaluate, with its banker and potentially other professional advisors, whether it qualifies for expanded SBA Section 7(a) and/or EIDL loans (see below for more information). Franchisors not in the restaurant or hospital space (Sector 72) should consider applying to be on the SBA’s franchise directory.
Assemble company documents, such as certificates or articles of incorporation, bylaws, operating agreements, and certificates of good standing (make sure that the company is in good standing).
Assemble financial information of a type that borrowers would ordinarily expect a lender to want to review, including financial statements, tax returns, and payroll information. As you will see below, payroll information is of particular importance for the expanded SBA Section 7(a) loans.