FFCRA UPDATE AND EMPLOYER OPPORTUNITIES AND ......2020/03/03 · FFCRA UPDATE AND EMPLOYER...

www.nexsenpruet.comFFCRA UPDATE AND EMPLOYER OPPORTUNITIES AND OBLIGATIONS

UNDER THE CARES ACT

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FFCRA UPDATE AND EMPLOYER

OPPORTUNITIES AND OBLIGATIONS

UNDER THE CARES ACT

March 31, 2020

MARK BAKKER & LAUREN DEYO


UNDER THE CARES ACT2

• Emergency Paid Sick

Leave

• Up to 80 hours

• 6 different reasons

• Subject to caps

EXPANDING PAID LEAVE FOR EMPLOYEES

• Emergency Paid FMLA

• Up to 12 weeks

• 1 reason only (child care

due to closings)

• Weeks 1-2 unpaid (but can

use paid sick leave)

• Weeks 3-12 2/3 pay

• Subject to caps

Only if under 500 employees



‣Effective: April 1, 2020

‣Expires: December 31, 2020

‣Under 500 employees “on

the day the employee’s

leave would start”

KEY DATES


UNDER THE CARES ACT

POSTINGHTTPS://WWW.DOL.GOV/AGENCIES/WHD/POSTERS

4

‣ Post by April 1

‣ Conspicuous place

‣ email or direct notice

‣ internal/external website

‣ Only current employees

‣ Effective postings



‣ Part-time Employees:

average in a 2 week period

‣Overtime (if scheduled)

‣Regular rate of pay

‣ Sick Pay capped at 80

COUNTING HOURS & CALCULATING PAY



‣ Tax Credit relief requires some

attention to documentation

‣ IRS forms and instructions

(TBD)

‣Childcare Leave: notice of

closure

DOCUMENTATION



‣Telework permitted

‣ Intermittent leave permitted

‣ COVID-19 related Sick Pay –

full day increments

‣ DOL encourages flexibility

and dialogue

INTERMITTENT LEAVE & TELEWORK



DOL EMPHASIS: LEAVE MUST BE FOR

QUALIFYING REASON

‣ DO I HAVE AVAILABLE WORK

FOR THIS EMPLOYEE,

INCLUDING TELEWORK?

‣ DOES THIS EMPLOYEE MEET 6

QUALIFYING EVENTS FOR

LEAVE?

BUSINESS CLOSURES/QUALIFYING REASONS



‣Unemployment Insurance

‣CARES Act

‣ Pre-existing leave entitlement

‣ Previous/Post-FMLA

NO DOUBLE DIPPING



‣ Fewer than 50 employees

‣ “Authorized officer” must determine:

‣ Provision of paid leave would result in

obligations exceeding revenues and

cause to cease operating

‣ Absence of employee(s) would entail a

substantial risk to financial health or

operational capabilities of business

‣ Not enough sufficient workers able,

willing, qualified and available to

perform labor or services

SMALL BUSINESS EXEMPTIONS



“Paycheck Protection

Program”

Loans for Small

Businesses

CARES ACT



‣ CARES? PPP? SBA? What are we

talking about?

‣ Who is eligible for a PPP Loan?

‣ What can the loan be used for?

‣ How will the loan be forgiven?

‣ What happens to amounts not

forgiven?

AGENDA



‣ CARES Act = Coronavirus Aid, Relief, and Economic

Security Act

‣ Signed into law on March 27, 2020

‣ $2 trillion economic stimulus

‣ $349 billion allocated to help small businesses through

the Paycheck Protection Program (PPP), which is

administered by the Small Business Association (SBA)

‣ Extension of existing SBA 7(a) loan program

‣ Goal is to keep workforce from being disrupted

‣ (Very) broadly speaking, these loans may be 100%

forgiven if borrowers maintain their payrolls during the

crisis

WHAT IS IT?



‣ A small business with fewer than 500 employees

‣ A small business that otherwise meets the SBA’s size

standards for the business’s specific industry classification

‣ A 501(c)(3) with fewer than 500 employees

‣ An individual who operates as a sole proprietor

‣ An individual who operates as an independent contractor

‣ An individual who is self-employed who regularly carries on any

trade or business

‣ A Tribal business concern that meets the SBA size standard

‣ A 501(c)(19) Veterans Organization that meets the SBA size

standard

WHO IS ELIGIBLE?



‣ Normal SBA affiliation rules do not apply

in the following instances:

‣ If your business is qualified as NAICS

code 72 (generally, the accommodation

and food services industry), the 500-

employee rule is applied on a per

physical location basis

‣ If you are operating as a franchise

‣ Or if you receive financial assistance

from a licensed Small Business

Investment Company

WHO IS ELIGIBLE? (CONTINUED)



‣ The 500-employee threshold includes all

employees:

‣ full-time,

‣ part-time,

‣ and any other status!

‣ This includes employees obtained from a

temporary employee agency, professional

employee organization, or leasing concern.

‣ Also includes employees of affiliates in most

instances.

WHO IS COUNTED AS AN EMPLOYEE?



‣ The borrower must have been in operation

before February 15, 2020 and had

employees for whom they paid salaries

and payroll taxes or paid independent

contractors.

‣ You do NOT need:

‣ Proof that you sought credit elsewhere,

and were unable to obtain it

‣ A personal guarantee for the loan

‣ Collateral for the loan

OTHER BASIC ELIGIBILITY STANDARDS:



A good faith certification that:

1. The uncertainty of current economic conditions makes the loan

request necessary to support ongoing operations

2. The borrower will use the loan proceeds to retain workers and

maintain payroll or make mortgage, lease, and utility payments

3. Borrower does not have an application pending for a loan duplicative

of the purpose and amounts applied for here

4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received

a loan duplicative of the purpose and amounts applied for here

(Note: There is an opportunity to fold emergency loans made

between Jan. 31, 2020 and the date this loan program becomes

available into a new loan)

‣ If you are an independent contractor, sole proprietor, or self-

employed individual, lenders will also be looking for certain

documents such as payroll tax filings, Forms 1099-MISC, and

income and expenses from the sole proprietorship.

WHAT ELSE WILL YOU NEED TO APPLY?



‣ Loans can be up to 2.5x the borrower’s

average monthly payroll costs from year

prior to loan, not to exceed $10 million

‣ For businesses not operational in 2019:

2.5x average total monthly payroll costs

incurred for January and February 2020

‣ For seasonal employers: 2.5x average

total monthly payments for payroll costs

for the 12-week period beginning February

15, 2019 or March 1, 2019 (decided by the

loan recipient) and ending June 30, 2019

HOW MUCH CAN A COMPANY BORROW?



1. For Employers: The sum of payments of any compensation with respect to

employees that is a:

‣ salary, wage, commission, or similar compensation;

‣ payment of cash tip or equivalent;

‣ payment for vacation, parental, family, medical, or sick leave

‣ allowance for dismissal or separation

‣ payment required for the provisions of group health care benefits, including

insurance premiums

‣ payment of any retirement benefit

‣ payment of state or local tax assessed on the compensation of the employee

2. For Sole Proprietors, Independent Contractors, and Self-Employed

Individuals: The sum of payments of any compensation to or income of a sole

proprietor or independent contractor that is a wage, commission, income, net

earnings from self-employment, or similar compensation and that is in an

amount that is not more than $100,000 in one year, as pro-rated for the covered

period

WHAT IS INCLUDED IN “PAYROLL COSTS”?



1. Compensation of an individual employee in excess

of an annual salary of $100,000, as prorated for the

period February 15, 2020 - June 30, 2020

2. Taxes imposed or withheld under chapters 21, 22,

or 24 of the Internal Revenue Code

3. Any compensation of an employee whose principal

place of residence is outside of the United States

4. Qualified sick leave wages for which a credit is

allowed under section 7001 of the Families First

Coronavirus Response Act; or qualified family leave

wages for which a credit is allowed under section

7003 of the Families First Coronavirus Response

Act

WHAT IS NOT INCLUDED IN PAYROLL COSTS?



‣ A borrower is eligible for loan forgiveness equal to the

amount the borrower spent on the following items during

the 8-week period beginning on the date of the

origination of the loan (when funds are disbursed):

‣ Payroll costs (using the same definition of payroll costs used

to determine loan eligibility)

‣ Interest on the mortgage obligation incurred in the ordinary

course of business (not principal)

‣ Rent on a leasing agreement

‣ Payments on utilities (electricity, gas, water, transportation,

telephone, or internet)

‣ The mortgage obligations, lease agreements, and

utilities described above must have been in place before

February 15, 2020.

FORGIVENESS – HOW DO I GET IT?



The amount of loan forgiveness is

reduced if there is a reduction in

the number of employees or a

reduction of greater than 25% in

wages paid to employees

FORGIVENESS AMOUNT CAN BE REDUCED:



The average number of full-time equivalent

employees per month for the eight-week period

divided by either:

‣ The average number of full-time employees per

month from February 15, 2019 –to June 30,

2019

OR, at the election of the borrower:

‣ the average number of full-time employees per

month from January 1, 2020 – February 29,

2020

‣ For seasonal employers: divide by the average

number of full-time employees per month from

February 15, 2019 – June 30, 2019

REDUCTION BASED ON EMPLOYEE COUNT:



Payroll cost – for any employee

who did not earn during any pay

period in 2019 wages at an

annualized rate of more than

$100,000, the amount of

reduction in wages that is greater

than 25% compared to their most

recent full quarter.

REDUCTION BASED ON REDUCTION IN SALARY:



Reductions in employment or wages

that occur during the period beginning

on February 15, 2020, and ending 30

days after enactment of the CARES

Act shall not reduce the amount of

loan forgiveness if by June 30, 2020

the borrower eliminates the reduction

in employees or reduction in wages.

BUT WAIT! THERE IS THE OPPORTUNITY TO

“CURE” THESE REDUCTIONS:



The borrower must submit a formal application for

forgiveness and provide the requisite documentation,

detailing the factors. The lenders will have 60 days

following the application to approve or deny the

application.

Remember! Keep detailed records during the 8-week

covered period of sums paid for payroll costs, mortgage

interest (not principal), leases, and utilities (including

electricity, gas, water, transportation, telephone, or internet

access), and keep copies of checks used to pay the

aforementioned sums. Finally, please keep meticulous

documentation verifying the number of employees on

payroll and pay rates during February 15, 2020 – June 30,

2020. This will help you during the application for

forgiveness process.

FORGIVENESS APPLICATION



If sums are not forgiven, then the loan continues with

favorable terms:

‣ a maturity date of 10 years,

‣ an interest rate of no more than 4%,

‣ and lenders are required to provide borrowers with

complete payment deferment for a period of not

less than 6 months (including payment of principal,

interest, and fees), and not more than 1 year.

Further, as mentioned previously, no collateral or

personal guarantee is required.

WHAT HAPPENS TO REMAINING SUMS?



No SBA application has been released yet. However, we suggest the gathering the following

(lenders may request additional documents):

• Business name, address, and point of contact

• NAICS code

• Type of entity (general/limited partnership, corporation (S corp, C corp, LLC, non-profit), sole

proprietorship, independent contractor, self-employed)

• Date established

• Business Certificate/License

• Are you a seasonal employer? What are your dates of operation

• Do you have a pending SBA 7(b)(2) loan (disaster loan) application

• Business financial information, including federal tax returns for last 3 years

• Payroll records for prior 12-months

• For sole proprietors, independent contractors, and self-employed applicants: provide payroll

tax filings reported to IRS, form 1099-MISC, and income and expense sheets

WHAT WILL LENDERS NEED FOR ME TO

APPLY FOR THE LOAN?



‣ Expansion of Workers Eligible for UI

‣ ICs/Self Employed

‣ Enhanced Unemployment Benefits:

‣ $600 Supplement for up to four months

(July 31)

‣ Additional state level benefits up to 13

weeks

‣ E.g., SC – $326 + 600 = $926

‣ E.G., SC – 20 weeks + 13 weeks = 33 weeks

CARES ACT – EXPANDED UNEMPLOYMENT


UNDER THE CARES ACT

QUESTION & ANSWER

31

If employees are working reduced hours

due to decrease in business because of

COVID-19 but are earning more than what

their NORMAL UI weekly amount would

be, are they still eligible for the

$600? Example: In SC the max weekly UI

amount is $326. Employee is working 20

hours making $480 instead of the usual 40

hours making $960. In normal

circumstances, they would not be eligible

for any UI payment because they are

making more than the $326.

UNEMPLOYMENT


UNDER THE CARES ACT

QUESTION & ANSWER

32

Regarding SBA loans – we understand

that there is a forgiveness provision in the

new law if we keep our employees, and

that they’re looking at FTE’s and a certain

look-back period. Do you know if we have

to have the same employees (i.e.,

something is tied to an employee ID # or

SSN), or if they’re just looking at total

numbers?.

CARES ACT


UNDER THE CARES ACT

QUESTION & ANSWER

33

Employer has a few employees that were

out taking care of a family member that

was sick and now they are sick. Does he

have to pay them for both of the below?

‣ Temp Sick EE is paid at 100% of pay

for 80 hours, also a dollar limit of

$5,110.00

‣ Temp Sick Family is paid at 2/3 of pay

for 80 hours also a dollar limit of

$2,000.

COORDINATION OF PAID SICK LEAVE


UNDER THE CARES ACT

QUESTION & ANSWER

34

For sick leave, what is minimum degree of

separation is required for an employee to qualify for

sick leave? In other words, if they have known

contact with an individual who has tested positive,

are they eligible for the sick leave? Also, how does

this apply to someone who has had contact with an

individual who is awaiting test results?

Can individual with underlying health conditions or

immune deficiency quality for sick leave or FMLA

as a precautionary measure? If so, what

documentation would the individual need to

substantiate the leave?

QUALIFYING FOR SICK LEAVE


UNDER THE CARES ACT

QUESTIONS/COMMENTS?

35

Mark W. Bakker864-282-1175

[email protected]

Lauren Deyo864-282-1107

[email protected]

mailto:[email protected]

mailto:[email protected]

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